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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-19612
IMCLONE SYSTEMS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 04-2834797
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
180 VARICK STREET,
NEW YORK, NY 10014
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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(212) 645-1405
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, PAR
VALUE $.001
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting and non-voting common equity held
by non-affiliates of the registrant as of March 28, 2000 was $2,562,514,413.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
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CLASS OUTSTANDING AS OF MARCH 28, 2000
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COMMON STOCK, PAR VALUE $.001 31,187,627
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Documents Incorporated by Reference: The registrant's definitive Proxy
Statement for the Annual Meeting of Stockholders scheduled to be held on May 31,
2000 to be filed with the Commission not later than 120 days after the close of
the registrant's fiscal year, has been incorporated by reference, in whole or in
part, into Part III, Items 10, 11, 12 and 13 of this Annual Report on Form 10-K.
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IMCLONE SYSTEMS INCORPORATED
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 16
Item 3. Legal Proceedings........................................... 17
Item 4. Submission of Matters to a Vote of Security Holders......... 17
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 18
Item 6. Selected Financial Data..................................... 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 20
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 28
Item 8. Financial Statements and Supplementary Data................. 28
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 28
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 29
Item 11. Executive Compensation...................................... 29
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 29
Item 13. Certain Relationships and Related Transactions.............. 29
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 29
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As used in this Form 10-K, "ImClone," "company," "we," "ours," and "us"
refer to ImClone Systems Incorporated, except where the context otherwise
requires or as otherwise indicated.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR CAUTIONARY STATEMENT
This Form 10-K contains "forward-looking" statements, as defined in the
Private Securities Litigation Reform Act of 1995, that are based on current
expectations, estimates and projections. Statements that are not historical
facts, including statements about our and our subsidiary's beliefs and
expectations, are forward-looking statements. These statements involve potential
risks and uncertainties; therefore, actual results may differ materially. You
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date on which they were made. We do not undertake any
obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise.
Important factors that may affect these expectations include, but are
not limited to: the risks and uncertainties associated with completing
pre-clinical and clinical trials of our compounds that demonstrate such
compounds' safety and effectiveness; obtaining additional financing to support
our operations; obtaining and maintaining regulatory approval for such compounds
and complying with other governmental regulations applicable to our business;
obtaining the raw materials necessary in the development of such compounds;
consummating collaborative arrangements with corporate partners for product
development; achieving milestones under collaborative arrangements with
corporate partners; developing the capacity to manufacture, market and sell our
products, either directly or with collaborative partners; developing market
demand for and acceptance of such products; competing effectively with other
pharmaceutical and biotechnological products; obtaining adequate reimbursement
from third party payers; attracting and retaining key personnel; protecting
proprietary rights; and those other factors set forth in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview and Risk Factors," all as are further discussed herein.
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PART I
ITEM 1. BUSINESS.
OVERVIEW
We are 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. 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
Vascular Endothelial Growth Factor ("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, therapeutic cancer vaccines and angiogenesis
inhibitors. We have also developed diagnostic products and vaccines for certain
infectious diseases, and we have licensed the rights to these products and
vaccines to corporate partners.
DEVELOPMENT PROGRAMS
IMC-C225 CANCER THERAPEUTIC
The activation of the Epidermal Growth Factor receptor, or EGF
receptor, is believed to play a critical role in the rapid proliferation of
certain types of tumor cells and select normal cells. Certain cancer types are
characterized by the overexpression of the EGF receptor. For example, according
to the National Cancer Institute ("NCI"), more than 61,000 cases of head and
neck cancer are diagnosed in the United States each year. More than 90% of head
and neck cancer cases have been shown to overexpress the EGF receptor on the
surface of the tumor cells. Similarly, according to the NCI, there are
approximately 132,000 cases of colorectal cancer diagnosed in the United States
each year, and in roughly half of these cases, the tumor cells have an
overexpression of the EGF receptor. Other types of cancer are also
characterized, in certain patients, by overexpression of the EGF receptor
including lung, renal and pancreatic cancer. By preventing the binding of
critical growth factors to the EGF receptor, we believe it is possible to
inhibit the growth of these tumors.
IMC-C225 is a chimerized (part human, part mouse) monoclonal antibody
that selectively binds to the EGF receptor and thereby inhibits growth of cells
dependent upon activation of the EGF receptor for replication. We have tested
IMC-C225 in numerous clinical trials, including several Phase I/II trials at
Sloan Kettering Memorial Cancer Center ("SLOAN KETTERING"), Yale Cancer Center,
University of Virginia, MD Anderson Cancer Center and the University of Alabama.
In
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these studies, we have given IMC-C225 intravenously at selected doses, both
alone and in combination with radiation therapy or chemotherapy. In completed
trials to date, we have tested IMC-C225 in approximately 200 patients with
various solid cancers, such as head and neck, colorectal, lung, renal, breast
and prostate cancers.
In June 1999, we completed a Phase I/II trial in which 12 patients
with advanced head and neck cancer were treated with IMC-C225 in combination
with cisplatin, a widely used chemotherapeutic drug. At the completion of the
trial, two of the nine evaluable patients had achieved a complete response and
four had achieved a partial response. Most of the patients had previously
received treatment, including standard chemotherapy, radiation therapy or
experimental treatments, and either did not respond or thereafter relapsed. In
particular, three of the six responders (including the two complete responders)
had previously been treated with a regimen containing cisplatin and relapsed
following such treatment.
In January 1999, we completed a Phase I/II trial in which 16 patients
with advanced head and neck cancer were treated with IMC-C225 in combination
with radiation therapy. At the completion of the trial, all 15 evaluable
patients had responded to therapy; 13 of the patients had achieved a complete
response and two had achieved a partial response. This compares with historical
response rates of approximately 40% in similar patients treated with radiation
alone.
We believe these trials have established an appropriate dosing regimen
and have provided preliminary evidence of efficacy. The primary side effect
observed in these trials has been a folliculitis skin rash, similar in
appearance to acne, that has varied in severity depending on the patient. The
rash subsides following completion of therapy. Additionally, a review of the
data from completed trials relating to the approximately 200 patients who have
received IMC-C225 has shown that three have experienced an anaphylactic reaction
to the drug. For that reason, we have established protocols for the initiation
of therapy in any patient whereby an initial dose of limited quantity is
administered in the presence of a physician. If an anaphylactic reaction is
experienced, dosing is terminated immediately and appropriate measures are taken
to mollify the symptoms.
While the data from the IMC-C225 clinical trials conducted to date
have been encouraging, the results from these trials are not sufficient to
establish that IMC-C225 is safe or effective in treating cancer.
In order to establish whether IMC-C225 is safe and effective in
treating cancer in a large patient population and to continue to determine the
types of tumors on which IMC-C225 is most effective, we have begun the Phase II
and Phase III clinical trials summarized below. In each of these trials,
IMC-C225 is being used in combination with standard cancer therapies.
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NUMBER OF
PATIENTS TO
BE ENROLLED
TRIAL/INDICATION TREATMENT IN STUDY COMMENTS
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Phase III - IMC-C225+ radiation (vs. 416 - open-label, stratified,
Head and neck cancer radiation alone) randomized study
- 8-week course of treatment - study initiated February 1999
- patient treatment commenced
April 1999
- 50+ sites expected
- primary endpoint: local
regional disease control at one
year
- study expanded into Europe in
December 1999
Phase III - IMC-C225+cisplatin (vs. 114 - double-blinded, placebo
Head and neck cancer placebo+cisplatin) controlled, randomized study
- 8-week course of treatment - conducted in cooperation with
the Eastern Cooperative
Oncology Group
- study initiated August 1999
- patient treatment commenced
December 1999
- 50+ sites expected
-primary endpoint: progression-
free survival
Phase II - IMC-C225+cisplatin 175 - open-label, stratified, non-
Refractory head and neck - 6-week course of treatment randomized study
cancer (patients previously - 98 patients expected to be
failed regimen containing treated with IMC-C225
cisplatin) - patients are stratified by
disease progression or stable
disease
- study initiated August 1999
- patient treatment commenced
September 1999
- 40+ sites expected
- primary endpoint: response
rate
Phase II - IMC-C225+irinotecan 98 - open-label, stratified, non-
Refractory colorectal cancer - 6-week course of treatment randomized study
(patients previously failed - patients are stratified by
regimen containing disease progression or stable
irinotecan) disease
- study initiated October 1999
- patient treatment commenced
October 1999
- 20+ sites expected
- primary endpoint: response
rate
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We expect that results will be available from the two Phase III studies
described above during 2001. We expect that enough information may be available
from the two Phase II studies described above during the first half of 2000 to
determine whether the data are sufficient to support an application for Food and
Drug Administration ("FDA") approval of IMC-C225.
We expect to conduct several additional Phase II clinical trials to
continue to determine whether IMC-C225 may be effective in treating other types
of cancer. We recently initiated a Phase II clinical trial of IMC-C225 in
combination with gemcitabine in treating pancreatic cancer. We also expect to
initiate additional Phase II trials in treating lung and other cancers later
this year. We recently expanded into Spain and France, with Merck KGaA, our
ongoing Phase III clinical trial for the treatment of head and neck cancer in
combination with radiation. In conjunction with Merck KGaA, we plan to expand
this trial into other European countries and conduct additional European
IMC-C225 clinical trials. There can be no assurance that we will receive
regulatory approval for IMC-C225 based on the results of our ongoing Phase II
clinical trials or any of our other ongoing or anticipated IMC-C225 clinical
trials.
We have entered into a development and marketing agreement with Merck
KGaA relating to IMC-C225. Under this agreement, we have retained the right to
develop and market IMC-C225 within the United States and Canada, and we have
granted Merck KGaA the exclusive right, except in Japan (where we will
co-develop and co-market IMC-C225 with Merck KGaA), to develop and market
IMC-C225 outside of the United States and Canada. Under the agreement, we will
manufacture IMC-C225. In return, Merck KGaA has agreed to pay up-front fees and
to make cash milestone payments and equity investments in our business if
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specific milestones are achieved. Merck KGaA will also pay us royalties on any
sales of IMC-C225 outside of the United States and Canada. Through March 15,
2000, we have received $20 million in up-front fees and milestone payments from
Merck KGaA and Merck KGaA has confirmed that we have achieved milestones with
respect to which we are entitled to receive an additional $6 million in payments
under this agreement. In addition, Merck KGaA has agreed to provide a guaranty
of our credit agreement obligations relating to the construction of our new
IMC-C225 commercial manufacturing facility.
As described above, we are testing IMC-C225 in several different types
of cancer. While in certain cancer types, like head and neck cancer, the EGF
receptor is overexpressed in nearly every patient with such cancer, in others,
like colorectal cancer, many patients will not be positive for the EGF receptor.
Currently, for the purpose of testing of patients in the colorectal cancer
trial, a diagnostic assay must be used to determine which patients are positive
for the EGF receptor. Patients must be positive for the EGF receptor to be
included in this trial. Currently, such diagnostic tests are being performed in
a laboratory setting as there are no commercialized assays available for such
purpose. If IMC-C225 is approved for treating particular cancer types, standard
diagnostic kits will need to be available commercially. We are in late stage
discussions with a company capable of developing, obtaining regulatory approval
for and commercializing such an assay in a timely fashion so that it will be
readily available both for our ongoing clinical trials and for
commercialization.
BEC2 CANCER VACCINE
A cancer vaccine works by the administration of an antigen or the
mimic of an antigen that is found on the surface of certain types of cancer
cells and which activates immune responses to protect against metastasis or
recurrence of the tumor. A cancer vaccine will generally be given after the
tumor has responded to initial treatment. Often, an antigen mimic can produce a
stronger immune response than that produced by the original antigen that it
resembles.
BEC2 is a monoclonal antibody that we are developing as a cancer
vaccine. BEC2 mimics GD3, a molecule expressed on the surface of several types
of cancer cells. By mimicking GD3, BEC2 stimulates an immune response against
cells expressing GD3.
We have tested BEC2 in Phase I clinical trials at Sloan Kettering
against certain forms of cancer, including both limited disease and extensive
disease small-cell lung carcinoma and melanoma (skin cancer). Limited disease
small-cell lung carcinoma is limited to the lungs. Extensive disease small-cell
lung carcinoma means that the disease has migrated to other parts of the body.
In one such trial, 15 patients with small-cell lung carcinoma who had previously
received chemotherapy and radiation therapy and achieved a partial or complete
response were treated with BEC2. At the time the results were analyzed,
approximately 27% of the patients had survived nearly five years following
diagnosis. These survival rates are longer than historical survival rates for
similar patients receiving conventional therapy and formed the basis for going
forward with Phase III studies. This trial is not sufficient to establish that
BEC2 is safe or effective in treating cancer.
In conjunction with Merck KGaA, we have initiated a 570-patient
multinational pivotal Phase III trial for BEC2 in the treatment of limited
disease small-cell lung cancer. The trial will examine patient survival two
years after course of therapy. We expect to complete enrollment in the trial
during 2001.
We have entered into a development and marketing agreement with Merck
KGaA relating to BEC2. We have retained the right to co-promote BEC2 with Merck
KGaA within North America, and we have granted Merck KGaA exclusive rights to
develop and market BEC2 outside of North America. Under the agreement, Merck
KGaA is also funding the Phase III pivotal trial. In addition, we intend to be
the worldwide manufacturer of BEC2.
MONOCLONAL ANTIBODY INHIBITOR OF ANGIOGENESIS
Our general experience with growth factors, particularly the use of
IMC-C225 to block the EGF receptor, has enabled us to pursue another promising
approach for the treatment of cancer, the inhibition of angiogenesis.
Angiogenesis is the natural process of new blood vessel growth. VEGF is one of a
group of molecules that helps regulate angiogenesis. Tumor cells as well as
normal cells produce VEGF. Once produced by the tumor cells, VEGF stimulates the
production of new blood ves-
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sels and ensures an adequate blood supply to the tumor, enabling the tumor to
grow. KDR is a growth factor receptor found almost exclusively on the surface of
human endothelial cells, which are the cells that line all blood vessels. VEGF
must recognize and bind to this KDR receptor in order to stimulate the
endothelial cells to grow and cause new blood vessels to form. We believe that
interference with the binding of VEGF to the KDR receptor inhibits angiogenesis,
and can potentially be used to slow or halt tumor growth.
IMC-1C11 is a chimerized monoclonal antibody, which specifically binds
to the KDR receptor. By doing so, it prevents VEGF from binding to that
receptor, which, in turn, blocks endothelial cell growth and inhibits
angiogenesis. IMC-1C11 therefore helps inhibit or eliminate cancer by preventing
the growth of new blood vessels and depriving the tumor of the blood supply that
it requires to grow. We filed an IND application with the FDA in December 1999
in order to commence clinical trials of IMC-1C11, which we initiated in March
2000.
We believe IMC-1C11 will be effective in treating many solid and
liquid tumors and that it may also be useful in treating other diseases such as
diabetic retinopathy, age-related macular degeneration, and rheumatoid arthritis
that, like cancer, depend on the growth of new blood vessels.
IMCLONE'S RESEARCH PROGRAMS
GENERAL
In addition to concentrating on our products in development, we
perform ongoing research, including research in each of the areas of our ongoing
clinical programs of growth factor inhibitors, therapeutic cancer vaccines and
angiogenesis inhibitors. We have assembled a scientific staff with expertise in
a variety of disciplines, including oncology, immunology, molecular and cellular
biology, antibody engineering, protein and synthetic chemistry and
high-throughput screening. In addition to pursuing research programs in-house,
we collaborate with academic institutions and corporations to support our
research and development efforts.
RESEARCH ON GROWTH FACTOR INHIBITORS
We are conducting a research program to develop inhibitors to the
cell-signal transduction pathways of a class of enzymes referred to as tyrosine
kinases. These pathways have been shown to be involved in the rapid
proliferation of tumor cells. We are developing monoclonal antibodies to inhibit
the binding of growth factors to cellular receptors that trigger these pathways,
thereby potentially inhibiting cell division and tumor growth. We are also
developing small molecule inhibitors to the tyrosine kinase pathways.
In October 1997, we entered into an agreement with CombiChem, Inc.
("COMBICHEM") a combinational chemistry company recently acquired by E.I. du
Pont de Nemours and Company, to utilize its library of structures of chemical
compounds to help us identify and synthesize novel small molecule candidates
that interfere with the function of growth factor receptors. Performance under
this agreement is substantially complete. We have also entered into an agreement
with the Institute for Molecular Medicine in Freiburg, Germany, which permits us
to test small molecules as therapeutic candidates to see if they are effective
in inhibiting various tyrosine kinase receptors.
RESEARCH ON CANCER VACCINES
We are conducting research to discover possible cancer vaccines as
another route to cancer treatment. Cancer vaccines would activate immune
responses to tumors to protect against metastasis or recurrence of cancer. We
are focusing our cancer-vaccine research efforts on developing melanoma
vaccines.
In addition to the development of BEC2, we are conducting research on
a possible melanoma vaccine based on the melanoma antigen gp75. A melanoma is a
tumor or cancerous growth of the skin. Animal studies have shown that a gp75
cancer vaccine is very effective in creating an immune response in the body
against melanoma cells, and may prevent or inhibit growth of experimental
melanoma tumors in mice. Additionally, we are investigating the use of other
melanoma antigens to be used in conjunction with gp75 for the development of an
effective vaccine. We are also investigating various modes of enhancing the
capacity of the vaccine to elicit an immune response. We have retained North
American marketing and manufacturing rights for gp75 and have licensed to Merck
KGaA the rights to manufacture and market gp75 outside North America. We expect
to commence human clinical trials of gp75 in 2000.
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RESEARCH ON ANGIOGENESIS INHIBITORS
We are continuing to work with DC101 in animal models. DC101 is an
antibody that neutralizes the FLK-1 receptor, which is the mouse receptor to
VEGF that corresponds to KDR in humans. Such models have shown that DC101
inhibits tumor growth, and we are now focusing on establishing protocols for
combination therapies of DC101 with radiation therapy or chemotherapy.
Preliminary studies have shown that such combination results in better efficacy
than with the DC101 antibody alone. We are supporting research in this area at
Sunnybrook Health Science Center, University of Toronto ("SUNNYBROOK HEALTH
SCIENCE CENTER").
In connection with our anti-angiogenesis research program, we are also
doing research to see whether antibodies that inhibit vascular-specific cadherin
("VE-CADHERIN") also inhibit angiogenesis. Cadherins are a family of cell
surface molecules that help organize tissue structures. Researchers believe that
VE-cadherin plays an important role in angiogenesis by organizing endothelial
cells into vascular tubes, which is a necessary step in the formation of new
blood vessels. As we stated above, advanced tumor growth is dependent on the
formation of a capillary blood vessel network in the tumor to ensure an adequate
blood supply to the tumor. Therefore, antibodies that inhibit VE-cadherin may
inhibit such capillary formation in tumors, and help fight cancer by cutting-off
an adequate blood supply to the tumor. We intend to test various monoclonal
antibodies against VE-cadherin to see if they are effective in inhibiting the
function of the VE-cadherin, and the growth of blood vessels.
In connection with our VE-cadherin research program, we have been
assigned the exclusive rights to VE-cadherin-2, a recently developed form of
VE-cadherin, and to antibodies that inhibit VE-cadherins. We also collaborate
with the Mario Negri Institute for Pharmacological Research, Milan, Italy (the
"MARIO NEGRI INSTITUTE"), to do pharmacological research to better determine the
role of VE-cadherin in angiogenesis.
We are conducting research on small molecules to develop inhibitors of
enzymes important in angiogenesis.
MISCELLANEOUS RESEARCH AREAS
We are conducting additional research outside of our three principal
areas of clinical focus. These include: (1) a means to induce apoptosis
(programmed cell-death) in order to enhance tumor cell killing, including
looking for small molecules that enhance the apoptosic process; (2) efforts to
isolate endothelial stem cells and to determine the utility of such isolated
cells, possibly in stimulation of wound healing, muscle regeneration or repair
of damage to blood-deprived tissues; and (3) development of a panel of genes
potentially useful for the maintenance and stimulation of stem cells.
RESEARCH COLLABORATIONS AND CLINICAL COLLABORATIONS
We engage in collaborations in the course of conducting our research
and clinical studies. We support research at the Mario Negri Institute to
explore the role that a family of proteins, called VE-cadherins, plays in
angiogenesis. At the University of Texas, Southwestern Medical Center we are
further studying the role VE-cadherins play in angiogenesis by studying
VE-cadherin-2, a type of VE-cadherin, in animal models. At the Sunnybrook Health
Science Center, we are supporting research to evaluate whether chemotherapy
combined with neutralizing antibodies to the FLK-1/VEGF receptor will result in
a synergistic anti-angiogenic response. At Princeton University and the
University of Pennsylvania, we are collaborating in the development of an
extensive panel of stem cell and stromal cell genes, toward the identification
of genes critical to stem cell maintenance and stimulation.
In the clinical area, at the University of Wisconsin-Madison Medical
School, we are conducting additional studies of IMC-C225 in head and neck
cancers in combination with radiation therapy. The European Organization for
Research and Treatment of Cancer is involved in managing the worldwide data for
the BEC2 Phase III study.
At Sloan Kettering, we collaborate both in the research area and
clinical area. We support research on both potential cancer vaccine products
BEC2 and gp75. We have been testing BEC2 in Phase I clinical trials at Sloan
Kettering against certain forms of cancer, including small-cell lung carcinoma
and melanoma.
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Our collaborations with Merck KGaA in developing our IMC-C225 and BEC2
products are described in the following section.
COLLABORATIONS WITH MERCK KGAA
IMC-C225 License and Development Agreement. In December 1998, we
entered into an agreement with Merck KGaA relating to the development and
commercialization of IMC-C225. Under this agreement:
- we have retained the rights to market IMC-C225 within the United
States and Canada
- we have granted Merck KGaA exclusive rights, except in Japan, to
market IMC-C225 outside of the United States and Canada
- 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
- we will co-develop and co-market IMC-C225 in Japan with Merck KGaA
- 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 is:
- paying to us $30 million in up-front fees and early cash-based
milestone payments based upon achievement of certain milestones set
forth in the agreement, of which $20 million has been received
through March 15, 2000, and Merck KGaA has confirmed that we have
achieved milestones with respect to which we are entitled to receive
an additional $6 million in payments
- paying to us an additional $30 million assuming achievement of
further milestones for which Merck KGaA will receive equity (the
"MILESTONE SHARES") in our company, which will be at prices at
varying premiums to the then market price of the common stock
depending upon the timing of the achievement of the respective
milestones
- providing to us, if we so choose, subject to certain terms, a $30
million guaranty for the construction of a manufacturing facility by
us for the commercial production of IMC-C225
- funding clinical development of IMC-C225 outside of the United
States and Canada
- required to pay us royalties on its future sales of IMC-C225 outside
of the United States and Canada, if any
The milestone shares, if issued, will be shares of our common stock
(or a non-voting security convertible into our common stock). The number of
shares issued to Merck KGaA will be determined by dividing the particular
milestone payment due by the purchase price of the common stock when the
milestone is achieved. The purchase price will relate to the then market price
of our common stock, plus a premium which varies, depending upon whether the
milestone is achieved early, on-time or late. The milestone shares will be a
non-voting preferred stock, or other non-voting stock convertible into our
common stock if issuing shares of common stock to Merck KGaA would result in
Merck KGaA owning greater than 19.9% of our common stock. These convertible
securities will not have voting rights. They will be convertible at a price
determined in the same manner as the purchase price for shares of our common
stock if shares of common stock were to be issued. They will not be convertible
into common stock if, as a result of the conversion, Merck KGaA would own
greater than 19.9% of our common stock. This 19.9% limitation is in place
through December 2002. After this date, Merck KGaA must sell shares it receives
as a result of conversion to the extent such shares result in Merck KGaA's
owning in excess of 19.9% of our 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 stock and milestone shares.
This agreement may be terminated by Merck KGaA in various instances,
including (1) at its discretion on any date on which a milestone is achieved (in
which case no milestone payment will
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be made), (2) for a one-year period after first commercial sale of IMC-C225 in
Merck KGaA's territory, upon Merck KGaA's reasonable determination that the
product is economically unfeasible (in which case Merck KGaA is entitled to
receive back 50% of the cash-based milestone payments then paid to date, but
only out of revenues received, 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), or (3) in the event we do not obtain certain collateral license
agreements in which case Merck KGaA also is entitled to a return of all cash
amounts with respect to milestone payments to date, plus liquidated damages of
$500,000. In April 1999, the parties agreed on the production concept for the
manufacturing facility and are currently working toward securing Merck KGaA's
guaranty of our obligations under a $30 million credit facility relating to the
construction of the manufacturing facility. In the event of termination of the
agreement, we will be required to use our best reasonable efforts to cause the
release of Merck KGaA as guarantor. Merck KGaA has also agreed to reimburse us
for one-half of the outside contract service costs incurred with respect to the
Phase III clinical trial of IMC-C225 in combination with radiation in head and
neck cancer patients.
As of December 31, 1999, we had recorded $20 million as fees
potentially refundable from our corporate partner under this agreement.
BEC2 Research and License Agreement. Effective April 1990, we entered
into an agreement with Merck KGaA relating to the development and
commercialization of BEC2 and the recombinant gp75 antigen. Under this
agreement:
- we have granted Merck KGaA a license to develop and market BEC2
worldwide and gp75 outside North America
- we have retained the right to co-promote BEC2 within North America
- it is intended that we will be the bulk product manufacturer of BEC2
to support worldwide sales
- we are required to give Merck KGaA the opportunity to negotiate a
license in North America to gp75 before granting such a license to
any third party
In return, Merck KGaA:
- has made research support payments to us totaling $4.7 million
- is required to make milestone payments to us of up to $22.5 million,
of which $3 million has been received through March 15, 2000, based
on milestones achieved in the product development of BEC2
- is required to make royalty payments to us on all sales of the
licensed products outside North America, if any, with a portion of
the earlier funding received under the agreement being creditable
against the amount of royalties due
Merck KGaA is responsible for conducting the clinical trials and
regulatory submissions outside North America, and we are responsible for
conducting those within North America. Costs worldwide to conduct a multi-site,
multinational Phase III clinical trial to obtain approval for the indication of
the treatment of limited disease small-cell lung carcinoma for BEC2 are the
responsibility of Merck KGaA. These include our out-of-pocket costs (but do not
include costs of establishing a manufacturing facility) for manufacturing
materials for clinical trials, conduct of clinical trials and regulatory
submissions (other than drug approval fees, which are the responsibility of
Merck KGaA or us in our respective territories). If these expenses, including
such expenses of Merck KGaA, exceed DM17 million, such excess expenses will be
shared 60% by Merck KGaA and 40% by us. As of March 15, 2000, this expense level
had not yet been reached. We will negotiate with Merck KGaA the allocation of
costs for the conduct of additional clinical trials for other indications. We
are responsible for providing the supply of the active agent outside of North
America at the expense of Merck KGaA, and the parties intend that the cost of
goods sold in North America be paid out of gross sales of any licensed product
in North America in accordance with a co-promotion agreement to be negotiated.
The agreement terminates upon the later of (1) the last to expire of
any patents issued and covered by the technology or (2) fifteen years from the
date of the first commercial sale. After termination, the license will survive
without further royalty payment and is irrevocable. The agreement may be
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terminated earlier by us in the event Merck KGaA fails to pursue in a timely
fashion regulatory approval or sale of a licensed product in a country in which
it has the right to do so. It also may be terminated earlier by Merck KGaA if
milestones are not achieved.
In the year ended December 31, 1999, we recorded $533,000 in revenue
from Merck KGaA under this agreement, which consisted of research and support
payments.
In connection with the December 1997 amendment to the agreement with
Merck KGaA for BEC2, Merck KGaA purchased from us 400,000 shares of our series A
convertible preferred stock (THE "SERIES A PREFERRED STOCK") for a total price
of approximately $40 million, of which 300,000 shares are currently outstanding.
In addition, Merck KGaA may nominate one member to our board of directors.
OTHER CORPORATE COLLABORATIONS
ABBOTT LABORATORIES
We have licensed some of our diagnostic products and techniques to
Abbott Laboratories ("ABBOTT") on a worldwide basis. In mid-1995, Abbott
launched its first DNA-based diagnostic test in Europe, using our Repair Chain
Reaction ("RCR") DNA probe technology. Abbott's test is used to diagnose the
sexually transmitted diseases chlamydia and gonorrhea, as well as mycobacteria.
The RCR DNA probe technology uses DNA amplification techniques to detect the
presence of DNA or RNA in biological samples thereby indicating the presence of
disease.
In December 1996, we amended our agreement with Abbott to allow Abbott
to exclusively license our patented DNA signal amplification technology,
Ampliprobe, to Chiron Diagnostics. DNA signal amplification technology such as
Ampliprobe also uses DNA signal amplification techniques in detecting the
presence of DNA or RNA in biological samples, thereby indicating the presence of
disease. Abbott receives a royalty payment from Chiron on all sales of Chiron
branched DNA diagnostic probe technology in countries covered by our patents.
Abbott, in turn, pays any such royalties it receives to us. The Chiron branched
DNA diagnostic probe technology has recently been sold to Bayer Pharmaceutical
Corporation.
Under the agreement Abbott has paid us up-front fees and research
support, and is obligated to pay milestone fees and royalties on sales. In June
1997, we received two milestone payments from Abbott totaling $1 million, as a
result of a patent issuance in Europe for our RCR technology. This is partially
creditable against royalties as described below. The issuance of the patent also
entitles us to receive royalty payments on sales in covered European countries
for products using our RCR technology. Abbott will be entitled to deduct from
royalties otherwise due, 25% of such royalties due for a two-year period and 50%
thereafter until a total of $500,000 has been deducted. In December 1999, a U.S.
patent was issued for the RCR technology for which we have received a $500,000
milestone payment from Abbott and are entitled to receive royalties on sales for
a two-year period from initiation of U.S. sales by Abbott for products using the
RCR technology. In February 2000, a Japanese patent was issued on this
technology and as a result we became entitled to a $250,000 milestone payment.
The agreement terminates upon the later of (1) the last to expire of any patents
issued covered by the technology or (2) if no patents are granted, twenty years,
subject to certain earlier termination provisions contained in the agreement. We
have an exclusive world-wide license to the RCR technology and the patents
issued with respect to it.
For the year ended December 31, 1999 we earned a total of $805,000 in
fees pursuant to our strategic alliance with Abbott which consisted of milestone
payments and royalties.
AMERICAN HOME PRODUCTS
In December 1987, we entered into a vaccine development and licensing
agreement with American Cyanamid Company ("CYANAMID") that provided Cyanamid an
exclusive worldwide license to manufacture and sell vaccines developed during
the research period of the agreement. In connection with the agreement, Cyanamid
purchased 410,001 shares of our common stock. During the three-year research
period of the agreement, which period expired in December 1990, we were engaged
in the development of two vaccine candidates, the first of which was for N.
gonorrhea based on recombinant proteins, and the second of which was for Herpes
Simplex Virus based on recombinant glycoproteins B and D.
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In September 1993, Cyanamid's Lederle-Praxis Biologicals division and
ImClone entered into a research collaboration agreement, which by its terms
supersedes the earlier agreement as to N. gonorrhea vaccine candidates, but not
as to Herpes Simplex Virus vaccine candidates. The successor to Cyanamid,
American Home Products Corporation ("AMERICAN HOME"), has the responsibility
under this agreement to pay research support to us, as well as milestone fees
and royalties on sales of any N. gonorrhea vaccine that might arise from the
collaboration. In January 1998, this agreement was extended to continue annual
research funding payable to us in the amount of $300,000 through September 1999
and to extend the period by which American Home was required to have filed an
IND application to initiate clinical trials with a vaccine candidate. In October
1999, this milestone was achieved, and American Home has made a $500,000 payment
to us.
American Home has the responsibility under both agreements for
conducting pre-clinical and clinical trials of the vaccine candidates, obtaining
regulatory approval, and manufacturing and marketing the vaccines. American Home
is required to pay royalties to us in connection with sales of the vaccines, if
any.
In the year ended December 31, 1999 we recorded revenues of $725,000
under the American Home agreements which consisted of milestone payments and
research and support payments.
IMMUNEX CORPORATION
We are the exclusive licensee of a family of patents and patent
applications covering the FLK-2/FLT-3 receptor. FLK-2/FLT-3 growth factor is a
protein that binds to and activates the FLK-2/FLT-3 receptor. The FLK-2/FLT-3
growth factor is owned by Immunex.
In December 1996, we entered into a non-exclusive license and supply
agreement with Immunex Corporation ("IMMUNEX"), under which we granted Immunex
an exclusive worldwide license to the FLK-2/FLT-3 receptor for the limited use
of the manufacture of the FLK-2/FLT-3 growth factor. Immunex is currently
testing the growth factor in human trials for stem cell stimulation and for
tumor inhibition. Under this agreement, we receive royalty and licensing fees
from Immunex, and Immunex has granted us a license to use the FLK-2/ FLT-3
growth factor for use in our ex vivo research on stem cells. In addition,
Immunex has granted us a world-wide non-exclusive license to use and sell the
FLK-2/FLT-3 growth factor, manufactured by Immunex, for ex vivo stem cell
expansion, together with an exclusive license to distribute the growth factor
with our own proprietary products for ex vivo expansion. Immunex will also
supply FLK-2/ FLT-3 growth factor to us. Subject to earlier termination
provisions contained in the agreements, our license terminates in December 2001,
subject to a five-year renewal period, and Immunex's license terminates thirteen
years after the first commercial sale of the product.
In the year ended December 31, 1999, we recorded revenues of $75,000
under this agreement which consisted of a licensing fee.
SMITHKLINE BEECHAM
In February 2000, we licensed to SmithKline Beecham certain patents
and patent applications to meningitis antigens along with related know-how and
materials, exclusively for the purpose of developing meningitis vaccines. In
return we will receive license fees, as well as milestone fees should an antigen
or antigens based on our claims be included in its vaccine candidate, and
royalties on sales of such vaccine.
MANUFACTURING
Under each of our IMC-C225 and BEC2 agreements with Merck KGaA we are
required to supply to Merck KGaA and Merck KGaA is required to obtain from us
IMC-C225 and BEC2, respectively, for clinical trials and commercial supply.
We own and operate a manufacturing facility for biologics in
Somerville, New Jersey for the manufacture of clinical trial materials. At this
facility we manufacture a portion of the IMC-C225 utilized for clinical trials
and are developing the purification process for IMC-1C11 and are in the early
stages of its production for clinical trials. This facility is operated in
accordance with current Good Manufacturing Practices ("CGMP"), which is a
requirement for product manufactured for use in clinical trials and for
commercial sale.
We are building a new manufacturing facility adjacent to our current
manufacturing facility in Somerville, New Jersey. This new facility will contain
three 10,000 liter fermenters and will be
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dedicated to the commercial production of IMC-C225. Under our agreement with
Merck KGaA for IMC-C225, Merck KGaA will provide to us, if we so choose, subject
to certain terms, a $30 million guaranty to apply toward the build-out of this
new facility. The facility will cost approximately $45 million and is being
built on a lot adjacent to our Somerville, New Jersey facility, which we
recently purchased for $700,000. The facility will be dedicated to the
production of IMC-C225 and will have an area of approximately 80,000 square
feet. We have incurred approximately $3,318,000 in engineering and other
preconstruction costs associated with the new manufacturing facility through
December 31, 1999.
To date, Boehringer Ingelheim Pharma KG ("BI") has supplied us with
quantities of IMC-C225 required for our clinical trials that exceed the capacity
of our current facility under an April 1999 development agreement. The total
cost under this agreement was approximately DM11,440,000. This material has been
provided to Merck KGaA for use in trials in Europe and we have invoiced Merck
KGaA for the majority of this amount pursuant to the terms of our agreement with
Merck KGaA.
In December 1999, we entered into a development and manufacturing
services agreement with Lonza Biologies PLC ("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 this agreement,
Lonza will manufacture four 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 intend to continue to utilize the services of a contract
manufacturer to provide a supplemental supply of IMC-C225 for both clinical
trials and commercial supply. 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 contract manufacturers in order to
have sufficient quantities of IMC-C225 for product launch.
MARKETING AND SALES
We intend to develop the capacity to market our cancer therapeutic
products directly in the U.S. and Canada. As part of this strategy, in our
agreement with Merck KGaA for IMC-C225, we have retained all rights to
commercialize IMC-C225 in the U.S. and Canada. We also have co-promotion rights
for commercialization of our BEC2 cancer vaccine in North America pursuant to
our BEC2 agreement with Merck KGaA. We intend to build an internal sales force
and establish the appropriate promotional campaigns and infrastructure.
In 1998, we hired a Vice-President of Marketing and Sales and have
recently hired directors of marketing, field sales and sales operations, each
with experience in the commercial launch of a monoclonal antibody cancer
therapeutic, to develop our internal marketing and sales capabilities. We are
preparing for the marketing and sale of IMC-C225 in the U.S. and Canada, and in
that regard, will be hiring regional sales managers and approximately 40 sales
people prior to the commencement of IMC-C225 sales. We believe that a sales
force of this size can adequately address the North American oncology market for
this drug, because a manageable number of oncologists are responsible for
prescribing most of the cancer therapeutics in North America. Other functions
related to commercialization will be outsourced, especially those requiring
considerable manpower and infrastructure resources such as inventory control,
distribution, accounts receivable and reimbursement. We are currently designing
our campaign to elicit the active involvement of leaders in the oncology field
to broaden the knowledge of the potential significance of IMC-C225.
We intend that the sales capability we will build for IMC-C225 will
allow us to directly market other cancer therapeutics that we may develop,
including IMC-1C11, when and if we receive such regulatory approval.
We expect that with respect to other cancer therapeutics that we may
develop, we may enter into development agreements with third parties that may
include co-marketing or co-promotion arrangements. In the alternative, we may
grant exclusive marketing rights to our corporate partners in return for
up-front fees, milestone payments, and royalties on sales.
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PATENTS AND TRADE SECRETS
GENERALLY
We seek patent protection for our proprietary technology and products
in the United States and abroad. Patent applications have been submitted and are
pending in the United States, Canada, Europe and Japan as well as other
countries. The patent position of biopharmaceutical firms generally is highly
uncertain and involves complex legal and factual questions. Our success will
depend, in part, on whether we can:
- obtain patents to protect our own products
- obtain licenses to use the technologies of third parties, which may
be protected by patents
- protect our trade secrets and know-how
- operate without infringing the intellectual property and proprietary
rights of others
PATENT RIGHTS; LICENSES
We currently have exclusive licenses or assignments to 64 issued
patents worldwide that relate to our proprietary technology in the United States
and foreign countries, 38 of which are issued United States patents. In
addition, we currently have exclusive licenses or assignments to approximately
43 families of patent applications.
IMC-C225. We have an exclusive license from the University of
California at San Diego 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
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 that may limit the ability of third parties to
commercialize EGF receptor antibodies for the treatment of cancer. Specifically,
we are pursuing patent protection for the use of any antibody that inhibits the
EGF receptor in combination with chemotherapy or radiation therapy. We have
exclusively licensed, from Rhone-Poulenc Rorer Pharmaceuticals, now known as
Aventis, 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, and the patent examiner in Europe has
indicated an intent to issue a European patent. U.S. prosecution continues. We
have filed additional patent applications based on our own research that would
cover the use of IMC-C225 or any other EGF receptor inhibitor in conjunction
with radiation therapy, and the use of IMC-C225 or any other EGF receptor
inhibitor in refractory patients, either alone or in combination with
chemotherapy or radiation therapy. We have patent applications pending that
include claims on (1) the use of IMC-C225 to significantly inhibit the growth of
tumor cells, (2) humanized forms of the antibody and antibody fragments and (3)
chimeric and humanized forms of the antibody and fragments of the antibody used
with other drugs, including chemotherapeutic agents.
Our exclusive license agreements with the University of California,
San Diego and Aventis require us to pay royalties on sales of IMC-C225 that are
covered by these licenses.
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
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. Based upon this opinion, as well as our review, in
conjunction with our 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. This opinion of
counsel, however, is not binding on any court or the U.S. Patent and Trademark
Office. In addition, there can
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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.
IMC-C225 is a "chimerized" monoclonal antibody, which means it is made
of antibody fragments derived from more than one type of animal. 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
before we can commercialize our own chimerized monoclonal antibodies, including
IMC-C225. Some of these licenses have already been obtained. We cannot be
certain that we will be able to obtain the rest of such licenses in the
territories where we want to commercialize IMC-C225, or how much such licenses
would cost.
BEC2. We have exclusively licensed from Sloan Kettering a family of
patents and patent applications relating to our BEC2 monoclonal anti-idiotypic
antibody. 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 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 with Merck KGaA, however, we cannot be certain that we
could obtain such licenses on commercially acceptable terms, if at all.
Our license from Sloan Kettering requires us to pay royalties on sales
of BEC2.
Angiogenesis Inhibitors. With respect to our research on inhibitors
to angiogenesis based on the FLK-1 receptor, we are the exclusive licensee from
Princeton University of a family of patents and patent applications covering the
FLK-1 receptor and antibodies to the receptor and its human homolog, KDR. We are
also the assignee of a family of patents and patent applications filed by our
scientists covering angiogenesis-inhibiting antibodies to receptors that bind
VEGF. One of the patents licensed from Princeton University claims the use of
FLK-1/KDR receptor antibodies to isolate cells expressing the FLK-1/KDR receptor
on their cell surfaces. Additionally, we are a co-owner of a recently filed
patent application claiming the use of FLK-1/KDR receptor antibodies to isolate
endothelial progenitor cells that express FLK-1/KDR on their cell surfaces. At
present, we are seeking exclusive rights to this invention from the co-owners.
Our license from Princeton University requires us to pay royalties on
sales that would otherwise infringe the licensed patents, which cover antibodies
to the FLK-1/KDR receptor including IMC-1C11.
VE Cadherin. We have an assignment of a family of patent applications
covering novel cadherin molecules that are involved in endothelial cell
interactions. These interactions are believed to be involved in angiogenic
processes. The subject patent applications also cover antibodies that bind to,
and affect, the cadherin molecules.
Diagnostics. Our diagnostics program has been licensed for commercial
development to Abbott. The program includes target amplification technology and
detection methods, such as RCR technology, signal amplification technology, such
as Ampliprobe, and p53 mutation detection for assisting in cancer diagnosis. Our
proprietary position with respect to our diagnostics program is based on
numerous families of patents and patent applications. We have either an
assignment from our own scientists or exclusive license from academic
institutions to these families of patents and patent applications. We have an
exclusive license to an issued patent assigned to Princeton University related
to the underlying technology for our Ampliprobe signal amplification and
detection system. We are aware that patent applications have been filed by, and
that patents have been issued to, third parties in the field of DNA
amplification technology. This could affect Abbott's ability to commercialize
our diagnostic products, and our ability to collect royalties for such
commercialization.
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
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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.
Trade Secrets. With respect to certain aspects of our technology, we
rely, and intend to continue to rely, on trade secrets, unpatented proprietary
know-how and continuing technological innovation to protect our competitive
position. Such aspects of our technology include methods of isolating and
purifying antibodies and other proteins, collections of plasmids in viable host
systems, and antibodies that are specific for proteins that are of interest to
us. We cannot be certain that others will not independently develop
substantially equivalent proprietary information or techniques.
Relationships between us and our employees, scientific consultants and
collaborators provide these persons with access to our trade secrets, know-how
and technological innovation under confidentiality agreements with the parties
involved. Similarly, our employees and consultants enter into agreements with us
that require that they do not disclose confidential information of ours and they
assign to us all rights to any inventions made while in our employ relating to
our activities.
We seek patent protection for our proprietary technology and products,
in the United States and abroad. Patent applications have been submitted and are
pending in the United States, Canada, Europe and Japan as well as other
countries.
GOVERNMENT REGULATION
The research and development, manufacture and marketing of human
therapeutic and diagnostic products are subject to regulation primarily by the
FDA in the United States and by comparable authorities in other countries. These
national agencies and other federal, state and local entities regulate, among
other things, research and development activities (including testing in animals
and in humans) and the testing, manufacturing, handling, labeling, storage,
record keeping, approval, advertising and promotion of the products that we are
developing. Noncompliance with applicable requirements can result in refusal to
approve product licenses or other applications, or revocation of approvals
previously granted. Noncompliance also can result in fines, criminal
prosecution, recall or seizure of products, total or partial suspension of
production or refusal to allow a company to enter into governmental supply
contracts.
The process of obtaining requisite FDA approval has historically been
costly and time consuming. Current FDA requirements before a new human drug or
biological product may be marketed in the United States include (1) the
successful conclusion of pre-clinical laboratory and animal tests, if
appropriate, to gain preliminary information on the product's safety, (2) filing
with the FDA of an Investigational New Drug ("IND") Application to conduct human
clinical trials for drugs or biologics, (3) the successful completion of
adequate and well-controlled human clinical investigations to establish the
safety and efficacy of the product for its recommended use and (4) filing by a
company and approval by the FDA of a New Drug Application ("NDA") for a drug
product or a Biological License Application ("BLA") for a biological product to
allow commercial distribution of the drug or biologic.
Pre-clinical tests include the evaluation of the product in the
laboratory and in animal studies to assess the potential safety and efficacy of
the product and its formulation. The results of the pre-clinical tests are
submitted to the FDA as part of an IND application to support the evaluation of
the product in human subjects or patients.
Clinical trials involve administration of the product to patients
under supervision of a qualified principal investigator. Such trials are
typically conducted in three sequential phases, although the phases may overlap.
In Phase I, the initial introduction of the drug into human subjects, the
product is tested for safety, dosage tolerance, absorption, metabolism,
distribution, and excretion. Phase II involves studies in a limited patient
population to (1) determine the biological or clinical activity of the product
for specific, targeted indications, (2) determine dosage tolerance and optimal
dosage, and (3) identify possible adverse effects and safety risks. If Phase II
evaluations indicate that a product is effective and has an acceptable
benefit-to-risk relationship, Phase III trials may be undertaken to further
evaluate clinical efficacy and to further test for safety within an expanded
patient population.
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The FDA reviews the results of the clinical trials and may order the
temporary or permanent discontinuation of clinical trials at any time if it
believes the product candidate exposes clinical subjects to an unacceptable
health risk. Investigational products used in clinical studies must be produced
in compliance with cGMP pursuant to FDA regulations.
On November 21, 1997, President Clinton signed into law the Food and
Drug Administration Modernization Act. That act codified the FDA's policy of
granting "fast track" approval for cancer therapies and other therapies intended
to treat severe or life threatening diseases and having potential to address
unmet medical needs. Previously, the FDA approved cancer therapies primarily
based on patient survival rates or data on improved quality of life. The FDA
considered evidence of partial tumor shrinkage, while often part of the data
relied on for approval, insufficient by itself to warrant approval of a cancer
therapy, except in limited situations. Under the FDA's new policy, which became
effective on February 19, 1998, the FDA has broadened authority to consider
evidence of partial tumor shrinkage or other clinical outcomes for approval.
This new policy is intended to facilitate the study of cancer therapies and
shorten the total time for marketing approvals. We intend to take advantage of
this policy; however, it is too early to tell what effect, if any, these
provisions may have on the approval of our product candidates.
Some of our cancer treatments require the use of in vitro diagnostic
products to test patients for particular traits. In vitro diagnostic products
are generally regulated by the FDA as medical devices. In general, the FDA must
approve a new diagnostic product that is not "substantially equivalent" to a
legally marketable product much in the way it must approve drugs and biological
products. Specifically, the device must be tested under an investigational
device exemption ("IDE") and receive FDA approval under a premarket approval
application ("PMA") before it can be commercially marketed. Substantially
equivalent devices go through a clearance process at the FDA that is generally
less onerous than the PMA process but also can require data submission and other
rigorous review.
Under current law, each domestic and foreign drug and device
product-manufacturing establishment must be registered with the FDA before
product approval. Domestic and foreign manufacturing establishments must meet
strict standards for compliance with cGMP regulations and licensing
specifications after the FDA has approved an NDA, BLA or PMA. The FDA and
foreign regulatory authorities periodically inspect domestic and foreign
manufacturing facilities where applicable.
Sales outside the United States of products we develop will also be
subject to regulatory requirements governing human clinical trials and marketing
for drugs and biological products and devices. The requirements vary widely from
country to country, but typically the registration and approval process takes
several years and requires significant resources. In most cases, if the FDA has
not approved a product for sale in the United States the product may be exported
for sale outside of the United States only if it has been approved in any one of
the following countries: the European Union, Canada, Australia, New Zealand,
Japan, Israel, Switzerland and South Africa. There are specific FDA regulations
that govern this process.
Our ability to earn sufficient returns on our products may depend in
part on the extent to which government health administration authorities,
private health coverage insurers and other organizations will provide
reimbursement for the costs of such products and related treatments. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and there can be no assurance that adequate third-party coverage will
be available.
ENVIRONMENTAL AND SAFETY MATTERS
We use hazardous materials, chemicals, viruses and various radioactive
compounds in our research and development activities. Accordingly, we are
subject to regulations under federal, state and local laws regarding work force
safety, environmental protection and hazardous substance control, and to other
present and possible future federal, state and local regulations. We have in
place safety procedures for storing, handling and disposing of these materials.
However, we cannot completely eliminate the risk of contamination or injury. We
could be held liable for any resulting damages, injuries or civil penalties, and
our trials could be suspended. In addition, environmental laws or regulations
may impose liability for the clean-up of contamination at properties we own or
operate, regardless of fault.
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<PAGE> 19
These environmental laws and regulations do not currently materially
adversely affect our operations, business or assets. However, these laws may
become more stringent, other facts may emerge, and our processes may change, and
therefore the amount and timing of expenditures in the future may vary
substantially from those currently anticipated.
COMPETITION
Competition in the biopharmaceutical industry is intense and based
significantly on scientific and technological factors. These factors include the
availability of patent and other protection for technology and products, the
ability to commercialize technological developments and the ability to obtain
governmental approval for testing, manufacturing and marketing. We compete with
specialized biopharmaceutical firms in the United States, Europe and elsewhere,
as well as a growing number of large pharmaceutical companies that are applying
biotechnology to their operations. Many biopharmaceutical companies have focused
their development efforts in the human therapeutics area, including cancer. Many
major pharmaceutical companies have developed or acquired internal biotechnology
capabilities or made commercial arrangements with other biopharmaceutical
companies. These companies, as well as academic institutions, governmental
agencies and private research organizations, also compete with us in recruiting
and retaining highly qualified scientific personnel and consultants. Our ability
to compete successfully with other companies in the pharmaceutical field will
also depend to a considerable degree on the continuing availability of capital
to us.
We are aware of certain products under development or manufactured by
competitors that are used for the prevention, diagnosis, or treatment of certain
diseases we have targeted for product development. Various companies are
developing biopharmaceutical products that potentially directly compete with our
product candidates. These include areas such as (1) the use of small molecules
to the receptor or antibodies to those receptors to treat cancer, (2) the use of
anti-idiotypic antibody or recombinant antigen approaches to cancer vaccine
therapy, (3) the development of inhibitors to angiogenesis, and (4) the use of
hematopoietic growth factors to treat blood system disorders to or for stem cell
or gene therapy. Some of these product candidates are in advanced stages of
clinical trials.
We expect that our products under development and in clinical trials
will address major markets within the cancer sector. Our competition will be
determined in part by the potential indications for which drugs are developed
and ultimately approved by regulatory authorities. Additionally, the timing of
market introduction of some of our potential products or of competitors'
products may be an important competitive factor. Accordingly, the relative speed
with which we can develop products, complete pre-clinical testing, clinical
trials and approval processes and supply commercial quantities to market are
expected to be important competitive factors. We expect that competition among
products approved for sale will be based on various factors, including product
efficacy, safety, reliability, availability, price, and patent position.
HUMAN RESOURCES
We initiated our in-house research and development in 1986. We have
assembled a scientific staff with a variety of complementary skills in a broad
base of advanced research technologies, including oncology, immunology,
molecular and cell biology, antibody engineering, protein and synthetic
chemistry and high-throughput screening. We have also recruited a staff of
technical and professional employees to carry out manufacturing of clinical
trial materials at our Somerville, New Jersey facility. Of our 179 full-time
personnel on March 15, 2000, 79 were employed in our product development,
clinical and manufacturing programs, 52 in research, and 48 in administration.
Our staff includes 21 persons with Ph.D.s and three with M.D.s.
ITEM 2. PROPERTIES
RESEARCH FACILITY -- NEW YORK, NEW YORK
We have occupied two contiguous leased floors at 180 Varick Street in
New York City since 1986. The current lease for the two floors was effective as
of January 1, 1999 and expires in December 2004. The rent under the lease
increases by 3% per year. Rent expense for the New York facility was
approximately $817,000, 574,000, and $554,000 for the years ended December 31,
1999, 1998 and 1997, respectively. We are in the process of renovating the
facility to better fit our needs. The renovation is expected to cost
approximately $2.0 million and is substantially complete.
16
<PAGE> 20
The original acquisition, construction and installation of our New
York research and development facilities were financed principally through the
sale of Industrial Development Agency Revenue Bonds (THE "IDA BONDS") issued by
the New York Industrial Development Agency ("NYIDA"). Equipment at these
facilities purchased with the proceeds of the bond secure the payment of debt
service on the outstanding IDA Bond.
MANUFACTURING FACILITY -- SOMERVILLE, NEW JERSEY
In June 1992, we acquired certain property and a building in
Somerville, New Jersey at a cost to us of approximately $4,665,000, including
expenses. We have retrofitted the building to serve as our clinical-grade
manufacturing facility. When purchased, the facility had in place various
features, including clean rooms, air handling, electricity, and water for
injection systems and administrative offices. The cost for completion of
facility modifications was approximately $5.4 million.
We currently operate the facility to develop and manufacture materials
for our clinical trials. Under certain circumstances, we also may use the
facility for the manufacturing of commercial products. In January 1998, we
completed the construction and commissioning of a new 1,750 square foot process
development center at this facility dedicated to manufacturing process
optimization for existing products and the pre-clinical and Phase I development
of new biological therapeutics.
We recently purchased for $700,000 a lot adjacent to our Somerville,
New Jersey facility on which we have broken ground for the building of a new
manufacturing facility for commercial supply of IMC-C225.
ITEM 3. LEGAL PROCEEDINGS
There are currently no material legal proceedings pending against us
or any of our property.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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<PAGE> 21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
Our common stock is traded in the over-the-counter market and prices
are reported on the Nasdaq National Market tier of The Nasdaq Stock Market under
the symbol "IMCL".
The following table sets forth, for the periods indicated, the range
of high and low sale prices for the common stock on the Nasdaq National Market,
as reported by The Nasdaq Stock Market. The quotations shown represent inter-
dealer prices without adjustment for retail mark-ups, mark downs or commissions,
and may not necessarily reflect actual transactions.
- ------------------------------------------------------
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
- -----------------------------
Year ended December 31, 1999
First Quarter.............. $16 15/16 $ 8 3/4
Second Quarter............. $26 $15 1/2
Third Quarter.............. $39 1/2 $21 5/16
Fourth Quarter............. $43 3/4 $16 1/4
</TABLE>
- ------------------------------------------------------
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
- -----------------------------
Year ended December 31, 1998
First Quarter.............. $ 8 7/16 $ 5 5/8
Second Quarter............. $13 7/8 $ 7 5/8
Third Quarter.............. $13 7/8 $ 8 1/4
Fourth Quarter............. $12 1/8 $ 5 9/16
</TABLE>
STOCKHOLDERS
As of the close of business on March 15, 2000, there were
approximately 369 holders of record of our common stock. We estimate that there
are approximately 23,000 beneficial owners of our common stock.
DIVIDENDS
We have never declared cash dividends on our common stock and have no
present intention of declaring such cash dividends in the foreseeable future.
The holders of our series A preferred stock are entitled to receive cumulative
dividends. They may receive dividends at the annual rate of $6.00 per share,
compounded annually. The dividends began to accrue when the series A preferred
stock was issued on December 15, 1997. Dividends on the outstanding series A
preferred stock are payable in cash on December 31st of each year beginning on
December 31, 1999, or at the time of conversion, whichever is sooner. The series
A preferred stock is of senior rank to all shares of common stock with respect
to payment of dividends. 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 in December 1999 and the 300,000 shares of series A
preferred stock that remained outstanding at December 31, 1999.
RECENT SALES BY THE COMPANY OF UNREGISTERED SECURITIES
In 1999, we issued an aggregate of 494,220 shares of unregistered
common stock to holders of warrants upon exercise of such warrants for a total
purchase price of $1,243,502, which were consummated as private sales under
Section 4(2) of the Securities Act of 1933, as amended.
18
<PAGE> 22
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 2,143 $ 4,193 $ 5,348 $ 600 $ 800
Operating expenses:
Research and development................ 30,027 21,049 16,455 11,482 8,768
General and administrative.............. 9,354 7,145 5,356 3,961 3,739
Net interest and other income(1)........ (2,627) (2,619) (972) (95) (2,066)
-------- -------- -------- -------- -------
Loss before extraordinary item.......... (34,611) (21,382) (15,491) (14,748) (9,641)
Extraordinary loss on extinguishment of
debt.................................. -- -- -- 1,267 --
-------- -------- -------- -------- -------
Net loss................................ (34,611) (21,382) (15,491) (16,015) (9,641)
Preferred dividends..................... 3,713 3,668 163 -- --
-------- -------- -------- -------- -------
Net loss to common stockholders......... $(38,324) $(25,050) $(15,654) $(16,015) $(9,641)
======== ======== ======== ======== =======
Basic and diluted net loss per common
share................................. $ (1.51) $ (1.03) $ (0.67) $ (0.83) $ (0.72)
======== ======== ======== ======== =======
Weighted average shares outstanding..... 25,447 24,301 23,457 19,371 13,311
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and securities..................... $ 119,368 $ 46,739 $ 59,610 $ 13,514 $ 10,207
Working capital......................... 97,064 35,073 56,671 7,695 3,735
Total assets............................ 145,694 62,252 75,780 25,885 22,803
Long-term obligations................... 3,335 3,746 3,430 2,775 4,235
Accumulated deficit..................... (173,457) (138,846) (117,464) (101,973) (85,958)
Stockholders' equity.................... $ 112,298 $ 45,174 $ 68,226 $ 16,589 $ 11,823
</TABLE>
- ---------------
(1) Net interest and other income is presented net of interest income, interest
expense and realized gains and losses on securities available for sale.
19
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis by our management is provided to
identify certain significant factors which affected our financial position and
operating results during the periods included in the accompanying financial
statements.
OVERVIEW AND RISK FACTORS
We are a biopharmaceutical company advancing oncology care by
developing a portfolio of targeted biologic treatments, which address the unmet
medical needs of patients with a variety of cancers. Our three programs include
growth factor blockers, cancer vaccines and anti-angiogenesis therapeutics.
Since our inception in April 1984, we have devoted substantially all of our
efforts and resources to research and development conducted on our own behalf
and through collaborations with corporate partners and academic research and
clinical institutions. We have not derived any commercial revenue from product
sales. As a result of our substantial research and development costs, we have
incurred significant operating losses and we have generated a cumulative net
loss of approximately $173 million for the period from our inception to December
31, 1999. We expect to incur significant additional operating losses.
Substantially all of our revenues were generated from license and
research arrangements with collaborative partners. Such revenues, as well as our
results of operations, have fluctuated and are expected to continue to fluctuate
significantly from period to period due to:
- the status of development of our various products
- 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 these agreements
- whether or not we achieve specified research or commercialization
milestones
- timely payment by our corporate partners of amounts payable to us
- the addition or termination of research programs or funding support
- variations in the level of expenses related to our proprietary
products during any given period
Before we can commercialize our products and begin to sell them to
generate revenues, they will need additional development and clinical testing,
which will require significant additional funds. Generally, to make a profit we
will need to successfully develop, test, introduce and market our products. It
is not certain that any of our products will be successfully developed or that
required regulatory approvals to commercialize them can be obtained. Further,
even if we successfully develop a product, there is no assurance that we will be
able to successfully manufacture or market that product or that customers will
buy it.
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: we have retained the rights to develop and
market IMC-C225 within the United States and Canada; we have granted Merck KGaA
exclusive rights, except in Japan, to develop and market IMC-C225 outside of the
United States and Canada; we have agreed to supply Merck KGaA, and Merck KGaA
will purchase from us, IMC-C225 for the conduct of clinical trials and the
commercialization of the product outside of the United States and Canada; we
will co-develop and co-market IMC-C225 in Japan with Merck KGaA; and we have
granted Merck KGaA an exclusive license outside of the United States and Canada,
without the right to sublicense, to certain of our patents to apply to a
humanized antibody to the EGF receptor on which Merck KGaA has performed
preclinical studies.
In return, Merck KGaA has agreed, subject to the terms of the
agreement, to (1) pay us $30 million in up-front fees and early cash-based
milestone payments based upon our achievement of the milestones set forth in the
agreement, (2) pay us an additional $30 million if further milestones are
achieved for which Merck KGaA will receive equity in ImClone which will be
priced at varying premiums to the then-market price of the common stock
depending upon the timing of the achievement of the respective milestones, (3)
provide us, subject to certain terms, a guaranty of our obligations under a $30
million credit facility relating to the construc-
20
<PAGE> 24
tion of a new IMC-C225 commercial manufacturing facility, (4) fund clinical
development of IMC-C225 outside of the United States and Canada, and (5) pay us
royalties on future sales of IMC-C225 in its territory, if any.
This agreement may be terminated by Merck KGaA in various instances,
including (1) at its discretion on any date on which a milestone is achieved (in
which case no milestone payment will be made), (2) for a one-year period after
first commercial sale of IMC-C225 in Merck KGaA's territory, upon Merck KGaA's
reasonable determination that the product is economically unfeasible (in which
case Merck KGaA is entitled to receive back 50% of the cash-based milestone
payments then paid to date, but only out of revenues received, 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), or (3) in the event we do not
obtain certain collateral license agreements, in which case Merck KGaA also is
entitled to a return of all cash milestone payments to date, plus liquidated
damages of $500,000. Upon termination of the agreement, we would also be
required to use our best reasonable efforts to cause the release of Merck KGaA
as guarantor of the credit facility for our new manufacturing facility.
Through December 31, 1999, Merck KGaA has paid us $20 million in
up-front and milestone fees and has confirmed that we have achieved additional
milestones with respect to which we are entitled to receive an additional $6
million in payments. The $20 million received through December 31, 1999 has been
recorded as fees potentially refundable from a corporate partner and revenue
recognition of all or a portion of such amounts will commence upon Merck KGaA's
agreeing on the production concept for the new IMC-C225 manufacturing facility
and our obtaining the necessary collateral license agreements. In April 1999,
the parties agreed on the production concept for the manufacturing facility and
are currently working toward securing Merck KGaA's guaranty of our obligations
under a $30 million credit facility. We are also in the process of negotiating
the necessary collateral license agreements. Merck has also agreed to reimburse
us for one-half of the outside contract service costs incurred with respect to
our Phase III clinical trial using C225 with radiation in head and neck cancer
patients.
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 made research support
payments to us totaling $4.7 million and is required to make milestone payments
to us of up to $22.5 million, of which $3 million has been received through
December 31, 1999. In addition, Merck KGaA is required to make royalty payments
to us on any sales of BEC2 outside North America, with a portion of the
milestone and research support payments received under the agreement being
creditable against the amount of royalties due.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues. Revenues for the years ended December 31, 1999 and 1998
were $2,143,000 and $4,193,000, respectively, a decrease of $2,050,000, or 49%.
Revenues for the year ended December 31, 1999 primarily consisted of (1)
$500,000 in milestone revenue and $225,000 in research support from our
partnership with American Home in infectious disease vaccines, (2) $533,000 in
research and support payments from our research and license agreement with Merck
KGaA for our principal cancer vaccine product candidate, BEC2, (3) $500,000 in
milestone revenue and $305,000 in royalty revenue from our strategic alliance
with Abbott in diagnostics, and (4) $75,000 in license fees from our
cross-licensing agreement with Immunex for novel hematopoietic growth factors.
Revenues for the year ended December 31, 1998 consisted of (1) $300,000 in
research support from our partnership with American Home in infectious disease
vaccines, (2) $1,000,000 in milestone revenue and $2,500,000 in research and
support payments from our agreement with Merck KGaA for BEC2, (3) $295,000 in
royalty revenue from our strategic alliance with Abbott in diagnostics and (4)
$98,000 from a Phase I Small Business Innovation Research grant from the NCI for
a program in cancer-related angiogenesis. The decrease in revenues for the year
ended December 31, 1999 was primarily attributable to the decrease in research
and support revenue as a result of the completion of all research and support
payments due from our research and license agreement with Merck KGaA for BEC2.
21
<PAGE> 25
Operating Expenses: Research and Development. Total operating
expenses for the years ended December 31, 1999 and 1998 were $39,381,000 and
$28,194,000, respectively, an increase of $11,187,000, or 40%. Research and
development expenses for the years ended December 31, 1999 and 1998 were
$30,027,000 and $21,049,000, respectively, an increase of $8,978,000 or 43%.
Such amounts for the years ended December 31, 1999 and 1998 represented 76% and
75%, respectively, of total operating expenses. The increase in research and
development expenses for the year ended December 31, 1999 was primarily
attributable to (1) the costs associated with the initiation of two pivotal
Phase III clinical trials of IMC-C225 in treating head and neck cancer, one in
combination with radiation and one in combination with cisplatin, (2) the costs
associated with the initiation of two additional Phase II clinical trials of
IMC-C225, one in refractory head and neck cancer in combination with cisplatin
and one in refractory colorectal cancer in combination with irinotecan, (3)
expenditures in the functional areas of product development, manufacturing,
clinical and regulatory affairs associated with IMC-C225, (4) non-cash expenses
recognized in connection with the issuance of options granted to scientific
consultants and collaborators and (5) expenditures associated with additional
staffing in the area of discovery research. We expect research and development
costs to increase in future periods as we continue to expand our efforts in
product development and clinical trials.
General and Administrative Expenses. General and administrative
expenses include administrative personnel costs, costs incurred in connection
with pursuing arrangements with corporate partners and technology licensors, and
expenses associated with applying for patent protection for our technology and
products. Such expenses for the years ended December 31, 1999 and 1998 were
$9,354,000 and $7,145,000, respectively, an increase of $2,209,000, or 31%. The
increase in general and administrative expenses primarily reflected (1)
additional support staffing for expanding our research, development, clinical,
manufacturing and marketing efforts, particularly with respect to IMC-C225 and
(2) expenses associated with the pursuit of strategic corporate alliances and
other corporate development expenses. We expect general and administrative
expenses to increase in future periods to support our planned increases in
research, development, clinical, manufacturing and marketing and sales efforts.
Interest and Other Income and Interest Expense. Interest income was
$2,842,000 for the years ended December 31, 1999 compared with $3,016,000 for
the year ended December 31, 1998, a decrease of $174,000, or 6%. Interest
expense was $292,000 and $435,000 for the years ended December 31, 1999 and
1998, respectively, a decrease of $143,000 or 33%. Interest expense for both
periods primarily included (1) interest on an outstanding Industrial Development
Revenue Bond issued in 1990 (THE "1990 IDA BOND") with a principal amount of
$2,200,000 and (2) interest recorded on various capital lease obligations under
a December 1996 Financing Agreement (THE "1996 FINANCING AGREEMENT") and an
April 1998 Financing Agreement (THE "1998 FINANCING AGREEMENT") with Finova
Technology Finance, Inc. ("FINOVA"). The decrease was primarily attributable to
capitalizing interest costs during the construction period of our new
manufacturing facility. The decrease was partially offset by entering into
additional capital leases. We recorded gains on securities available for sale
for the year ended December 31, 1999 in the amount of $77,000 as compared with
gains of $34,000 for the year ended December 31, 1998. The gain for the year
ended December 31, 1999 includes an $828,000 write-down of our investment in
CombiChem as a result of an other than temporary decline in the first quarter of
1999. In November 1999, CombiChem was acquired by E.I. du Pont de Nemours and
Company for cash consideration of $6.75 per share, which represented a financial
reporting gain to us of approximately $937,000 in the fourth quarter of 1999,
after considering the aforementioned write-down. The resulting net gain on the
investment in CombiChem was $109,000 for the year ended December 31, 1999.
Net Losses. We had net losses to common stockholders of $38,324,000
or $1.51 per share for the year ended December 31, 1999 compared with
$25,050,000 or $1.03 per share for the year ended December 31, 1998. The
increase in the net loss and per share net loss to common stockholders was due
primarily to the factors noted above.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues. Revenues for the years ended December 31, 1998 and 1997
were $4,193,000 and $5,348,000, respectively, a decrease of $1,155,000, or 22%.
Revenues for the year ended December 31, 1998 consisted of (1) $300,000 in
research support from our partnership with American Home in infec-
22
<PAGE> 26
tious disease vaccines, (2) $1 million in milestone revenue and $2.5 million in
research and support payments from our agreement with Merck KGaA for BEC2, (3)
$295,000 in royalty revenue from our strategic alliance with Abbott in
diagnostics and (4) $98,000 from a Phase I Small Business Innovation Research
grant from the NCI for a program in cancer-related angiogenesis. Revenues for
the year ended December 31, 1997 consisted of (1) $300,000 in research support
from our partnership with American Home in infectious disease vaccines, (2)
$2,000,000 in milestone revenue and $1,667,000 in research and support payments
from our agreement with Merck KGaA for BEC2 and (3) $1,000,000 in milestone
revenue and $381,000 in royalty revenue from our strategic alliance with Abbott
in diagnostics. The decrease in revenues for the year ended December 31, 1998
was primarily attributable to a decrease in milestone revenue which can vary
widely from period to period depending upon the timing of the achievement of
various research and development milestones for products under development.
Operating Expenses: Research and Development. Total operating
expenses for the years ended December 31, 1998 and 1997 were $28,194,000 and
$21,811,000, respectively, an increase of $6,383,000, or 29%. Research and
development expenses for the years ended December 31, 1998 and 1997 were
$21,049,000 and $16,455,000, respectively, an increase of $4,594,000 or 28%.
Such amounts for both years ended December 31, 1998 and 1997 represented 75% of
total operating expenses. The increase in research and development expenses for
the year ended December 31, 1998 was partially attributable to (1) the costs
associated with an agreement in principle for the supplemental further
development and manufacture of clinical grade IMC-C225 to support ongoing and
future human clinical trials, (2) expenditures associated with additional
staffing in the area of discovery research, (3) the initiation of new supported
research programs with academic institutions, (4) the establishment of corporate
in-licensing arrangements and (5) expenditures in the functional areas of
product development, manufacturing, clinical and regulatory affairs associated
with IMC-C225. This increase was partially offset by the one-time $2.2 million
non-cash compensation expense recorded for the year ended December 31, 1997 in
connection with the extension of the term of an officer's warrant to purchase
397,000 shares of common stock.
General and Administrative Expenses. General and administrative
expenses include administrative personnel costs, costs incurred in connection
with pursuing arrangements with corporate partners and technology licensors, and
expenses associated with applying for patent protection for our technology and
products. Such expenses for the years ended December 31, 1998 and 1997 were
$7,145,000 and $5,356,000, respectively, an increase of $1,789,000, or 33%. The
increase in general and administrative expenses primarily reflected (1)
additional support staffing for expanding our research, development, clinical
and manufacturing efforts, particularly with respect to IMC-C225 and (2)
expenses associated with the pursuit of strategic corporate alliances and other
corporate development expenses. We expect general and administrative expenses to
increase in future periods to support our planned increases in research,
development, clinical and manufacturing efforts.
Interest and Other Income and Interest Expense. Interest and other
income was $3,054,000 for the year ended December 31, 1998 compared with
$1,523,000 for the year ended December 31, 1997, an increase of $1,531,000, or
101%. The increase was primarily attributable to the increased interest income
earned from higher cash balances in our investment portfolio resulting from the
private placement of series A preferred stock completed in December 1997.
Interest expense was $435,000 and $551,000 for the years ended December 31, 1998
and 1997, respectively, a decrease of $116,000, or 21%. Interest expense for
both periods primarily included (1) interest on the 1990 IDA Bond, which has a
principal amount of $2.2 million, (2) interest recorded on capital lease
obligations and (3) interest recorded on a liability to Pharmacia and Upjohn
Inc. ("PHARMACIA"), for the reacquisition of the worldwide rights to a
recombinant mutein form of Interleukin-6 ("IL-6M") as well as clinical material
manufactured and supplied to us by Pharmacia. The decrease was primarily
attributable to the (1) December 1997 repayment of an IDA Bond issued in 1986
(THE "1986 IDA BOND") with a principal amount of $2.1 million and (2) February
1998 repayment of the remaining liability to Pharmacia.
Net Losses. We had net losses to common stockholders of $25,050,000,
or $1.03 per share, for the year ended December 31, 1998 compared with
$15,654,000, or $0.67 per share, for the year ended December 31, 1997. The
increase in the
23
<PAGE> 27
net loss and per share net loss to common stockholders was due primarily to the
factors noted above and the accrued dividends and incremental yield on the
series A preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, our principal sources of liquidity consisted of
cash and cash equivalents and short-term securities available for sale of
approximately $119.4 million. This includes approximately $94.1 million in net
proceeds from our November 1999 public sale of 3,162,500 shares of common stock.
From inception through December 31, 1999 we have financed our operations through
the following means:
- Public and private sales of equity securities in financing
transactions have raised approximately $258.0 million in net
proceeds
- We have earned approximately $35.0 million from license fees,
contract research and development fees and royalties from
collaborative partners. Additionally, we have received $20.0 million
in potentially refundable fees from our IMC-C225 development and
license agreement with Merck KGaA. As of March 15, 2000, Merck KGaA
has confirmed that we have achieved milestones, with respect to
which we are entitled to receive an additional $6.0 million in
payments. The amounts from Merck KGaA with respect to IMC-C225 have
yet to be recognized as revenue because they are refundable under
certain circumstances
- We have earned approximately $11.3 million in interest income
- The sale of the IDA Bonds in each of 1985, 1986 and 1990 raised an
aggregate of $6.3 million, the proceeds of which have been used for
the acquisition, construction and installation of our research and
development facility in New York City, and of which $2.2 million is
currently outstanding
We may from time to time consider a number of strategic alternatives
designed to increase shareholder value, including joint ventures, acquisitions
and other forms of alliances as well as the sale of all or part of the company.
The 1990 IDA Bond in the outstanding principal amount of $2.2 million
becomes due in 2004. We will incur annual interest on the 1990 IDA Bond
aggregating approximately $248,000. In order to secure our obligations to the
New York Industrial Development Agency under the 1990 IDA Bond, we have granted
the NYIDA a security interest in facility equipment purchased with the bond
proceeds.
In February 2000, we completed a private placement of $240 million in
convertible subordinated notes due March 1, 2005. We received net proceeds from
this offering of approximately $232.2 million, after deducting expenses
associated with the offering. The notes bear interest at an annual rate of 5.5%
payable semi-annually on September 1 and March 1 of each year, beginning
September 1, 2000. A holder may convert all or a 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. We may redeem some or all of the notes at specified redemption prices
prior to March 6, 2003 if specified common stock price thresholds are met. On or
after March 6, 2003, we may redeem some or all of the notes at specified
redemption prices.
We signed a definitive agreement in April 1999 with BI for the further
development, production scale-up and manufacture of our lead therapeutic product
candidate, IMC-C225, for use in human clinical trials. This material has been
provided to Merck KGaA for use in trials in Europe and we have invoiced Merck
KGaA for this material pursuant to the terms of our agreement with Merck KGaA.
We did not hedge our exposure to the foreign currency risk associated with this
agreement.
In December 1999, we entered into a development and manufacturing
services agreement with 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 this agreement, Lonza will manufacture four 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 princi-
24
<PAGE> 28
ple with Lonza to the material terms of a three-year commercial supply agreement
for which the definitive agreement is being completed.
We have obligations under various capital leases for certain
laboratory, office and computer equipment and also certain building improvements
primarily under the 1996 Financing Agreement and the 1998 Financing Agreement
with Finova. The 1996 Financing Agreement allowed us to finance the lease of
equipment and make certain building and leasehold improvements to existing
facilities involving amounts totaling approximately $2.5 million. Each lease has
a fair market value purchase option at the expiration of a 42-month term.
Pursuant to the 1996 Financing Agreement, we issued to Finova a warrant due to
expire in December 31, 2000 to purchase 23,220 shares of our common stock at an
exercise price of $9.69 per share which they exercised in November 1999. We
recorded a non-cash debt discount of approximately $125,000 in connection with
this financing, which discount is being amortized over the 42-month term of the
first lease. The 1996 Financing Agreement with Finova expired in December 1997
and we utilized only $1.7 million of the full $2.5 million under the agreement.
In April 1998, we entered into the 1998 Financing Agreement with Finova totaling
approximately $2 million. The terms of the 1998 Financing Agreement are
substantially similar to the now expired 1996 Financing Agreement except that
each lease has a 48-month term. As of December 31, 1999, we had entered into
twelve individual leases under both the 1996 Financing Agreement and the 1998
Financing Agreement aggregating a total cost of $3.7 million. The 1998 Financing
Agreement expired in May 1999. In January and February 2000, we entered into
financing arrangements with Finova and Transamerica Business Credit Corporation
under which we may obtain at our option up to an aggregate of $25,000,000 for
our utilization primarily in connection with the build-out of our new commercial
manufacturing facility. The funds may be obtained through multiple leases for
not less than specified minimum amounts. Each lease contains a balloon purchase
option at the end of a 48-month term. The Company paid $100,000 in application
fees associated with these agreements, which may be applied against future
principal and interest payments.
We rent our New York City facility under a lease that was scheduled to
expire in March 1999. We renewed the entire lease for a term commencing as of
January 1, 1999 through December 2004 and are in the process of renovating the
facility to better fit our needs. The renovation is expected to cost
approximately $2.0 million and is substantially complete.
Under our agreement with Merck KGaA for IMC-C225, we developed, in
consultation with Merck KGaA, a production concept for a new manufacturing
facility for the commercial production of IMC-C225. Merck KGaA is to provide us,
if we so choose, subject to certain conditions, with a guaranty under a $30
million credit facility for the build-out of this facility. We have determined
to erect this facility adjacent to our current manufacturing facility in New
Jersey, which supplies IMC-C225 to support our clinical trials. We broke ground
on the facility in January 2000 and estimate that the total cost will be
approximately $45 million. We are currently in the process of negotiating the
terms of the loan agreement and guaranty. We expect to fund the remaining cost
of this facility through a combination of cash on hand, proceeds from our
February 2000 private placement of convertible notes and equipment financing
transactions.
In 1998, we hired a Vice-President of Marketing and Sales and have
recently hired directors of marketing, field sales and sales operations, each
with experience in the commercial launch of a monoclonal antibody cancer
therapeutic, to develop our internal marketing and sales capabilities. We are
preparing for the marketing and sale of IMC-C225 in the U.S. and Canada, and in
that regard, we are hiring regional sales managers and approximately 40 sales
people prior to the commencement of IMC-C225 sales.
Total capital expenditures made during the year ended December 31,
1999 were $7,650,000, of which $532,000 have been reimbursed in accordance with
the terms of the 1998 Financing Agreement with Finova. Of the total capital
expenditures made during the year ended December 31, 1999, $3,020,000 related to
the purchase of equipment for and costs associated with the retrofit of our
corporate office and research laboratories in New York and other capital
expenditures relating to our New York facility. We incurred $4,002,000 for the
purchase of land, engineering and other pre-construction costs associated with
the build-out of the commercial manufacturing facility to be erected adjacent to
our current manufacturing facility in New Jersey. The remaining $628,000 is
related to
25
<PAGE> 29
improving and equipping our existing manufacturing facility.
The holders of the series A preferred stock are entitled to receive
cumulative dividends at an annual rate of $6.00 per share. Dividends accrue as
of the issuance date of the series A preferred stock and are payable on the
outstanding series A preferred stock in cash on December 31 of each year
beginning December 31, 1999 or at the time of conversion or redemption of the
series A preferred stock on which the dividend is to be paid, whichever is
sooner. In December 1999, we paid the dividend then accrued on the series A
preferred stock equal to $4,894,000.
We believe that our existing cash on hand including the proceeds from
our February 2000 private placement of convertible notes and amounts expected to
be available under our credit facilities should enable us to maintain our
current and planned operations through at least 2002. We are also entitled to
reimbursement for certain research and development expenditures and to certain
milestone payments, including $10 million in cash-based milestone payments and
$30 million in equity-based milestone payments from our IMC-C225 development and
license agreement with Merck KGaA, which are to be paid subject to our attaining
research and development milestones, certain of which have recently been
attained, and certain other conditions. There can be no assurance that we will
achieve the unachieved milestones. Additionally, the termination of the
agreement due to our failure to obtain the necessary collateral license
agreements would require us to return all milestone payments made to date, plus
$500,000 in liquidated damages. Our future working capital and capital
requirements will depend upon numerous factors, including, but not limited to:
- progress of our research and development programs, pre-clinical
testing and clinical trials
- our corporate partners fulfilling their obligations to us
- timing and cost of seeking and obtaining regulatory approvals
- timing and cost of manufacturing scale-up and effective
commercialization activities and arrangements
- level of resources that we devote to the development of marketing
and sales capabilities
- costs involved in filing, prosecuting and enforcing patent claims
- technological advances
- status of competitors
- our ability to maintain existing and establish new collaborative
arrangements with other companies to provide funding to support
these activities
- costs of establishing both clinical scale and commercial scale
manufacturing capacity in our facility and those of others
In order to fund our capital needs after 2002, we will require
significant levels of additional capital and we intend to raise the capital
through additional arrangements with corporate partners, equity or debt
financings, or from other sources including the proceeds of product sales, if
any. There is no assurance that we will be successful in consummating any such
arrangements. If adequate funds are not available, we may be required to
significantly curtail our planned operations.
At December 31, 1999, we had net operating loss carryforwards for
United States federal income tax purposes of approximately $151 million, which
expire at various dates from 2000 through 2019. At December 31, 1999 we had
research credit carryforwards of approximately $7.7 million, which expire at
various dates from 2009 through 2019. Under Section 382 of the Internal Revenue
Code of 1986, as amended, a corporation's ability to use net operating loss and
research credit carryforwards may be limited if the corporation experiences a
change in ownership of more than 50 percentage points within a three-year
period. Since 1986, we have experienced at least two such ownership changes. As
a result, we are only permitted to use in any one year approximately $5.2
million of our available net operating loss carryforwards that relate to periods
before these ownership changes. Similarly, we are limited in using our research
credit carryforwards. It has not been determined whether the November 1999
public common stock offering and the February 2000 private placement of
convertible notes resulted in additional ownership
26
<PAGE> 30
changes that would further limit the use of our net operating losses and
research credit carryforwards.
YEAR 2000 READINESS
In order to ready our systems for the Year 2000 (Y2K), we incurred
aggregate expense in 1999 and 1998 of approximately $350,000. This included
costs for general systems improvements. Year 2000 preparations were completed as
planned, and no major impacts on us were experienced.
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in
Financial Statements ("SAB 101"). SAB 101 summarizes certain of the staff's
views in applying generally accepted accounting principles to revenue
recognition in financial statements, including the recognition of non-refundable
fees received upon entering into arrangements. We are in the process of
evaluating this SAB and the effect it will have on our financial statements and
current revenue recognition policies.
27
<PAGE> 31
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our holdings of financial instruments comprise a mix of any of U.S.
corporate debt, foreign corporate debt, U.S. government debt, foreign
government/agency guaranteed debt and commercial paper. All such instruments are
classified as securities available for sale. Generally, we do not invest in
portfolio equity securities or commodities or use financial derivatives for
trading purposes. Our debt security portfolio represents funds held temporarily
pending use in our business and operations. We manage these funds accordingly.
We seek reasonable assuredness of the safety of principal and market liquidity
by investing in investment grade fixed income securities while at the same time
seeking to achieve a favorable rate of return. Our market risk exposure consists
principally of exposure to changes in interest rates. Our holdings are also
exposed to the risks of changes in the credit quality of issuers. We invest in
securities which have a range of maturity dates. Typically, those with a
short-term maturity are fixed-rate, highly liquid, debt instruments and those
with longer-term maturities are debt instruments with periodic interest rate
adjustments. We also have certain foreign exchange currency risk. See footnote 2
of the financial statements. The table below presents the principal amounts and
related weighted average interest rates by year of maturity for our investment
portfolio as of December 31, 1999:
<TABLE>
<CAPTION>
2005 AND
2000 2001 2002 2003 2004 THEREAFTER TOTAL FAIR VALUE
----------- ---------- ---------- ---- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate............ $21,611,000 $1,887,000 $1,452,000 $-- $ -- $ -- $ 24,950,000 $ 24,933,000
Average Interest
Rate................ 5.04% 5.50% 8.0% -- -- -- 5.25% --
Variable Rate......... -- -- -- -- 5,922,000(1) $76,459,000(1) $ 82,381,000 $ 82,419,000
Average Interest
Rate................ -- -- -- -- 5.86% 6.44% 6.40% --
----------- ---------- ---------- -- ---------- ----------- ------------ ------------
$21,611,000 $1,887,000 $1,452,000 -- 5,922,000 $76,459,000(1) $107,331,000 $107,352,000
=========== ========== ========== == ========== =========== ============ ============
</TABLE>
- ---------------
(1) These holdings consist of U.S. corporate and foreign corporate floating rate
notes. Interest on the securities is adjusted at fixed dates using
prevailing interest rates. These holdings are highly liquid and we consider
the potential for loss of principal to be minimal.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this item is submitted as a separate section of this
report commencing on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
28
<PAGE> 32
PART III
The information required by "Item 10. -- Directors and Executive
Officers of the Registrant"; "Item 11. -- Executive Compensation"; "Item 12. --
Security Ownership of Certain Beneficial Owners and Management"; and "Item
13. -- Certain relationships and Related Transactions" is incorporated into Part
III of this Annual Report on Form 10-K by reference to our Proxy Statement for
the Annual Meeting of Stockholders scheduled to be held on May 31, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C>
(a)(1) and (2) The response to this portion of Item 14. is submitted as a
separate section of this report commencing on page F-1.
(a)(3) Exhibits (numbered in accordance with Item 601 of Regulation
S-K).
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------
<S> <C> <C>
3.1 Certificate of Incorporation, as amended through December
31, 1998.................................................... O (3.1)
3.1A Amendment dated June 4, 1999 to the Company's Certificate of
Incorporation, as amended................................... U (3.1A)
3.2 Amended and Restated By-Laws of the Company................. N (3.2)
4.1 Form of Warrant issued to the Company's officers and
directors under Warrant Agreements.......................... A (4.1)
4.2 Stock Purchase Agreement between Erbamont Inc. and the
Company, dated May 1, 1989.................................. A (4.2)
4.3 Stock Purchase Agreement between American Cyanamid Company
(Cyanamid) and the Company dated December 18, 1987.......... A (4.3)
4.4 Form of Subscription Agreement entered into in connection
with September 1991 private placement....................... A (4.4)
4.5 Form of Warrant issued in connection with September 1991
private placement........................................... A (4.5)
4.6 Preferred Stock Purchase Agreement between the Company and
Merck KGaA ("Merck") dated December 3, 1997................. P (4.6)
4.7 Certificate of Designations, Preferences and Rights of
Series A Convertible Preferred Stock........................ P (4.7)
10.1 Company's 1986 Employee Incentive Stock Option Plan,
including form of Incentive Stock Option Agreement.......... F (10.1)
10.2 Company's 1986 Non-qualified Stock Option Plan, including
form of Non-qualified Stock Option Agreement................ F (10.2)
10.3 Company's 401(k) Plan....................................... F (10.3)
10.4 Research and License Agreement between Merck and the Company
dated December 19, 1990..................................... B (10.4)
10.5 Hematopoietic Growth Factors License Agreement between
Erbamont, N.V. and the Company, dated May 1, 1989, and
Supplemental Amendatory Agreement between Erbamont, N.V. and
the Company dated September 28, 1990........................ B (10.6)
10.6 Agreement between Cyanamid and the Company dated December
18, 1987 and supplemental letter agreement between Cyanamid
and the Company dated September 6, 1991..................... B (10.7)
</TABLE>
29
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------
<S> <C> <C>
10.7 Agreement between Hadasit Medical Research Services &
Development, Ltd. and the Company........................... B (10.8)
10.8 Agreement between Hadasit Medical Research Services &
Development, Ltd. and the Company dated September 21,
1989........................................................ B (10.9)
10.9 Supported Research Agreement between Memorial Sloan
Kettering Cancer Center (MSKCC) and the Company dated March
26, 1990.................................................... A (10.10)
10.10 License Agreement between MSKCC and the Company, dated March
26, 1990.................................................... B (10.11)
10.11 License Agreement between MSKCC and the Company, dated March
26, 1990.................................................... B (10.12)
10.12 License Agreement between MSKCC and the Company, dated March
26, 1990.................................................... B (10.13)
10.13 Research Agreement between the Trustees of Princeton
University (Princeton) and the Company dated January 1,
1991........................................................ B (10.14)
10.14 Research Agreement between Princeton and the Company dated
May 1, 1991................................................. B (10.15)
10.15 Research Agreement between Princeton and the Company dated
May 1, 1991................................................. B (10.16)
10.16 License Agreement between Princeton and the Company dated
March 20, 1991.............................................. B (10.17)
10.17 License Agreement between Princeton and the Company dated
May 29, 1991................................................ B (10.18)
10.18 License Agreement between Princeton and Oncotech, Inc. dated
September 3, 1987........................................... B (10.19)
10.19 Supported Research Agreement between The University of North
Carolina at Chapel Hill ("UNC") and the Company effective
July 5, 1988................................................ B (10.20)
10.20 License Agreement between UNC and the Company dated July 5,
1988........................................................ B (10.21)
10.21 License Agreement between UNC and the Company dated July 27,
1988........................................................ B (10.22)
10.22 Supported Research Agreement between UNC and the Company
effective April 1, 1989..................................... B (10.23)
10.23 License Agreement between UNC and the Company dated July 1,
1991........................................................ B (10.24)
10.24 Agreement between Celltech Limited and the Company dated May
23, 1991.................................................... B (10.25)
10.25 Form of Non-disclosure and Discovery Agreement between
employees of the Company and the Company.................... A (10.30)
10.26 Industrial Development Bond Documents:...................... A (10.31)
10.26.1 Industrial Development Revenue Bonds (1985 ImClone Systems
Incorporated Project)....................................... A (10.31.1)
10.26.1.1 Lease Agreement, dated as of October 1, 1985, between the
New York City Industrial Development Agency (NYCIDA) and the
Company, as Lessee.......................................... A (10.31.1.3)
10.26.1.2 Indenture of Trust, dated as of October 1, 1985, between
NYCIDA and United States Trust Company of New York (US
Trust), as Trustee.......................................... A (10.31.1.2)
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------
<S> <C> <C>
10.26.1.3 Company Sublease Agreement, dated as of October 1, 1985,
between the Company and NYCIDA.............................. A (10.31.1.3)
10.26.1.4 Tax Regulatory Agreement, dated October 9, 1985, from NYCIDA
and the Company to US Trust, as Trustee..................... A (10.31.1.4)
10.26.1.5 Lessee Guaranty Agreement, dated as of October 1, 1985,
between the Company and US Trust, as Trustee................ A (10.31.1.5)
10.26.1.6 First Supplemental Indenture of Trust, dated as of November
1, 1985 from the NYCIDA to US Trust......................... A (10.31.1.6)
10.26.1.7 Third Supplemental Indenture of Trust, dated as of October
12, 1990 from NYCIDA to US Trust............................ A (10.31.1.7)
10.26.2 Industrial Development Revenue Bonds (1986 ImClone Systems
Incorporated Project)....................................... A (10.31.2)
10.26.2.1 First Amendment to Company Sublease Agreement, dated as of
December 1, 1986, between the Company, as Sublessor, and
NYCIDA as Sublessee......................................... A (10.31.2.1)
10.26.2.2 First Amendment to Lease Agreement, dated as of December 1,
1986, between NYCIDA and the Company, as Lessee............. A (10.31.2.2)
10.26.2.3 Second Supplement Indenture of Trust, dated as of December
1, 1986 between NYCIDA and US Trust, as Trustee............. A (10.31.2.3)
10.26.2.4 Tax Regulatory Agreement, dated December 31, 1986, from
NYCIDA and the Company to US Trust, as Trustee.............. A (10.31.2.4)
10.26.2.5 First Amendment to Lessee Guaranty Agreement, dated as of
December 1, 1986, between the Company and US Trust, as
Trustee..................................................... A (10.31.2.5)
10.26.2.6 Bond Purchase Agreement, dated as of December 31, 1986,
between NYCIDA and New York Muni Fund, Inc., as Purchaser... A (10.31.2.6)
10.26.2.7 Letter of Representation and Indemnity Agreement, dated as
of December 31, 1986, from the Company to NYCIDA and New
York Muni Fund, Inc., as Purchaser.......................... A (10.31.2.7)
10.26.3 Industrial Development Revenue Bonds (1990 ImClone Systems
Incorporated Project)....................................... A (10.31.3)
10.26.3.1 Lease Agreement, dated as of August 1, 1990, between NYCIDA
and the Company, as lessee.................................. A (10.31.3.1)
10.26.3.2 Company Sublease Agreement, dated as of August 1, 1990,
between the Company, as Sublessor, and NYCIDA............... A (10.31.3.2)
10.26.3.3 Indenture of Trust, dated as of August 1, 1990, between
NYCIDA and US Trust, as Trustee............................. A (10.31.3.3)
10.26.3.4 Guaranty Agreement, dated as of August 1, 1990, from the
Company to US Trust, as Trustee............................. A (10.31.3.4)
10.26.3.5 Tax Regulatory Agreement, dated August 1, 1990, from the
Company and NYCIDA to US Trust, as Trustee.................. A (10.31.3.5)
10.26.3.6 Agency Security Agreement, dated as of August 1, 1990, from
the Company, as Debtor, and the NYCIDA to US Trust, as
Trustee..................................................... A (10.31.3.6)
10.26.3.7 Letter of Representation and Indemnity Agreement, dated as
of August 14, 1990, from the Company to NYCIDA, New York
Mutual Fund, Inc., as the Purchaser and Chase Securities,
Inc., as Placement Agent Company to NYCIDA.................. A (10.31.3.7)
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------
<S> <C> <C>
10.27 Lease Agreement between 180 Varick Street Corporation and
the Company, dated October 8, 1985, and Additional Space and
Modification Agreement between 180 Varick Street Corporation
and the Company, dated June 13, 1989........................ A (10.32)
10.28 License Agreement between The Board of Trustees of the
Leland Stanford Junior University and the Company effective
May 1, 1991................................................. A (10.33)
10.29 License Agreement between Genentech, Inc. and the Company
dated December 28, 1989..................................... A (10.34)
10.30 License Agreement between David Segev and the Company dated
December 28, 1989........................................... B (10.35)
10.31 Letter of Intent between the Company and Dr. David Segev
dated November 18, 1991..................................... C (10.40)
10.32 Agreement between the Company and Celltech Limited dated
March 11, 1992.............................................. C (10.42)
10.33 Agreement of Sale dated June 19, 1992 between the Company
and Korsch Tableting Inc.................................... D (10.45)
10.34 Research and License Agreement, having an effective date of
December 15, 1992, between the Company and Abbott
Laboratories................................................ E (10.46)
10.35 Research and License Agreement between the Company and
Chugai Pharmaceutical Co., Ltd. dated January 25, 1993...... E (10.47)
10.36 License Agreement between the Company and the Regents of the
University of California dated April 9, 1993................ G (10.48)
10.37 Contract between the Company and John Brown, a division of
Trafalgar House, dated January 19, 1993..................... H (10.49)
10.38 Collaboration and License Agreement between the Company and
the Cancer Research Campaign Technology, Ltd., signed April
4, 1994, with an effective date of April 1, 1994............ G (10.50)
10.39 Termination Agreement between the Company and Erbamont Inc.
dated July 21, 1993......................................... H (10.51)
10.40 Research and License Agreement between the Company and
Cyanamid dated September 15, 1993........................... G (10.52)
10.41 Clinical Trials Agreement between the Company and the
National Cancer Institute dated November 23, 1993........... H (10.53)
10.42 License Agreement between the Company and UNC dated December
1, 1993..................................................... G (10.54)
10.43 Notice of Termination for the research collaboration between
the Company and Chugai Pharmaceutical Co., Ltd. dated
December 17, 1993........................................... H (10.55)
10.44 License Agreement between the Company and Rhone-Poulenc
Rorer dated June 13, 1994................................... I (10.56)
10.45 Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and GFL Ultra Fund Limited dated August
12, 1994.................................................... I (10.57)
10.46 Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and GFL Ultra Fund Limited dated
November 4, 1994............................................ I (10.58)
10.47 Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and Anker Bank Zuerich dated November
10, 1994.................................................... I (10.59)
</TABLE>
32
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------
<S> <C> <C>
10.48 Option Agreement, dated as of April 27, 1995, between
ImClone Systems Incorporated and High River Limited
Partnership relating to capital stock of Cadus
Pharmaceutical Corporation.................................. J (10.60)
10.49 Option Agreement, dated as of April 27, 1995, between
ImClone Systems Incorporated and High River Limited
Partnership relating to 300,000 shares of common stock of
ImClone Systems Incorporated................................ J (10.61)
10.50 Option Agreement, dated as of April 27, 1995, between
ImClone Systems Incorporated and High River Limited
Partnership relating to 150,000 shares common stock of
ImClone Systems Incorporated................................ J (10.62)
10.51 Stock Purchase Agreement, dated as of August 10, 1995, by
and between ImClone Systems Incorporated and the members of
the Oracle Group............................................ J (10.63)
10.52 Form of Warrant issued to the members of the Oracle Group... J (10.64)
10.53 Loan Agreement, dated as of August 10, 1995, by and between
ImClone Systems Incorporated and the members of the Oracle
Group....................................................... J (10.65)
10.54 Security Agreement, dated as of August 10, 1995, by and
between ImClone Systems Incorporated and the members of the
Oracle Group................................................ J (10.66)
10.55 Mortgage, dated August 10, 1995, made by ImClone Systems
Incorporated for the benefit of Oracle Partners, L.P., as
Agent....................................................... J (10.67)
10.56 Financial Advisory Agreement entered into between the
Company and Genesis Merchant Group Securities dated November
2, 1995..................................................... K (10.68)
10.57 Repayment Agreement (with Confession of Judgment, and
Security Agreement) entered into between the Company and
Pharmacia, Inc. on March 6, 1996............................ K (10.69)
10.58 License Amendment entered into between the Company and
Abbott Laboratories on August 28, 1995, amending the
Research and License Agreement between the parties dated
December 15, 1992........................................... K (10.70)
10.59 Amendment of September 1993 to the Research and License
Agreement between the Company and Merck of April 1, 1990.... K (10.71)
10.60 Amendment of October 1993 to the Research and License
Agreement between the Company and Merck of April 1, 1990.... K (10.72)
10.61 Employment agreement dated May 17, 1996 between the Company
and Carl S. Goldfischer..................................... L (10.73)
10.62 Financial Advisory Agreement dated February 26, 1997 between
the Company and Hambrecht & Quist LLC....................... L (10.74)
10.63 Exchange Agreement exchanging debt for common stock dated as
of April 15, 1996 among the Company and members of The
Oracle Group................................................ L (10.75)
10.64 Collaborative Research and License Agreement between the
Company and CombiChem, Inc. dated October 10, 1997.......... M (10.76)
10.65 Amendment of May 1996 to Research and License Agreement
between the Company and Merck of April 1, 1990.............. P (10.65)
10.66 Amendment of December 1997 to Research and License Agreement
between the Company and Merck of April 1, 1990.............. P (10.66)
10.67 Equipment Leasing Commitment from Finova Technology Finance,
Inc......................................................... Q (10.67)
10.68 Development and License Agreement between the Company and
Merck KGaA dated December 14, 1998.......................... R (10.70)
</TABLE>
33
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------
<S> <C> <C>
10.69 Lease dated as of December 15, 1998 for the Company's
premises at 180 Varick Street, New York, New York........... T (10.69)
10.70 Engagement Agreement, as amended between the Company and
Diaz & Altschul Capital LLC................................. T (10.70)
10.71 Amendment dated March 2, 1999 to Development and License
Agreement between the Company and Merck KGaA................ T (10.71)
10.72 Agreement for Supply of Material dated as of January 1, 1997
between the Company, Connaught Laboratories Limited, a
Pasteur Merieux Company and Merck KGaA...................... U (10.72)
10.73 Development and Supply Agreement dated as of April 30, 1999
between the Company and Beohringer Ingelheim Pharma KG...... V (10.73)
10.74 Indenture dated as of February 29, 2000 by and between the
Company and The Bank of New York, as Trustee................ W
10.75 Form of 5 1/2% Convertible Subordinated Notes Due 2005...... W
21.1 Subsidiaries................................................ T (21.1)
23.1 Consent of KPMG LLP......................................... W
27.1 Financial Data Schedule..................................... W
99.1 1996 Incentive Stock Option Plan, as amended................ X (99.1)
99.2 1996 Non-Qualified Stock Option Plan, as amended............ X (99.2)
99.3 ImClone Systems Incorporated 1998 Non-Qualified Stock Option
Plan........................................................ X (99.3)
99.4 ImClone Systems Incorporated 1998 Employee Stock Purchase
Plan........................................................ W
99.5 Option Agreement, dated as of September 1, 1998, between the
Company and Ron Martell..................................... S (99.3)
99.6 Option Agreement, dated as of January 4, 1999, between the
Company and S. Joseph Tarnowski............................. X (99.4)
</TABLE>
- ---------------
(A) Previously filed with the Commission; incorporated by reference to
Registration Statement on Form S-1, File No. 33-43064.
(B) Previously filed with the Commission; incorporated by reference to
Registration Statement on Form S-1, File No. 33-43064. Confidential
treatment was granted for a portion of this exhibit.
(C) Previously filed with the Commission; incorporated by reference to
Registration Statement on Form S-1, File No. 33-48240. Confidential
treatment was granted for a portion of this exhibit.
(D) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K, filed June 26, 1992.
(E) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1992. Confidential treatment was granted for a portion of this Exhibit.
(F) Previously filed with the Commission; incorporated by reference Amendment
No. 1 to Registration Statement on to Form S-1, File No. 33-61234.
(G) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993. Confidential Treatment was granted for a portion of this Exhibit.
(H) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
34
<PAGE> 38
(I) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994.
(J) Previously filed with the Commission; incorporated by reference to
Registration Statement on Form S-2, File No. 33-98676.
(K) Previously filed with the Commission, incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995.
(L) Previously filed with the Commission, incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996.
(M) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, as amended. Confidential treatment was granted for a portion of this
Exhibit.
(N) Previously filed with the Commission; incorporated by reference to the
Company's Current Report on Form 8-K dated January 21, 1998.
(O) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
(P) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Confidential treatment was granted for a portion of this Exhibit.
(Q) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(R) Previously filed with the Commission; incorporated by reference to the
Company's Registration Statement on Form S-3, File No. 333-67335.
Confidential treatment was granted for a portion of this Exhibit.
(S) Previously filed with the Commission; incorporated by reference to the
Company's Registration Statement on Form S-8, File No. 333-64827.
(T) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
(U) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
(V) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
Confidential Treatment has been granted for a portion of this exhibit.
(W) Filed herewith
(X) Previously filed with the Commission; incorporated by reference to the
Company's Registration Statement on Form S-8; File No. 333-30172.
(b) Reports on Form 8-K
On October 7, 1999, the Company filed with the Commission a Current Report on
Form 8-K under Item 5.
35
<PAGE> 39
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
IMCLONE SYSTEMS INCORPORATED
March 29, 2000
By /s/ SAMUEL D. WAKSAL
------------------------------------
SAMUEL D. WAKSAL
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ ROBERT F. GOLDHAMMER Chairman of the Board of March 29, 2000
- --------------------------------------------------- Directors
(ROBERT F. GOLDHAMMER)
/s/ SAMUEL D. WAKSAL President, Chief Executive March 29, 2000
- --------------------------------------------------- Officer and Director (Principal
(SAMUEL D. WAKSAL) Executive Officer)
/s/ HARLAN W. WAKSAL Executive Vice President, Chief March 29, 2000
- --------------------------------------------------- Operating Officer and Director
(HARLAN W. WAKSAL)
/s/ CARL S. GOLDFISCHER Vice President, Finance and March 29, 2000
- --------------------------------------------------- Chief Financial Officer
(CARL S. GOLDFISCHER) (Principal Financial Officer)
/s/ RICHARD BARTH Director March 29, 2000
- ---------------------------------------------------
(RICHARD BARTH)
/s/ VINCENT T. DEVITA, JR. Director March 29, 2000
- ---------------------------------------------------
(VINCENT T. DEVITA, JR.)
/s/ DAVID M. KIES Director March 29, 2000
- ---------------------------------------------------
(DAVID M. KIES)
/s/ PAUL B. KOPPERL Director March 29, 2000
- ---------------------------------------------------
(PAUL B. KOPPERL)
/s/ JOHN MENDELSOHN Director March 29, 2000
- ---------------------------------------------------
(JOHN MENDELSOHN)
/s/ WILLIAM R. MILLER Director March 29, 2000
- ---------------------------------------------------
(WILLIAM R. MILLER)
</TABLE>
36
<PAGE> 40
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets at December 31, 1999 and 1998... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997.......................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997.............. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS
IMCLONE SYSTEMS INCORPORATED:
We have audited the consolidated financial statements of ImClone Systems
Incorporated and subsidiary as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ImClone
Systems Incorporated and subsidiary as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
KPMG LLP
Princeton, New Jersey
March 3, 2000
F-2
<PAGE> 42
IMCLONE SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 12,016 $ 3,888
Securities available for sale............................. 107,352 42,851
Prepaid expenses.......................................... 158 470
Other current assets...................................... 7,599 1,196
-------- --------
Total current assets............................... 127,125 48,405
-------- --------
Property and equipment:
Land...................................................... 1,087 340
Building and building improvements........................ 10,810 10,519
Leasehold improvements.................................... 4,891 4,846
Machinery and equipment................................... 9,049 7,834
Furniture and fixtures.................................... 898 640
Construction in progress.................................. 5,209 115
-------- --------
Total cost......................................... 31,944 24,294
Less accumulated depreciation and amortization............ (14,729) (12,877)
-------- --------
Property and equipment, net........................ 17,215 11,417
-------- --------
Patent costs, net........................................... 1,013 860
Deferred financing costs, net............................... 37 46
Other assets................................................ 304 1,524
-------- --------
$145,694 $ 62,252
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 3,987 $ 1,109
Accrued expenses.......................................... 5,123 4,847
Interest payable.......................................... 45 45
Deferred revenue.......................................... -- 75
Fees potentially refundable from corporate partner........ 20,000 4,000
Current portion of long-term liabilities.................. 906 744
Preferred stock dividends payable......................... -- 2,512
-------- --------
Total current liabilities.......................... 30,061 13,332
-------- --------
Long-term debt.............................................. 2,200 2,200
Other long-term liabilities, less current portion........... 1,135 1,546
-------- --------
Total liabilities.................................. 33,396 17,078
-------- --------
Commitments and contingencies
Stockholders' equity :
Preferred stock, $1.00 par value; authorized 4,000,000
shares; issued and outstanding Series A Convertible:
300,000 and 400,000 at December 31, 1999 and December
31, 1998, respectively (preference in liquidation
$30,000 and $42,512, respectively)...................... 300 400
Common stock, $.001 par value; authorized 60,000,000
shares; issued 29,703,090 and 24,567,312 at December 31,
1999 and December 31, 1998, respectively; outstanding
29,652,273, and 24,516,495 at December 31, 1999 and
December 31, 1998, respectively......................... 30 25
Additional paid-in capital................................ 286,038 184,853
Accumulated deficit....................................... (173,457) (138,846)
Treasury stock, at cost; 50,817 shares at December 31,
1999 and December 31, 1998.............................. (492) (492)
Note receivable -- officer and stockholder................ (142) (142)
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on securities available for
sale................................................... 21 (624)
-------- --------
Total stockholders' equity......................... 112,298 45,174
-------- --------
$145,694 $ 62,252
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 43
IMCLONE SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
License fees from third parties.......................... $ 1,080 $ 1,000 $ 3,000
Research and development funding from third parties and
other................................................. 1,063 3,193 2,348
-------- -------- --------
Total revenues................................... 2,143 4,193 5,348
-------- -------- --------
Operating expenses:
Research and development................................. 30,027 21,049 16,455
General and administrative............................... 9,354 7,145 5,356
-------- -------- --------
Total operating expenses......................... 39,381 28,194 21,811
-------- -------- --------
Operating loss............................ (37,238) (24,001) (16,463)
-------- -------- --------
Other:
Interest and other income................................ (2,919) (3,054) (1,523)
Interest expense......................................... 292 435 551
-------- -------- --------
Net interest and other income.................... (2,627) (2,619) (972)
-------- -------- --------
Net loss.................................. (34,611) (21,382) (15,491)
Preferred dividends (including assumed incremental yield
attributible to beneficial conversion feature of $1,331,
$1,268 and $51 for the years ended December 31, 1999,
1998, and 1997, respectively)............................ 3,713 3,668 163
-------- -------- --------
Net loss to common stockholders........... $(38,324) $(25,050) $(15,654)
======== ======== ========
Basic and diluted net loss per common share................ $ (1.51) $ (1.03) $ (0.67)
======== ======== ========
Weighted average shares outstanding........................ 25,447 24,301 23,457
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 44
IMCLONE SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NOTE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
----------------- ------------------- PAID-IN ACCUMULATED TREASURY OFFICER AND
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT STOCK STOCKHOLDER
-------- ------ ---------- ------ ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996..... -- $ -- 20,248,122 $20 $118,760 $(101,973) $(169) $ --
-------- ----- ---------- --- -------- --------- ----- -----
Issuance of preferred stock...... 400,000 400 39,597
Issuance of common stock......... 3,000,000 3 23,152
Options exercised................ 147,450 223
Warrants exercised............... 869,500 1 1,385
Options granted to
non-employees................... 189
Options/warrants granted to
employees....................... 2,512
Treasury shares.................. (323)
Preferred stock dividends........ (112)
Comprehensive loss:
Net loss......................... (15,491)
Other comprehensive income (loss)
Unrealized holding gain arising
during the period.............
Less: Reclassification
adjustment for realized loss
included in net loss..........
Total other comprehensive
income...................
Comprehensive loss...............
-------- ----- ---------- --- -------- --------- ----- -----
Balance at December 31, 1997..... 400,000 400 24,265,072 24 185,706 (117,464) (492) --
-------- ----- ---------- --- -------- --------- ----- -----
Options exercised................ 154,097 1 613
Warrants exercised............... 143,755 200
Issuance of shares through
employee stock purchase plan.... 4,388 33
Options granted to
non-employees................... 540
Options granted to employees..... 150
Note receivable -- officer
and stockholder................. (131)
Interest on note
receivable -- officer and
stockholder..................... 11 (11)
Preferred stock dividends........ (2,400)
Comprehensive loss:
Net loss......................... (21,382)
Other comprehensive income (loss)
Unrealized holding loss arising
during the period.............
Less: Reclassification
adjustment for realized gain
included in net loss..........
Total other comprehensive
loss.....................
Comprehensive loss...............
-------- ----- ---------- --- -------- --------- ----- -----
Balance at December 31, 1998..... 400,000 400 24,567,312 25 184,853 (138,846) (492) (142)
======== ===== ========== === ======== ========= ===== =====
Conversion of preferred stock.... (100,000) (100) 800,000 1 99
Issuance of common stock......... 3,162,500 3 94,122
Options exercised................ 671,305 1 5,315
Warrants exercised............... 495,220 1,257
Issuance of shares through
employee stock purchase plan.... 6,753 177
Options granted to
non-employees................... 2,411
Options granted to employees..... 175
Interest received on note
receivable -- officer and
stockholder..................... 11
Interest accrued on note
receivable -- officer and
stockholder..................... 11 (11)
Preferred stock dividends........ (2,382)
Comprehensive loss:
Net loss......................... (34,611)
Other comprehensive income (loss)
Unrealized holding gain arising
during the period.............
Less: Reclassification
adjustment for realized gain
included in net loss..........
Total other comprehensive
income...................
Comprehensive loss...............
-------- ----- ---------- --- -------- --------- ----- -----
Balance at December 31, 1999..... 300,000 $ 300 29,703,090 $30 $286,038 $(173,457) $(492) $(142)
======== ===== ========== === ======== ========= ===== =====
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
(LOSS) TOTAL
------------- --------
<S> <C> <C>
Balance at December 31, 1996..... $(49) $ 16,589
---- --------
Issuance of preferred stock...... 39,997
Issuance of common stock......... 23,155
Options exercised................ 223
Warrants exercised............... 1,386
Options granted to
non-employees................... 189
Options/warrants granted to
employees....................... 2,512
Treasury shares.................. (323)
Preferred stock dividends........ (112)
Comprehensive loss:
Net loss......................... (15,491)
Other comprehensive income (loss)
Unrealized holding gain arising
during the period............. 99 99
Less: Reclassification
adjustment for realized loss
included in net loss.......... (2) (2)
---- --------
Total other comprehensive
income................... 101 101
--------
Comprehensive loss............... (15,390)
---- --------
Balance at December 31, 1997..... 52 68,226
---- --------
Options exercised................ 614
Warrants exercised............... 200
Issuance of shares through
employee stock purchase plan.... 33
Options granted to
non-employees................... 540
Options granted to employees..... 150
Note receivable -- officer
and stockholder................. (131)
Interest on note
receivable -- officer and
stockholder..................... --
Preferred stock dividends........ (2,400)
Comprehensive loss:
Net loss......................... (21,382)
Other comprehensive income (loss)
Unrealized holding loss arising
during the period............. (638) (638)
Less: Reclassification
adjustment for realized gain
included in net loss.......... 38 38
---- --------
Total other comprehensive
loss..................... (676) (676)
--------
Comprehensive loss............... (22,058)
---- --------
Balance at December 31, 1998..... (624) 45,174
==== ========
Conversion of preferred stock.... --
Issuance of common stock......... 94,125
Options exercised................ 5,316
Warrants exercised............... 1,257
Issuance of shares through
employee stock purchase plan.... 177
Options granted to
non-employees................... 2,411
Options granted to employees..... 175
Interest received on note
receivable -- officer and
stockholder..................... 11
Interest accrued on note
receivable -- officer and
stockholder..................... --
Preferred stock dividends........ (2,382)
Comprehensive loss:
Net loss......................... (34,611)
Other comprehensive income (loss)
Unrealized holding gain arising
during the period............. 722 722
Less: Reclassification
adjustment for realized gain
included in net loss.......... 77 77
---- --------
Total other comprehensive
income................... 645 645
--------
Comprehensive loss............... (33,966)
---- --------
Balance at December 31, 1999..... $ 21 $112,298
==== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 45
IMCLONE SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(34,611) $(21,382) $(15,491)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 1,968 1,769 1,797
Expense associated with issuance of options and
warrants.............................................. 2,586 690 2,729
Write-off of patent costs............................... 86 235 146
Loss (gain) on securities available for sale............ (77) (38) 2
Changes in:
Prepaid expenses...................................... 312 126 (474)
Other current assets.................................. (6,505) (607) (110)
Due from officers and stockholders.................... 102 -- 101
Other assets.......................................... (128) (62) (37)
Interest payable...................................... -- (23) (170)
Accounts payable...................................... 2,878 (622) 672
Accrued expenses...................................... 276 3,407 75
Deferred revenue...................................... (75) (133) 208
Fees potentially refundable from corporate partner.... 16,000 4,000 --
-------- -------- --------
Net cash used in operating activities.............. (17,188) (12,640) (10,552)
-------- -------- --------
Cash flows from investing activities:
Acquisitions of property and equipment.................. (7,118) (472) (1,657)
Purchases of securities available for sale.............. (105,520) (62,779) (241,623)
Sales and maturities of securities available for sale... 40,980 76,996 195,450
Sale (purchase) of investment in CombiChem, Inc......... 2,109 -- (2,000)
Additions to patents.................................... (346) (254) (212)
-------- -------- --------
Net cash (used in) provided by investing
activities....................................... (69,895) 13,491 (50,042)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from issuance of preferred stock........... -- -- 39,997
Net proceeds from issuance of common stock.............. 94,125 -- 23,154
Proceeds from exercise of stock options and warrants.... 6,573 682 1,581
Proceeds from issuance of common stock under the
employee stock purchase plan.......................... 177 33 --
Purchase of treasury stock.............................. -- -- (323)
Proceeds from equipment and building improvement
financings............................................ 94 594 --
Repayment of long-term debt............................. -- -- (2,113)
Payment of preferred stock dividends.................... (4,893) -- --
Payments of other liabilities........................... (876) (830) (1,878)
Interest received on note receivable -- officer and
stockholder........................................... 11 -- --
-------- -------- --------
Net cash provided by financing activities.......... 95,211 479 60,418
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents...................................... 8,128 1,330 (176)
Cash and cash equivalents at beginning of year.............. 3,888 2,558 2,734
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 12,016 $ 3,888 $ 2,558
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 46
IMCLONE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PREPARATION
ImClone Systems Incorporated (the "Company") is a biopharmaceutical
company advancing oncology care by developing a portfolio of targeted biologic
treatments, which address the unmet medical needs of patients with a variety of
cancers. The Company's three programs include growth factor blockers, cancer
vaccines and anti-angiogenesis therapeutics. A substantial portion of the
Company's efforts and resources are devoted to research and development
conducted on its own behalf and through collaborations with corporate partners
and academic research and clinical institutions. The Company has not derived any
commercial revenue from product sales. The Company is managed and operated as
one business. The entire business is comprehensively managed by a single
management team that reports to the Chief Operating Officer. The Company does
not operate separate lines of business or separate business entities with
respect to any of its product candidates. In addition, the Company does not
conduct any of its operations outside of the United States. Accordingly, the
Company does not prepare discrete financial information with respect to separate
product areas or by location and does not have separately reportable segments as
defined by SFAS No. 131. The Company employs accounting policies that are in
accordance with generally accepted accounting principles in the United States.
The biopharmaceutical industry is subject to rapid and significant
technological change. The Company has numerous competitors, including major
pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions. These competitors may succeed in
developing technologies and products that are more effective than any that are
being developed by the Company or that would render the Company's technology and
products obsolete and non-competitive. Many of these competitors have
substantially greater financial and technical resources and production and
marketing capabilities than the Company. In addition, many of the Company's
competitors have significantly greater experience than the Company in
pre-clinical testing and human clinical trials of new or improved pharmaceutical
products and in obtaining Food and Drug Administration ("FDA") and other
regulatory approvals on products for use in health care. The Company is aware of
various products under development or manufactured by competitors that are used
for the prevention, diagnosis or treatment of certain diseases the Company has
targeted for product development, some of which use therapeutic approaches that
compete directly with certain of the Company's product candidates. The Company
has limited experience in conducting and managing pre-clinical testing necessary
to enter clinical trials required to obtain government approvals and has limited
experience in conducting clinical trials. Accordingly, the Company's competitors
may succeed in obtaining FDA approval for products more rapidly than the
Company, which could adversely affect the Company's ability to further develop
and market its products. If the Company commences significant commercial sales
of its products, it will also be competing with respect to manufacturing
efficiency and marketing capabilities, areas in which the Company has limited or
no experience.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements
of ImClone Systems Incorporated and its wholly-owned subsidiary EndoClone
Incorporated. All significant intercompany balances and transactions have been
eliminated in consolidation.
(B) CASH EQUIVALENTS
Cash equivalents consist primarily of U.S. Government instruments,
commercial paper, master notes and other readily marketable debt instruments.
The Company considers all highly liquid debt instruments with original
maturities not exceeding three months to be cash equivalents.
F-7
<PAGE> 47
(C) INVESTMENTS IN SECURITIES
The Company classifies its investment in debt and equity securities as
available-for-sale.
Available-for-sale securities are recorded at fair value. Unrealized
holding gains and losses, net of related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate component
of accumulated comprehensive (income) loss until realized. Realized gains and
losses from the sale of available-for-sale securities are determined on a
specific identification basis.
A decline in the market value of any available-for-sale security below
cost that is deemed to be other than temporary results in a reduction in
carrying amount to fair value. The impairment is charged to earnings and a new
cost basis for the security is established. Dividend and interest income is
recognized when earned.
(D) LONG-LIVED ASSETS
Property and equipment are stated at cost. Equipment under capital
leases is stated at the present value of minimum lease payments. Depreciation of
fixed assets is provided by straight-line methods over estimated useful lives of
three to twelve years, and leasehold improvements are being amortized over the
related lease term or the service lives of the improvements, whichever is
shorter.
Patent and patent application costs are capitalized and amortized on a
straight-line basis over their respective expected useful lives, up to a 15-year
period.
The Company reviews long-lived assets for impairment when events or
changes in business conditions indicate that their full carrying value may not
be recovered. Assets are considered to be impaired and are written down to fair
value if expected associated undiscounted cash flows are less than the carrying
amounts. Fair value is generally the present value of the expected associated
cash flows.
(E) DEFERRED FINANCING COSTS
Costs incurred in obtaining the Industrial Development Revenue Bonds
(Note 6) are amortized using the straight-line method over the terms of the
related bonds.
(F) REVENUE RECOGNITION
License fees are recognized when the Company executes license agreements
with third parties that provide for the payment of non-refundable fees or when
all parties concur that specified goals are achieved. These fees are recognized
as license fee revenues in accordance with the terms of the particular
agreement.
Research and development funding revenue is derived from collaborative
agreements with third parties and is recognized in accordance with the terms of
the respective contracts.
Royalty revenue is recognized when earned and collection is probable.
Royalty revenue is derived from sales of products by corporate partners using
licensed Company technology.
Revenue recognized in the accompanying consolidated statements of
operations is not subject to repayment. Amounts received that are subject to
repayment if certain specified goals are not met are classified as fees
potentially refundable from corporate partner; revenue recognition of such
amounts will commence upon the achievement of such specified goals. Revenue
received that is related to future performance is classified as deferred revenue
and recognized when the revenue is earned.
In December 1999, the Securities and Exchange Commission staff issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements and specifically addresses revenue recognition in the biotechnology
industry for non-refundable technology access fees and other non-refundable
fees. SAB 101 is effective for fiscal years beginning after December 15, 1999.
The Company is evaluating SAB 101 and the effect it may have on the consolidated
financial statements and its current revenue recognition policies.
F-8
<PAGE> 48
(G) FOREIGN CURRENCY TRANSACTIONS
Gains and losses from foreign currency transactions, such as those
resulting from the translation and settlement of receivables and payables
denominated in foreign currencies, are included in the consolidated statements
of operations. The Company does not currently use derivative financial
instruments to manage the risks associated with foreign currency fluctuations.
The Company recorded losses on foreign currency transactions of approximately
$7,000, $153,000 and $24,000 for the years ended December 31,1999, 1998 and
1997, respectively.
(H) STOCK-BASED COMPENSATION PLANS
The Company has two types of stock-based compensation plans, stock
option plans and a stock purchase plan. The Company accounts for its stock-based
compensation plans in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. As such, compensation expense would be recorded on the
date of grant of an option only if the market price of the underlying stock on
the date of grant exceeded the exercise price. The Company provides the pro
forma net income and pro forma earnings per share disclosures for employee and
director stock option grants made in 1995 and future years as if the
fair-value-based method defined in Statement of Financial Accounting Standards
("SFAS") No. 123 had been applied.
(I) RESEARCH AND DEVELOPMENT
Research and development expenditures are expensed as incurred.
(J) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(K) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(L) NET LOSS PER COMMON SHARE
Basic and diluted loss per common share is based on the net loss for the
relevant period, adjusted for series A convertible preferred stock ("series A
preferred stock") dividends and the assumed incremental yield attributable to
the beneficial conversion feature aggregating $3,713,000, $3,668,000 and
$163,000 for the years ended December 31, 1999, 1998 and 1997, respectively,
divided by the weighted average number of shares issued and outstanding during
the period. For purposes of the diluted loss per share calculation, the exercise
or conversion of all potential common shares is not included since their effect
would be anti-dilutive for all years presented. As of December 31, 1999, 1998
and 1997, the Company had approximately 9,750,000, 10,933,000 and 9,444,000,
respectively, potential common shares outstanding including shares underlying
convertible preferred stock, stock options and stock warrants. The potential
shares of common stock into which the series A preferred stock is convertible
are based on the future market price of the Company's common stock. The
potential common stock outstanding relating to series A preferred stock
conversion for the years ended December 31, 1999, 1998 and 1997 has been
estimated based on the respective closing prices of the common stock at December
31, 1999, 1998 and December 31, 1997.
F-9
<PAGE> 49
(M) COMPREHENSIVE INCOME (LOSS)
SFAS No. 130, "Reporting Comprehensive Income," establishes standards
for reporting and presentation of comprehensive income and its components in a
full set of financial statements. Comprehensive income (loss) consists of net
income (loss) and net unrealized gains (losses) on securities and is presented
in the consolidated statements of stockholders' equity.
(3) SECURITIES AVAILABLE FOR SALE
The amortized cost, gross unrealized holding gains, gross unrealized
holding losses and fair value for available-for-sale securities by major
security type at December 31, 1999 and 1998 were as follows:
At December 31, 1999:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST HOLDING GAINS HOLDING LOSSES FAIR VALUE
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
U.S. Government debt............... $ 997,000 $ -- $ -- $ 997,000
U.S. corporate debt................ 30,710,000 57,000 (9,000) 30,758,000
Foreign corporate debt............. 68,215,000 29,000 (56,000) 68,188,000
Foreign government/agency
guaranteed debt.................. 7,409,000 -- -- 7,409,000
------------ ------- -------- ------------
$107,331,000 $86,000 $(65,000) $107,352,000
============ ======= ======== ============
</TABLE>
At December 31, 1998:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST HOLDING GAINS HOLDING LOSSES FAIR VALUE
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Commercial paper..................... $ 4,738,000 $ -- $ -- $ 4,738,000
U.S. Government debt................. 2,000,000 2,000 -- 2,002,000
U.S. corporate debt.................. 21,633,000 69,000 (48,000) 21,654,000
Foreign corporate debt............... 14,150,000 44,000 (42,000) 14,152,000
Foreign government/agency guaranteed
debt............................... 302,000 3,000 -- 305,000
----------- -------- -------- -----------
$42,823,000 $118,000 $(90,000) $42,851,000
=========== ======== ======== ===========
</TABLE>
Maturities of debt securities classified as available-for-sale were as
follows at December 31, 1999:
Years ended December 31,
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
------------ ------------
<S> <C> <C>
2000....................................... $ 21,611,000 $ 21,599,000
2001....................................... 1,887,000 1,881,000
2002....................................... 1,452,000 1,453,000
2003....................................... -- --
2004....................................... 5,922,000 5,925,000
2005 and thereafter........................ 76,459,000 76,494,000
------------ ------------
$107,331,000 $107,352,000
============ ============
</TABLE>
Proceeds from the sale of investment securities available-for-sale were
$25,081,000, $35,604,000 and $9,115,000 for the years ended December 31, 1999,
1998 and 1997, respectively. Gross realized gains included in income in the
years ended December 31, 1999, 1998 and 1997 were $33,000, $41,000 and $1,000,
respectively, and gross realized losses included in income in the years ended
December 31, 1999, 1998 and
F-10
<PAGE> 50
1997 were $65,000, $3,000 and $3,000, respectively. Additionally, during 1999
the Company recognized a net gain of $109,000 on the sale of its investment in
CombiChem, Inc. ("CombiChem"). See Note 4.
(4) INVESTMENT IN AND COLLABORATION WITH COMBICHEM, INC.
In October 1997, the Company entered into a Collaborative Research and
License Agreement with CombiChem to discover and develop novel small molecules
for use against selected targets for the treatment of cancer. The companies
utilized CombiChem's Discovery Engine(TM) and Universal Informer Library(TM) to
generate small molecules for screening in the Company's assays for
identification of lead candidates. The Company provided CombiChem with research
funding through October 1999 in the amount of $500,000 annually and will pay
milestone payments and royalties on marketed products, if any, resulting from
the collaboration. Concurrent with the execution of the Collaborative Research
and License Agreement, the Company entered into a Stock Purchase Agreement
pursuant to which the Company purchased 312,500 shares of common stock of
CombiChem, as adjusted, for aggregate consideration of $2,000,000. This
investment was included in other assets. In March 1999, the Company recorded an
$828,000 write-down in its investment in CombiChem as a result of an other than
temporary decline in market value. In November 1999, CombiChem was acquired by
E.I. du Pont de Nemours and Company for cash consideration of $6.75 per share,
which represented a financial reporting gain to the Company of approximately
$937,000 in the fourth quarter of 1999, after considering the aforementioned
write-down. The resulting net gain on the investment in CombiChem was $109,000
for the year ended December 31, 1999.
(5) ACCRUED EXPENSES
The following items are included in accrued expenses:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Salaries and other payroll related expenses............ $1,558,000 $1,256,000
Research and development contract services............. 2,291,000 2,032,000
Other.................................................. 1,274,000 1,559,000
---------- ----------
$5,123,000 $4,847,000
========== ==========
</TABLE>
(6) LONG-TERM DEBT
On December 31, 1986, the New York City Industrial Development Agency
(the "NYIDA") issued on behalf of the Company an Industrial Development Revenue
Bond (the "1986 Bond") bearing annual interest at 10.75% in the amount of
$2,113,000 with a maturity date of December 15, 1994. The proceeds from the sale
of the 1986 Bond were used by the Company for the acquisition, construction and
installation of the Company's research and development facility in New York
City. During December 1994, the 1986 Bond's original maturity date of December
15, 1994 was extended to June 15, 1996. During June 1996, the Company and the
NYIDA extended the maturity date an additional eighteen months to December 15,
1997. The Company repaid the obligation on December 15, 1997.
In August 1990, the NYIDA issued an Industrial Development Revenue Bond
(the "1990 Bond") bearing annual interest at 11.25% in the amount of $2,200,000.
The 1990 Bond is due May 1, 2004. The 1990 Bond includes a provision that if the
Company terminates its lease on its New York City facility, a portion of which
was scheduled to expire in March 1999, the 1990 Bond will become due 60 days
prior to such date. The Company renewed the entire lease for the New York City
facility effective as of January 1, 1999 through December 2004. The proceeds
from the sale of the 1990 Bond were used by the Company for the acquisition,
construction and installation of the Company's research and development facility
in New York City.
The Company has granted a security interest in all equipment located in
its New York City facility purchased with the proceeds from the 1990 bond to
secure the obligation of the Company to the NYIDA relating to the 1990 Bond.
Interest expense on the 1990 Bond was approximately $248,000 for each of the
years ended December 31, 1999, 1998 and 1997.
F-11
<PAGE> 51
(7) OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Liability under capital lease obligations.... $2,010,000 $2,253,000
Liability under license agreement............ 31,000 37,000
---------- ----------
2,041,000 2,290,000
Less current portion......................... (906,000) (744,000)
---------- ----------
$1,135,000 $1,546,000
========== ==========
</TABLE>
The Company is obligated under various capital leases for certain
laboratory, office and computer equipment and also certain building improvements
primarily under a December 1996 financing agreement (the "1996 Financing
Agreement") and an April 1998 financing agreement (the "1998 Financing
Agreement") with Finova Technology Finance, Inc. ("Finova"). The 1996 Financing
Agreement allowed the Company to finance the lease of equipment and make certain
building and leasehold improvements to existing facilities involving amounts
aggregating approximately $2,500,000. Each lease has a fair market value
purchase option at the expiration of a 42-month term. Pursuant to the 1996
Financing Agreement, the Company issued to Finova a warrant expiring December
31, 1999 to purchase 23,220 shares of common stock at an exercise price of $9.69
per share which was exercised in November 1999. The Company recorded a non-cash
debt discount of approximately $125,000 in connection with this financing, which
discount is being amortized over the 42-month term of the first lease. The 1996
Financing Agreement with Finova expired in December 1997 and the Company did not
utilize the full $2,500,000 under the agreement. In April 1998, the Company
entered into the 1998 Financing Agreement with Finova aggregating approximately
$2,000,000. The terms of the 1998 Financing Agreement are substantially similar
to the now expired 1996 Financing Agreement except that each lease has a
48-month term and no warrants were issued. As of December 31, 1999, the Company
had entered into twelve individual leases under both the 1996 Financing
Agreement and the 1998 Financing Agreement aggregating a total cost of
$3,687,000. There are no covenants associated with these financing agreements
which materially restrict the Company's activities. See Notes 14 and 16.
At December 31, 1999 and 1998, the gross amount of laboratory equipment,
office equipment, building improvements and furniture and fixtures and the
related accumulated depreciation and amortization recorded under all capital
leases were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Laboratory, office and computer equipment.... $ 2,845,000 $2,407,000
Building improvements........................ 963,000 861,000
Furniture and fixtures....................... 170,000 92,000
----------- ----------
3,978,000 3,360,000
Less accumulated depreciation and
amortization.............................. (1,209,000) (643,000)
----------- ----------
$ 2,769,000 $2,717,000
=========== ==========
</TABLE>
In connection with the Company's production and eventual marketing of
certain products, the Company entered into a license agreement that requires
minimum annual royalty payments throughout the term of the agreement. The
agreement expires in 2004 and calls for minimum annual payments of $10,000,
which are creditable against royalties that may be due from sales. To the extent
the minimum annual royalties are not expected to be offset by sales, the Company
has charged the net present value of these payments to operations. An interest
rate of 10% was used to discount the cash flows.
F-12
<PAGE> 52
(8) COLLABORATIVE AGREEMENTS
In December 1990, the Company entered into a development and
commercialization agreement with Merck KGaA with respect to its principal cancer
vaccine product candidate, BEC2 and the recombinant gp75 antigen (collectively
"BEC2"). The agreement has been amended a number of times, most recently in
December 1997. The agreement grants Merck KGaA a license, with the right to
sublicense, to manufacture and market BEC2 outside of North America for all
indications. Merck KGaA has also been granted a license, without the right to
sublicense, to market but not manufacture BEC2 in North America. The Company has
the right to co-promote BEC2 in North America. In return, the Company is
entitled to and has recognized research support payments totaling $4,700,000 as
of December 31, 1999. Merck KGaA is also required to make milestone payments up
to $22,500,000, of which $3,000,000 has been recognized as of December 31, 1999,
based on milestones achieved in the licensed products' development. Merck KGaA
is also responsible for worldwide costs up to DM17,000,000 associated with a
multi-site, multinational Phase III clinical trial for BEC2 in limited disease
small-cell lung carcinoma. Any expenses for this trial that exceed DM17,000,000
will be shared 60% by Merck KGaA and 40% by the Company. As of December 31,
1999, this expense level had not yet been reached. Merck KGaA is also required
to pay royalties on the eventual sales of BEC2 outside of North America, if any.
Revenues arising from sales of BEC2 in North America will be distributed in
accordance with the terms of a co-promotion agreement to be negotiated by the
parties.
In December 1998, the Company entered into a development and license
agreement with Merck KGaA with respect to its lead interventional therapeutic
product candidate for cancer, IMC-C225. In exchange for exclusive rights to
market IMC-C225 outside of North America and co-development rights in Japan, the
Company can receive $30,000,000, of which $20,000,000 has been received as of
December 31, 1999, in up-front fees and early cash-based milestone payments
assuming achievement of defined milestones. An additional $30,000,000 can be
received assuming the achievement of further milestones for which Merck KGaA
will receive equity in the Company. The equity underlying these milestone
payments will be priced at varying premiums to the then market price of the
common stock depending upon the timing of the achievement of the respective
milestones. Additionally, if the Company so chooses, Merck KGaA will, subject to
certain terms, provide the Company a $30,000,000 secured line of credit or
guaranty for the build-out of a manufacturing facility for the commercial
development of IMC-C225. Merck KGaA will pay the Company a royalty on future
sales of IMC-C225 outside of North America, if any. Merck KGaA has also agreed
not to own greater than 19.9% of the Company's voting securities through
December 3, 2002. This agreement may be terminated by Merck KGaA in various
instances, including (1) at its discretion on any date on which a milestone is
achieved (in which case no milestone payment will be made), (2) for a one-year
period after first commercial sale of IMC-C225 in Merck KGaA's territory, upon
Merck KGaA's reasonable determination that the product is economically
unfeasible (in which case Merck KGaA is entitled to receive back 50% of the
cash-based milestone payments then paid to date, but only out of revenues
received, 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), or (3)
in the event the Company does not obtain certain collateral license agreements
in which case Merck KGaA also is entitled to a return of all cash amounts with
respect to milestone payments to date, plus liquidated damages of $500,000. In
April 1999, the parties agreed on the production concept for the manufacturing
facility and are currently working toward securing Merck KGaA's guaranty of the
Company's obligations under a $30 million credit facility relating to the
construction of the manufacturing facility. In the event of termination of the
agreement, the Company will be required to use its best reasonable efforts to
cause the release of Merck KGaA as guarantor. The $20,000,000 in payments
received through December 31, 1999 has been recorded as fees potentially
refundable from corporate partner and revenue recognition of such amounts will
commence upon the Company obtaining the defined collateral license agreements.
In December 1999, the Company, with Merck KGaA, expanded the ongoing
Phase III clinical trial of IMC-C225 for the treatment of head and neck cancer
in combination with radiation into Spain. The Company and Merck KGaA plan to
expand this trial into other European countries and conduct additional European
IMC-C225 clinical trials. In order to support the clinical trials in Europe,
Merck KGaA has taken possession of and agreed to reimburse the Company for all
of the IMC-C225 manufactured under its contract manufacturing agreement with
Boehringer Ingelheim Pharma KG ("BI Pharma"). See Note 14. At
F-13
<PAGE> 53
December 31, 1999, Merck KGaA is indebted to the Company in the amount of
$4,442,000 for these costs. Merck has further agreed to reimburse the Company
for one-half of the outside contract service costs incurred with respect to the
Phase III clinical trial of IMC-C225 for the treatment of head and neck cancer
in combination with radiation. Amounts due from Merck KGaA related to this
agreement totaled approximately $1,112,000 at December 31, 1999. The
aforementioned reimbursements due from Merck KGaA for manufacturing and clinical
trial costs were recorded as reductions to research and development expenses and
totaled $5,554,000 for the year ended December 31, 1999. The aforementioned
amounts due from Merck KGaA as of December 31, 1999 are included in other
current assets.
Revenues for the years ended December 31, 1999, 1998 and 1997 were
$2,143,000, $4,193,000 and $5,348,000, respectively. Revenues for the year ended
December 31, 1999 primarily included (1) $500,000 in milestone revenue and
$225,000 in research support from the Company's partnership with the
Wyeth/Lederle Vaccine and Pediatrics Division of American Home Products
Corporation ("American Home") in infectious disease vaccines, (2) $533,000 in
research and support payments from the Company's research and license agreement
with Merck KGaA with respect to the Company's BEC2 product candidate, and (3)
$500,000 in milestone revenue and $305,000 in royalty revenue from the Company's
strategic alliance with Abbott Laboratories ("Abbott") in diagnostics. Revenues
for the year ended December 31, 1998 included (1) $300,000 in research support
from the Company's partnership with American Home in infectious disease
vaccines, (2) $1,000,000 in milestone revenue and $2,500,000 in research and
support payments from the Company's research and license agreement with Merck
KGaA with respect to the Company's BEC2 product candidate and (3) $295,000 in
royalty revenue from the Company's strategic alliance with Abbott in
diagnostics. Revenues for the year ended December 31, 1997 included (1) $300,000
in research support from the Company's partnership with American Home in
infectious disease vaccines, (2) $2,000,000 in milestone revenue and $1,667,000
in research and support payments from the Company's research and license
agreement with Merck KGaA with respect to the Company's BEC2 product candidate,
and (3) $1,000,000 in milestone revenue and $381,000 in royalty revenue from the
Company's strategic alliance with Abbott in diagnostics.
Revenues were derived from the following geographic areas:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
United States........................... $1,610,000 $ 693,000 $1,681,000
Germany................................. 533,000 3,500,000 3,667,000
---------- ---------- ----------
$2,143,000 $4,193,000 $5,348,000
========== ========== ==========
</TABLE>
(9) COMMON STOCK
In May 1999, the stockholders approved the amendment of the Company's
certificate of incorporation to increase the total number of shares of common
stock the Company is authorized to issue from 45,000,000 shares to 60,000,000
shares.
In November 1999, the Company completed a public sale of 3,162,500
shares of common stock for net proceeds of approximately $94,125,000.
(10) PREFERRED STOCK
In connection with the December 1997 amendment to the Company's research
and license agreement with Merck KGaA, Merck KGaA purchased from the Company in
December 1997 400,000 shares of the Company's series A preferred stock for total
consideration of $40,000,000. The holders of the series A preferred stock are
entitled to receive annual cumulative dividends of $6.00 per share. Dividends
accrue as of the issuance date of the series A preferred stock and are payable
on the outstanding series A preferred stock in cash annually on December 31 of
each year beginning December 31, 1999 or at the time of conversion or redemption
of the series A preferred stock on which the dividend is to be paid, whichever
is sooner. In
F-14
<PAGE> 54
December 1999, 100,000 shares of series A preferred stock were converted into
800,000 shares of common stock and an additional 100,000 shares of series A
preferred stock became convertible on January 1, 2000 into 249,610 shares of
common stock at a conversion price of $40.063 per share which was the average of
the closing prices for the common stock for the five trading days ended on
December 31, 1999. During the period from issuance through December 31, 1999,
the series A preferred stock was convertible at a price equal to $12.50 per
share; 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 on December 31,
2000; during the period from January 1, 2002 through December 31, 2002 the
series A preferred stock is convertible at a beneficial conversion price equal
to 88% of the average of the closing prices for the common stock for the five
trading days ending on December 31, 2001; and 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 on December
31, 2002. 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, the Company has the right to
require the holder of the series A preferred stock to convert all such shares
that may be convertible. The Company may also redeem in whole or in part any of
the series A preferred stock then outstanding at a redemption price of $120 per
preferred share, plus accrued and unpaid dividends thereon. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the holders of the series A preferred stock shall be entitled to receive in cash
out of the assets of the Company, whether from capital or from earnings
available for distribution to its stockholders, before any amount shall be paid
the holders of the common stock or holders of other classes or series of capital
stock of the Company, an amount equal to the preference in liquidation; provided
that, 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, the
Company calculated an assumed incremental yield of $5,455,000 at the date of
issuance based on the beneficial conversion feature noted above. Such 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 was 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, the Company has
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.
(11) STOCK OPTIONS AND WARRANTS
(A) STOCK OPTION PLANS:
In February 1986, the Company adopted and the shareholders thereafter
approved an Incentive Stock Option Plan and a Non-Qualified Stock Option Plan
(the "86 Plans"). In February 1996, the Company's Board of Directors adopted and
the shareholders thereafter approved an additional Incentive Stock Option Plan
and Non-Qualified Stock Option Plan (the "96 Plans"). In May 1998, the Company's
Board of Directors adopted an additional Non-Qualified Stock Option Plan (the
"98 Plan"), which shareholders are not required to approve. 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
employees, directors, consultants and advisors of the Company. 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
F-15
<PAGE> 55
terminated, expire ten years from the date of grant. Options granted under these
plans vest over one-to-five-year periods. At December 31, 1999, options to
purchase 7,193,301 shares of common stock were outstanding and 1,707,298 shares
were available for grant. Options may no longer be granted under the 86 Plans
pursuant to the terms of the 86 Plans.
A summary of stock option activity follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1996................................ 2,103,577 $ 5.80
Granted................................................ 456,194 6.62
Exercised.............................................. (147,450) 1.51
Canceled............................................... (35,226) 8.60
---------
Balance at December 31, 1997................................ 2,377,095 6.19
Granted................................................ 2,432,976 10.19
Exercised.............................................. (154,097) 3.98
Canceled............................................... (246,850) 11.04
---------
Balance at December 31, 1998................................ 4,409,124 8.20
Granted................................................ 3,514,260 24.44
Exercised.............................................. (671,305) 7.92
Canceled............................................... (58,778) 10.77
---------
Balance at December 31, 1999................................ 7,193,301 $16.13
=========
</TABLE>
In May 1996, the Company granted an officer an option to purchase
225,000 shares of the Company's common stock at an exercise price below the
market price of the stock on the date of grant. The Company has recorded
compensation expense of $150,000, $150,000 and $279,000 in the years ended
December 31, 1999, 1998 and 1997, respectively, as prescribed under APB Opinion
No. 25.
In September 1998 and January 1999, the Company granted options to each
of its Vice President of Marketing and Vice President of Product and Process
Development to purchase 60,000 shares of common stock. 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.
During the years ended December 31, 1999, 1998 and 1997, the Company
granted options to purchase 84,000, 124,000, and 32,000 shares, respectively, of
its common stock to certain Scientific Advisory Board members and outside
consultants in consideration for future services. The fair value of these grants
was calculated using the Black-Scholes option pricing model. See Note 11(c) for
weighted average assumptions used. During the years ended December 31, 1999,
1998 and 1997, the Company recognized approximately $2,411,000, $540,000, and
$189,000, respectively, in compensation expense relating to the options granted
to Scientific Advisory Board members and outside consultants. During the years
ended December 31, 1999, 1998 and 1997, the Company granted options to outside
members of its Board of Directors to purchase approximately 155,000, 44,000 and
153,000 shares, respectively, of its common stock. No compensation expense was
recorded for these option grants.
In May 1999, the Company's stockholders approved the grant of an option
to the 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 original terms of the options provide that they vest in their entirety seven
years from the date of grant, but may vest earlier as to 20% of the shares
annually if certain targets in the Company's common stock price are achieved. In
December 1999, the Compensation and Stock Option Committee amended the options,
subject to shareholder approval, to provide that the tranches vest immediately
upon the target prices for each tranche being achieved.
F-16
<PAGE> 56
During April 1995, the Company completed the sale of the remaining
one-half of its shares of capital stock of Cadus Pharmaceutical Corporation
("Cadus") for $3.0 million to High River Limited Partnership ("High River"). In
exchange for receiving a now-expired right to repurchase all outstanding shares
of capital stock of Cadus held by High River, the Company granted to High River
two options to purchase shares of common stock. One option is for 150,000 shares
at an exercise price per share equal to $2.00, subject to adjustment under
certain circumstances, and the other option is for 300,000 shares at an exercise
price per share equal to $0.69, subject to adjustment under certain
circumstances. Both options will expire on April 26, 2000. The 450,000 options
have a weighted average exercise price of $1.13.
(B) WARRANTS
As of December 31, 1999, a total of 1,768,370 shares of common stock
were issuable upon exercise of outstanding warrants. Such warrants have been
issued to certain officers, directors and other employees of the Company,
certain Scientific Advisory Board members, certain investors and certain credit
providers and investors.
A summary of warrant activity follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1996................................ 3,276,845 $2.41
Granted................................................ 397,000 1.50
Exercised.............................................. (869,500) 1.56
Canceled............................................... (397,000) 1.50
--------- -----
Balance at December 31, 1997................................ 2,407,345 2.71
Granted................................................ -- --
Exercised.............................................. (143,755) 1.39
Canceled............................................... -- --
--------- -----
Balance at December 31, 1998................................ 2,263,590 2.80
Granted................................................ -- --
Exercised.............................................. (495,220) 2.54
Canceled............................................... -- --
--------- -----
Balance at December 31, 1999................................ 1,768,370 $2.87
========= =====
</TABLE>
In March 1997, the Company extended for a two-year period the term of an
officer's warrant to purchase 397,000 shares of the Company's common stock at a
per share exercise price equal to $1.50. In connection with this transaction,
the Company recognized non-cash compensation expense of approximately
$2,233,000. The outstanding warrants (which are all currently exercisable)
expire and are exercisable for the number of shares of common stock as shown
below:
<TABLE>
<CAPTION>
<S> <C>
March 2000.................................................. 6,150
July 2000................................................... 72,000
August 2000................................................. 509,000
November 2000............................................... 12,720
March 2001.................................................. 1,500
May 2001.................................................... 792,700
June 2003................................................... 12,000
December 2004............................................... 12,300
December 2005............................................... 350,000
---------
Total.................................................. 1,768,370
=========
</TABLE>
F-17
<PAGE> 57
(C) SFAS NO. 123 DISCLOSURES:
The following table summarizes the weighted average fair value of stock
options and warrants granted to employees and directors during the years ended
December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
OPTION PLANS
-------------------------------------------------------------
1999 1998 1997
------------------- ------------------ ------------------
SHARES(1) $ SHARES(1) $ SHARES(1) $
--------- ------ --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Exercise price is less than market
value at date of grant............. 100,000(2) $10.87 -- $ -- -- $ --
Exercise price equals market value at
date of grant...................... 3,330,260 $16.59 900,476 $5.52 424,194 $4.29
Exercise price exceeds market value
at date of grant................... -- $ 0.00 1,408,500 $6.28 -- $ --
</TABLE>
- ---------------
(1) Does not include 84,000 in 1999, 124,000 shares in 1998 and 32,000 shares in
1997 under options granted to non-employees. The fair value of these
non-employee grants has been recorded as compensation expense as prescribed
by SFAS No. 123.
(2) The Company has recorded compensation expense of $25,000 in the year ended
December 31, 1999 in connection with these grants as prescribed under APB
Opinion No. 25.
The only warrant grant in 1997 was the extension of an officer's warrant
to purchase 397,000 shares of common stock. The extension has been considered a
cancellation of the original grant and the issuance of a new below market grant.
Accordingly, the Company recorded compensation expense of $2,233,000 in the year
ended December 31, 1997 as prescribed under APB Opinion No. 25. The fair value
of this grant was approximately $2,346,000 or $5.91 per share.
The fair value of stock options and warrants was estimated using the
Black-Scholes option pricing model. The Black-Scholes model considers a number
of variables including the exercise price and the expected life of the option,
the current price of the common stock, the expected volatility and the dividend
yield of the underlying common stock, and the risk-free interest rate during the
expected term of the option. The following summarizes the weighted average
assumptions used:
<TABLE>
<CAPTION>
OPTION PLANS
------------------------------ WARRANTS
1999 1998 1997 1997
---- ---- ---- --------
<S> <C> <C> <C> <C>
Expected life (years)................................ 5.9 5.3 3.5 2.0
Interest rate........................................ 5.47% 5.58% 6.00% 6.00%
Volatility........................................... 79.96% 76.03% 72.29% 72.29%
Dividend yield....................................... 0% 0% 0% 0%
</TABLE>
The following table summarizes information concerning stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING WEIGHTED NUMBER WEIGHTED
NUMBER CONTRACTUAL AVERAGE EXERCISABLE AVERAGE
RANGE OF OUTSTANDING TERM EXERCISE AT EXERCISE
EXERCISE PRICES AT 12/31/99 (YEARS) PRICE 12/31/99 PRICE
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.563-5.97......................... 1,025,856 3.88 $ 3.12 997,358 $ 3.04
6.00-10.875......................... 1,268,873 7.46 8.57 880,049 8.34
11.375-18.00........................ 1,728,687 8.53 11.88 707,376 11.65
18.25............................... 1,650,250 9.39 18.25 -- --
19.00-38.00......................... 1,519,635 9.90 33.77 -- --
--------- ---------
7,193,301 8.16 $16.13 2,584,783 $ 7.20
========= =========
</TABLE>
F-18
<PAGE> 58
As of December 31, 1999, the outstanding warrants to purchase 1,768,370
common shares were all exercisable and have a weighted average remaining
contractual term of 2.0 years. The weighted average remaining contractual term
at December 31, 1999 for the 6,150 outstanding warrants exercisable at $.63 per
share is .2 years, the 12,300 exercisable at $.69 per share is 5.0 years, the
1,050,420 exercisable at $1.50 per share is 1.1 years, the 290,500 exercisable
at $3.00 per share is .6 years, the 350,000 exercisable at $5.50 per share is
6.0 years, the 12,000 exercisable at $7.00 per share is 3.5 years, the 6,000
exercisable at $10.00 per share is .9 years, and the 41,000 exercisable at
$13.33 per share is 1.3 years.
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its options and warrants. Except as previously indicated, no
compensation cost has been recognized for its stock option and warrant grants.
Had compensation cost for the Company's stock option grants been determined
based on the fair value at the grant dates for awards consistent with the method
of SFAS No. 123, the Company's net loss to common stockholders and loss per
common share would have been increased to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net loss to common stockholders:
As reported................................. $(38,324,000) $(25,050,000) $(15,654,000)
Pro forma................................... (47,606,000) (32,306,000) (17,283,000)
Basic and diluted loss per common share:
Basic and diluted
As reported................................. $ (1.51) $ (1.03) $ (0.67)
Pro forma................................... (1.87) (1.33) (0.74)
</TABLE>
The pro forma effect on the loss for the years ended December 31, 1999,
1998 and 1997 is not necessarily indicative of the pro forma effect on future
years' operating results since it does not take into effect the pro forma
compensation expense related to grants made prior to January 1, 1995.
(12) EMPLOYEE STOCK PURCHASE PLAN
In April 1998, the Company's Board of Directors adopted the ImClone
Systems Incorporated 1998 Employee Stock Purchase Plan (the "ESPP"), subject to
shareholders' approval, which was received in May 1998. The ESPP, as amended,
allows eligible employees to purchase shares of the Company's common stock
through payroll deductions at the end of quarterly purchase periods. To be
eligible, an individual must be an employee, work more than 20 hours per week
for at least five months per calendar year and not own greater than 5% of the
Company's common stock. Pursuant to the ESPP, the Company has reserved 500,000
shares of common stock for issuance. Prior to the first day of each quarterly
purchase period, each eligible employee may elect to participate in the ESPP.
The participant is granted an option to purchase a number of shares of common
stock determined by dividing the participants' contributions accumulated prior
to the last day of the quarterly period by the purchase price. The participant
has the ability to withdraw from the ESPP until the second to last day of the
quarter. The purchase price is equal to 85% of the market price per share on the
last day of each quarterly purchase period. An employee may purchase stock from
the accumulation of payroll deductions of up to a maximum of 15% of his or her
compensation, limited to $25,000 per year. Participating employees have
purchased 6,753 shares of common stock at an aggregate purchase price of
$177,000 for the year ended December 31, 1999 and 4,388 shares of common stock
at an aggregate purchase price of $33,000 for the year ended December 31, 1998.
As of December 31, 1999, 488,859 shares were available for future purchases. No
compensation expense has been recorded in connection with the ESPP.
(13) INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1999 and December 31, 1998 are presented below.
F-19
<PAGE> 59
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Research and development credit carryforward.............. $ 7,714,000 $ 3,642,000
Compensation relating to the issuance of stock options and
warrants............................................... 3,142,000 376,000
Net operating loss carryforwards.......................... 64,512,000 57,169,000
Other..................................................... 8,542,000 3,424,000
------------ ------------
Total gross deferred tax assets............................. 83,910,000 64,611,000
Less valuation allowance.................................. (83,910,000) (64,611,000)
------------ ------------
Net deferred tax assets................................... -- --
------------ ------------
Deferred tax liabilities:
Total gross deferred tax liabilities...................... -- --
------------ ------------
Net deferred tax asset.................................... $ -- $ --
============ ============
</TABLE>
A valuation allowance is provided when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The net
change in the total valuation allowance for the years ended December 31, 1999
and 1998 was an increase of $19,299,000 and $8,333,000, respectively. The tax
benefit assumed using the federal statutory tax rate of 34% has been reduced to
an actual benefit of zero due principally to the aforementioned valuation
allowance.
At December 31, 1999, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $150,600,000, which expire at
various dates from 2000 through 2019. At December 31, 1999, the Company had
research credit carryforwards of approximately $7,714,000, which expire at
various dates from 2009 through 2019. Pursuant to Section 382 of the Internal
Revenue Code of 1986, as amended, the annual utilization of a company's net
operating loss and research credit carryforwards may be limited if the Company
experiences a change in ownership of more than 50 percentage points within a
three-year period. Since 1986, the Company experienced at least two such
ownership changes. Accordingly, the Company's net operating loss carryforwards
available to offset future federal taxable income arising before such ownership
changes are limited to $5,159,000 annually. Similarly, the Company is restricted
in using its research credit carryforwards arising before such ownership changes
to offset future federal income taxes. The Company has not yet determined
whether the November 1999 public common stock offering and the February 2000
private placement of convertible notes resulted in additional ownership changes
that would further limit the use of net operating loss and research credit
carryforwards.
(14) COMMITMENTS
LEASES
The Company leases its New York City facility under an operating lease,
which expires in December 2004. The annual minimum rent for 1999 was $720,000
and increases 3% annually for each year thereafter. Rent expense for the New
York City facility was approximately $817,000, $574,000, and $554,000 for the
years ended December 31, 1999, 1998 and 1997, respectively. See also Note 6.
F-20
<PAGE> 60
Future minimum lease payments under the capital and operating leases are
as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ----------
<S> <C> <C>
Years ending December 31, 2000...................... $1,031,000 $ 780,000
2001........................................... 702,000 794,000
2002........................................... 431,000 815,000
2003........................................... 61,000 823,000
2004........................................... -- 835,000
---------- ----------
2,225,000 4,047,000
Less interest expense............................... (215,000) --
---------- ----------
$2,010,000 $4,047,000
========== ==========
</TABLE>
SUPPORTED RESEARCH
The Company has entered into various research and license agreements
with certain academic institutions and others to supplement the Company's
research activities and to obtain for the Company rights to certain technology.
The agreements generally require the Company to fund the research and to pay
royalties based upon percentages of revenues, if any, on sales of products
developed from technology arising under these agreements.
CONSULTING AGREEMENTS
The Company has consulting agreements with several of its Scientific
Advisory Board members and other consultants. These agreements generally are for
a term of one year or are terminable at the Company's option.
CONTRACT SERVICES
In April 1999, the Company signed a definitive agreement with BI Pharma
for the further development, production scale-up and manufacture of the
Company's lead therapeutic product candidate, IMC-C225, for use in human
clinical trials. The total cost under the agreement was DM11,440,000 or
$6,283,000 based on the foreign currency rate on the dates of payment. Of this
amount, $4,451,000 has been paid through December 31, 1999. All of the material
manufactured under this agreement has been provided to Merck KGaA for use in
clinical trials in Europe and Merck KGaA has agreed to reimburse the Company
approximately $4,442,000. This amount has been accounted for as reduction to
research and development expense in the fourth quarter of 1999 and is included
as a component of other current assets on the accompanying consolidated balance
sheet as of December 31, 1999.
In December 1999, the Company signed a development and manufacturing
services agreement with Lonza Biologies PLC ("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 the Company's reference material. Under this
agreement, Lonza will manufacture four 5,000 liter production runs under cGMP
conditions of material that may be used for clinical and/or commercial supply.
The Company also has agreed in principle with Lonza to the material terms of a
three-year commercial supply agreement for which the definitive agreement is
being completed.
The Company is building a new manufacturing facility adjacent to its
current manufacturing facility in New Jersey. This new facility will contain
three 10,000 liter fermentors and will be dedicated to the commercial production
of IMC-C225. The 80,000 square foot facility will cost approximately $45 million
and will be built on a lot of land purchased in December 1999 for $700,000. The
Company has incurred approximately $3,318,000 in engineering and other
pre-construction costs associated with the new manufacturing facility through
December 31, 1999.
F-21
<PAGE> 61
(15) RETIREMENT PLANS
The Company maintains a 401(k) retirement plan available to all
full-time, eligible employees. Employee contributions are voluntary and are
determined on an individual basis, limited to the maximum amount allowable under
federal tax regulations. The Company, at its discretion, may make certain
contributions to the plan. The Company contributed approximately $70,000 and
$47,000 to the plan for the years ended December 31, 1999 and 1998,
respectively. No such contributions were made to the plan during the year ended
December 31, 1997.
(16) SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING
ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
-------- --------- ----------
<S> <C> <C> <C>
Cash paid during the year for:
Interest, including amounts capitalized of $204,000 in
1999................................................ $497,000 $ 422,000 $ 707,000
======== ========= ==========
Non-cash investing and financing activities:
Finova capital asset and lease obligations additions... 532,000 731,000 1,324,000
======== ========= ==========
Other capital lease obligations........................ -- -- 28,000
======== ========= ==========
Unrealized gain (loss) on securities
available-for-sale.................................. 645,000 (676,000) 101,000
======== ========= ==========
Warrant exercise paid with a note from officer and
stockholder......................................... -- 131,000 --
======== ========= ==========
Accrued interest on note receivable -- officer and
stockholder......................................... 11,000 11,000 --
======== ========= ==========
</TABLE>
(17) RELATED PARTY TRANSACTIONS
The Company has scientific consulting agreements with two members of the
Board of Directors. Expenses relating to these agreements were $112,000 for each
of the years ended December 31, 1999, 1998 and 1997.
Through March 1995, the Company made miscellaneous non-interest-bearing
cash advances to the President and CEO of the Company totaling approximately
$156,000. The officer provided the Company with a demand promissory note
pursuant to which the officer was obligated to repay the debt over a twenty-four
month period ended April 30, 1997. In March 1997, the Company accepted a new
promissory note (the "new promissory note") in the aggregate amount of $110,000
from the officer. The new promissory note was payable as to $15,000 no later
than May 15, 1997 and the remainder upon the earlier of on demand by the Company
or December 31, 1997 and bore interest at the rate of 5% compounded quarterly.
The new promissory note covered the remaining balance of the original note,
interest thereon and additional miscellaneous cash advances made since the date
of the original note totaling $15,000. At December 31, 1997, the new promissory
note was paid in full by the officer.
In January 1998, the Company accepted a promissory note totaling
approximately $131,000 from its President and CEO in connection with the
exercise of a warrant to purchase 87,305 shares of the Company's common stock.
The note is due no later than two years from issuance and is full recourse.
Interest is payable on the first anniversary date of the promissory note and on
the stated maturity or any accelerated maturity at the annual rate of 8.5%. At
December 31, 1999, the total amount due the Company, including interest, was
approximately $142,000 and is classified in the stockholders' equity section of
the consolidated balance sheet as a note receivable from officer and
stockholder.
In October 1998, the Company accepted an unsecured promissory note
totaling $100,000 from its Executive Vice President and COO. The note was
payable on demand including interest at the annual rate of 8.25% for the period
that the loan is outstanding. In April 1999, the note, including all interest,
was paid in full.
F-22
<PAGE> 62
The Company uses Concord Capital Management International, a New
York-based money management firm, to manage the investment of a portion of the
Company's debt security portfolio. The Company's Chairman of the Board is a
limited partner of Concord Capital Management International. The Company has
paid investment fees to Concord Capital Management International of
approximately $60,000, $82,000 and $40,000 in the years ended December 31, 1999,
1998 and 1997, respectively.
In January 1999, the Company accepted an unsecured promissory note
totaling $60,000 from its Vice President, Product and Process Development. The
note was payable upon the earlier of the Company's demand or July 28, 1999
including interest at an annual rate of 8.75% for the period that the loan was
outstanding. The loan was made in connection with the acceptance of employment
and the corresponding relocation of the officer. In July 1999, the note,
including all interest, was paid in full.
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
For the years ended December 31, 1999 and 1998, the following methods
and assumptions were used to estimate the fair value of each class of financial
instrument:
CASH AND CASH EQUIVALENTS, OTHER RECEIVABLES, ACCOUNTS PAYABLE, ACCRUED AND
OTHER CURRENT LIABILITIES
The carrying amounts approximate fair value because of the short
maturity of those instruments.
LONG-TERM DEBT
Discounted cash flow analyses were used to determine the fair value of
long-term debt because quoted market prices on these instruments were
unavailable. The fair value of these instruments approximated the carrying
amount.
(19) SUBSEQUENT EVENTS
In February 2000, the Company completed a private placement of
$240,000,000 in convertible subordinated notes due March 1, 2005. The Company
received net proceeds from this offering of approximately $232,200,000, after
deducting costs associated with the offering. The notes bear interest at an
annual rate of 5.5% payable semi-annually on September 1 and March 1 of each
year, beginning September 1, 2000. The holders may convert all or a portion of
the notes 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 the common stock of the Company occur. The notes will be subordinated
to all existing and future senior indebtedness. The Company 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 (1) 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 (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 the notes are redeemed
under these circumstances, the Company will make an additional payment of
$152.54 per $1,000 aggregate principal amount of notes, minus the amount of any
interest actually paid on the note prior to the date the notice was mailed. On
or after March 6, 2003, the Company may redeem some or all of the notes at
specified redemption prices, plus accrued and unpaid interest to the day
preceding the redemption date.
In January and February 2000, the Company entered into financing
arrangements with two financing companies under which the Company may obtain at
its option up to an aggregate of $25,000,000 for utilization primarily in
connection with the build-out of the Company's new commercial manufacturing
facility. The funds may be obtained through multiple capital leases for not less
than specified minimum amounts. Each lease contains a balloon purchase option at
the end of a 48-month term. The Company paid $100,000 in application fees
associated with these agreements which may be applied against future principal
and interest payments.
F-23
<PAGE> 1
EXHIBIT 10.74
Execution Copy
IMCLONE SYSTEMS INCORPORATED
and
THE BANK OF NEW YORK
as Trustee
---------------------------
INDENTURE
Dated as of
February 29, 2000
---------------------------
5 1/2% Convertible Subordinated Notes due 2005
<PAGE> 2
Reconciliation and Tie Between the Trust Indenture Act of 1939 and Indenture,
dated as of February 29, 2000, between ImClone Systems Incorporated and The Bank
of New York as Trustee.
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
<S> <C> <C>
Section 310 (a)(1)........................................................................8.9
(a)(2)........................................................................8.9
(a)(3).......................................................................N.A.
(a)(4).......................................................................N.A.
(a)(5)........................................................................8.9
(b)..........................................................8.8; 8.9; 8.10; 8.11
Section 311 (a)..........................................................................8.13
(b)..........................................................................8.13
(b)(2).......................................................................8.13
Section 312 (a)...................................................................6.1; 6.2(a)
(b)........................................................................6.2(b)
(c)........................................................................6.2(c)
Section 313 (a)........................................................................6.3(a)
(b)........................................................................6.3(a)
(c)........................................................................6.3(a)
(d)........................................................................6.3(b)
Section 314 (a)...........................................................................6.4
(b)..........................................................................N.A.
(c)(1).......................................................................16.5
(c)(2).......................................................................16.5
(c)(3).......................................................................N.A.
(d)..........................................................................N.A.
(e)..........................................................................16.5
Section 315 (a)...........................................................................8.1
(b)...........................................................................7.8
(c)...........................................................................8.1
(d)...........................................................................8.1
(d)(1).....................................................................8.1(a)
(d)(2).....................................................................8.1(b)
(d)(3).....................................................................8.1(c)
(e)...........................................................................7.9
Section 316 (a)...........................................................................7.7
(a)(1)(A).....................................................................7.7
(a)(1)(B).....................................................................7.7
(a)(2).......................................................................N.A.
(b)...........................................................................7.4
Section 317 (a)(1)........................................................................7.5
(a)(2)........................................................................7.5
(b)...........................................................................5.4
</TABLE>
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<TABLE>
<S> <C> <C>
Section 318 (a)..........................................................................16.7
</TABLE>
* Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
** Note: N.A. means Not Applicable.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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ARTICLE 1 DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions.......................................................................2
ARTICLE 2 ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
SECTION 2.01. Designation Amount and Issue of Notes.............................................9
SECTION 2.02. Form of Notes....................................................................10
SECTION 2.03. Date and Denomination of Notes; Payments of Interest..............................10
SECTION 2.04. Execution of Notes...............................................................13
SECTION 2.05. Exchange and Registration of Transfer of Notes; Restrictions on
Transfer; Depositary ..........................................................13
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes.......................................22
SECTION 2.07. Temporary Notes..................................................................23
SECTION 2.08. Cancellation of Notes Paid, Etc..................................................24
SECTION 2.09. CUSIP Numbers....................................................................24
ARTICLE 3 REDEMPTION OF NOTES
SECTION 3.01. Optional Redemption by the Company...............................................24
SECTION 3.02. Notice of Redemptions; Selection of Notes........................................26
SECTION 3.03. Payment of Notes Called for Redemption...........................................28
SECTION 3.04. Conversion Arrangement on Call for Redemption....................................29
SECTION 3.05. Redemption at Option of Holders..................................................30
ARTICLE 4 SUBORDINATION OF NOTES
SECTION 4.01. Agreement of Subordination.......................................................32
SECTION 4.02. Payments to Noteholders..........................................................33
SECTION 4.03. Subrogation of Notes.............................................................37
SECTION 4.04. Authorization to Effect Subordination............................................38
SECTION 4.05. Notice to Trustee................................................................38
</TABLE>
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<TABLE>
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SECTION 4.06. Trustee's Relation to Senior Indebtedness........................................39
SECTION 4.07. No Impairment of Subordination...................................................40
SECTION 4.08. Certain Conversions Not Deemed Payment...........................................40
SECTION 4.09. Article Applicable to Paying Agents..............................................41
SECTION 4.10. Senior Indebtedness Entitled to Rely.............................................41
SECTION 4.11. Reliance on Judicial Order or Certificate of Liquidating Agent...................41
ARTICLE 5 PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.01. Payment of Principal, Premium and Interest.......................................41
SECTION 5.02. Maintenance of Office or Agency..................................................42
SECTION 5.03. Appointments to Fill Vacancies in Trustee's Office...............................42
SECTION 5.04. Provisions as to Paying Agent....................................................43
SECTION 5.05. Existence........................................................................44
SECTION 5.06. Maintenance of Properties........................................................44
SECTION 5.07. Payment of Taxes and Other Claims................................................44
SECTION 5.08. Rule 144A Information Requirement................................................45
SECTION 5.09. Stay, Extension and Usury Laws...................................................45
SECTION 5.10. Compliance Certificate...........................................................46
SECTION 5.11. Liquidated Damages Notice........................................................46
ARTICLE 6 NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 6.01. Noteholders' Lists...............................................................47
SECTION 6.02. Preservation and Disclosure of Lists.............................................47
SECTION 6.03. Reports by Trustee...............................................................47
SECTION 6.04. Reports by Company...............................................................48
ARTICLE 7 REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT
SECTION 7.01. Events of Default................................................................48
SECTION 7.02. Payments of Notes on Default; Suit Therefor......................................50
SECTION 7.03. Application of Monies Collected by Trustee.......................................52
SECTION 7.04. Proceedings by Noteholder........................................................53
SECTION 7.05. Proceedings by Trustee...........................................................54
SECTION 7.06. Remedies Cumulative and Continuing...............................................54
SECTION 7.07. Direction of Proceedings and Waiver of Defaults by Majority of Noteholders.......55
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 7.08. Notice of Defaults...............................................................55
SECTION 7.09. Undertaking to Pay Costs.........................................................56
ARTICLE 8 THE TRUSTEE
SECTION 8.01. Duties and Responsibilities of Trustee...........................................56
SECTION 8.02. Reliance on Documents, Opinions, Etc.............................................58
SECTION 8.03. No Responsibility for Recitals, Etc..............................................59
SECTION 8.04. Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes.............59
SECTION 8.05. Monies to Be Held in Trust.......................................................59
SECTION 8.06. Compensation and Expenses of Trustee.............................................60
SECTION 8.07. Officers' Certificate as Evidence................................................60
SECTION 8.08. Conflicting Interests of Trustee.................................................61
SECTION 8.09. Eligibility of Trustee...........................................................61
SECTION 8.10. Resignation or Removal of Trustee................................................61
SECTION 8.11. Acceptance by Successor Trustee..................................................63
SECTION 8.12. Succession by Merger, Etc........................................................63
SECTION 8.13. Preferential Collection of Claims................................................64
SECTION 8.14. Trustee's Application for Instructions from the Company..........................64
ARTICLE 9 THE NOTEHOLDERS
SECTION 9.01. Action by Noteholders............................................................65
SECTION 9.02. Proof of Execution by Noteholders................................................65
SECTION 9.03. Who Are Deemed Absolute Owners...................................................65
SECTION 9.04. Company-owned Notes Disregarded..................................................66
SECTION 9.05. Revocation of Consents; Future Holders Bound.....................................66
ARTICLE 10 MEETINGS OF NOTEHOLDERS
SECTION 10.01. Purpose of Meetings.............................................................67
SECTION 10.02. Call of Meetings by Trustee.....................................................67
SECTION 10.03. Call of Meetings by Company or Noteholders......................................67
SECTION 10.04. Qualifications for Voting.......................................................68
SECTION 10.05. Regulations.....................................................................68
SECTION 10.06. Voting..........................................................................69
SECTION 10.07. No Delay of Rights by Meeting...................................................69
</TABLE>
ARTICLE 11 SUPPLEMENTAL INDENTURES
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<TABLE>
<S> <C> <C>
SECTION 11.01. Supplemental Indentures Without Consent of Noteholders..........................69
SECTION 11.02. Supplemental Indenture with Consent of Noteholders..............................71
SECTION 11.03. Effect of Supplemental Indenture................................................72
SECTION 11.04. Notation on Notes...............................................................72
SECTION 11.05. Evidence of Compliance of Supplemental Indenture to Be Furnished to Trustee.....73
ARTICLE 12 CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 12.01. Company May Consolidate, Etc on Certain Terms...................................73
SECTION 12.02. Successor Corporation to Be Substituted.........................................73
SECTION 12.03. Opinion of Counsel to Be Given Trustee..........................................74
ARTICLE 13 SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01. Discharge of Indenture..........................................................75
SECTION 13.02. Deposited Monies to Be Held in Trust by Trustee.................................75
SECTION 13.03. Paying Agent to Repay Monies Held...............................................76
SECTION 13.04. Return of Unclaimed Monies......................................................76
SECTION 13.05. Reinstatement...................................................................76
ARTICLE 14 IMMUNITY OF INCORPORATIONS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 14.01. Indenture and Notes Solely Corporate Obligations................................77
ARTICLE 15 CONVERSION OF NOTES
SECTION 15.01. Right to Convert................................................................77
SECTION 15.02. Exercise of Conversion Privilege; Issuance of Common Stock on Conversion;
No Adjustment for Interest or Dividends........................................78
SECTION 15.03. Cash Payments in Lieu of Fractional Shares......................................79
SECTION 15.04. Conversion Price................................................................80
SECTION 15.05. Adjustment of Conversion Price..................................................80
SECTION 15.06. Effect of Reclassification, Consolidation, Merger or Sale.......................91
SECTION 15.07. Taxes on Shares Issued..........................................................92
</TABLE>
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<TABLE>
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SECTION 15.08. Reservation of Shares; Shares to Be Fully Paid; Compliance with Governmental
Requirements; Listing of Common Stock.........................................92
SECTION 15.09. Responsibility of Trustee.......................................................93
SECTION 15.10. Notice to Holders Prior to Certain Actions......................................94
ARTICLE 16 MISCELLANEOUS PROVISIONS
SECTION 16.01. Provisions Binding on Company's Successors......................................95
SECTION 16.02. Official Acts by Successor Corporation..........................................95
SECTION 16.03. Addresses for Notices, Etc......................................................95
SECTION 16.04. Governing Law...................................................................96
SECTION 16.05. Evidence of Compliance with Conditions Precedent; Certificates to Trustee.......96
SECTION 16.06. Legal Holidays..................................................................96
SECTION 16.07. Trust Indenture Act.............................................................96
SECTION 16.08. No Security Interest Created....................................................97
SECTION 16.09. Benefits of Indenture...........................................................97
SECTION 16.10. Table of Contents, Headings, Etc................................................97
SECTION 16.11. Authenticating Agent............................................................97
SECTION 16.12. Execution in Counterparts.......................................................98
SECTION 16.13. Severability....................................................................98
</TABLE>
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vii
<PAGE> 11
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viii
<PAGE> 12
INDENTURE
INDENTURE, dated as of February 29, 2000, between ImClone Systems
Incorporated, a Delaware corporation (hereinafter called the "Company"), having
its principal office at 180 Varick Street, 7th Floor, New York, New York 10014,
and The Bank of New York , as trustee hereunder (hereinafter called the
"Trustee"), having its principal corporate trust office at 101 Barclay Street,
Floor 21 West, New York, New York, 10286.
W I T N E S S E T H:
--------------------
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 5 1/2% Convertible Subordinated Notes due 2005
(hereinafter called the "Notes"), in an aggregate principal amount not to exceed
$200,000,000 ($240,000,000, if the option is fully exercised by the Initial
Purchasers) and, to provide the terms and conditions upon which the Notes are to
be authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by
the Notes, a form of assignment, a form of option to elect repayment upon a
Fundamental Change, and a form of conversion notice to be borne by the Notes are
to be substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute this Indenture a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE 1
<PAGE> 13
DEFINITIONS
SECTION 1.1. Definitions. The terms defined in this Section 1.1 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture that are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this Indenture. The
words "herein", "hereof", "hereunder", and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as the
singular.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"ADDITIONAL PAYMENT" has the meaning specified in Section 3.1(a).
"BOARD OF DIRECTORS" means the Board of Directors of the Company or a
committee of such Board duly authorized to act for it hereunder.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which the banking institutions in The City of New
York or the city in which the Corporate Trust Office is located are authorized
or obligated by law or executive order to close or be closed.
"CLOSING PRICE" has the meaning specified in Section 15.5(h)(1).
"COMMISSION" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this Indenture such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
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"COMMON STOCK" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 15.6, however, shares issuable on conversion of Notes shall include
only shares of the class designated as common stock of the Company at the date
of this Indenture (namely, the Common Stock, par value $.001 per share) or
shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to redemption
by the Company; provided, however, that if at any time there shall be more than
one such resulting class, the shares of each such class then so issuable shall
be substantially in the proportion which the total number of shares of such
class resulting from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifications.
"COMPANY" means the corporation named as the "Company" in the first
paragraph of this Indenture, and, subject to the provisions of Article Twelve,
shall include its successors and assigns.
"COMPANY NOTICE" has the meaning specified in Section 3.5(b).
"CONVERSION PRICE" has the meaning specified in Section 15.4.
"CORPORATE TRUST OFFICE" or other similar term, means the designated
office of the Trustee at which at any particular time its corporate trust
business shall be administered, which office is, at the date as of which this
Indenture is dated, located at 101 Barclay Street, 21st Floor West, New York,
New York, 10286, Attention: Corporate Trust Trustee Administration.
"CUSTODIAN" means The Bank of New York, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"DEFAULT" means any event that is, or after notice or passage of time,
or both, would be, an Event of Default.
"DEFAULTED INTEREST" has the meaning specified in Section 2.3.
"DEPOSITARY" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.5(d) as the
Depositary with respect to such Notes, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
3
<PAGE> 15
"DESIGNATED SENIOR INDEBTEDNESS" means all Indebtedness existing on the
date hereof and Senior Indebtedness incurred after the date hereof. If any
payment made to any holder of any Designated Senior Indebtedness or its
Representative with respect to such Designated Senior Indebtedness is rescinded
or must otherwise be returned by such holder or Representative upon the
insolvency, bankruptcy or reorganization of the Company or otherwise, the
reinstated Indebtedness of the Company arising as a result of such rescission or
return shall constitute Designated Senior Indebtedness effective as of the date
of such rescission or return.
"EVENT OF DEFAULT" means any event specified in Section 7.1(a), (b),
(c), (d) or (e).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as in effect from time to
time.
"FUNDAMENTAL CHANGE" means the occurrence of any transaction or event
in connection with which all or substantially all of the Common Stock shall 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 is not all or substantially all common
stock listed (or, upon consummation of or immediately following such transaction
or event, which will be listed) on a United States national securities exchange
or approved for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities prices.
"GLOBAL NOTE" has the meaning set forth in Section 2.5(b).
"INDEBTEDNESS" means, with respect to any Person, and without
duplication, (a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of such Person for borrowed money (including obligations of the
Company in respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or similar instruments (whether or not the recourse of
the lender is to the whole of the assets of such Person or to only a portion
thereof), 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; (b) all reimbursement obligations and other
liabilities (contingent or otherwise) of such Person with respect to letters of
credit, bank guarantees or bankers" acceptances; (c) all obligations and
liabilities (contingent
4
<PAGE> 16
or otherwise) in respect of capital leases and real or personal property leases
of such Person required, in conformity with generally accepted accounting
principles, to be accounted for as capitalized lease obligations on the balance
sheet of such Person and all obligations and other liabilities (contingent or
otherwise) under any lease or related document (including a purchase agreement)
in connection with the lease of real property which provides that such Person is
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 the obligations of such Person under such lease or
related document to purchase or to cause a third party to purchase such leased
property; (d) all obligations of such Person (contingent or otherwise) with
respect to an interest rate or other swap, cap or collar agreement or foreign
currency hedge, exchange, purchase or similar instrument or agreement; (e) all
direct or indirect guaranties or similar agreement by such Person in respect of,
and obligations or liabilities (contingent or otherwise) of such Person to
purchase or otherwise acquire or otherwise assure a creditor against loss in
respect of, indebtedness, obligations or liabilities of another Person of the
kind described in clauses (a) through (d); (f) any indebtedness or other
obligations described in clauses (a) through (e) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
such Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person; and (g) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (f).
"INDENTURE" means this instrument as originally executed or, if amended
or supplemented as herein provided, as so amended or supplemented.
"INITIAL PURCHASERS" means Morgan Stanley & Co. Incorporated and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"LIQUIDATED DAMAGES" has the meaning specified for "Liquidated Damages
Amount" in Section 2(e) of the Registration Rights Agreement.
"NON-PAYMENT DEFAULT" has the meaning specified in Section 4.2(ii).
"NON-PROVISIONAL REDEMPTION" has the meaning specified in Section
3.1(b).
5
<PAGE> 17
"NON-PROVISIONAL REDEMPTION DATE" has the meaning specified in Section
3.1(b).
"NOTE" or "NOTES" means any Note or Notes, as the case may be,
authenticated and delivered under this Indenture, including the Global Note.
"NOTE REGISTER" has the meaning specified in Section 2.5(a).
"NOTE REGISTRAR" has the meaning specified in Section 2.5(a).
"NOTEHOLDER" or "HOLDER" as applied to any Note, or other similar terms
(but excluding the term "beneficial holder"), means any Person in whose name at
the time a particular Note is registered on the Note registrar"s books.
"NOTICE DATE" means the date of mailing of the notice of redemption
pursuant to Section 3.2.
"OFFICERS' CERTIFICATE" means a written certificate containing the
information specified in Section 16.5 signed in the name of the Company by its
Chairman of the Board, Chief Executive Officer, President or any Vice President
and by its Treasurer or any Assistant Treasurer, Controller or any Assistant
Controller, or Secretary or any Assistant Secretary of the Company, and
delivered to the Trustee.
"OPINION OF COUNSEL" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, or other counsel
reasonably acceptable to the Trustee.
"NON-PROVISIONAL REDEMPTION" has the meaning specified in Section
3.1(b).
"OUTSTANDING", when used with reference to Notes and subject to the
provisions of Section 9.4, means, as of any particular time, all Notes
authenticated and delivered by the Trustee under this Indenture, except:
(a) Notes theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(b) Notes, or portions thereof, (i) for the redemption of
which monies in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Company) or
(ii) which shall have been otherwise defeased in accordance with
Article Thirteen;
6
<PAGE> 18
(c) Notes paid pursuant to Section 2.6 or in lieu of which, or
in substitution for which, other Notes shall have been authenticated
and delivered pursuant to the terms of Section 2.6; and
(d) Notes converted into Common Stock pursuant to Article
Fifteen and Notes deemed not outstanding pursuant to Article Three.
"PAYMENT BLOCKAGE NOTICE" has the meaning specified in Section 4.2(ii).
"PERSON" means a corporation, an association, a partnership, a limited
liability company, an individual, a joint venture, a joint stock company, a
trust, an unincorporated organization or a government or an agency or a
political subdivision thereof.
"PORTAL MARKET" means The Portal Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.
"PREDECESSOR NOTE" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note, and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the lost, destroyed or
stolen Note that it replaces.
"PROVISIONAL REDEMPTION" means has the meaning specified in Section
3.1(a).
"PROVISIONAL REDEMPTION DATE" means has the meaning specified in
Section 3.1(a).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement, dated as of February 29, 2000, among the Company and the Initial
Purchasers, as amended from time to time in accordance with its terms.
"REPRESENTATIVE" means (a) the indenture trustee or other trustee,
agent or representative for holders of Senior Indebtedness or (b) with respect
to any Senior Indebtedness that does not have any such trustee, agent or other
representative, (i) in the case of such Senior Indebtedness issued pursuant to
an agreement providing for voting arrangements as among the holders or owners of
such
7
<PAGE> 19
Senior Indebtedness, any holder or owner of such Senior Indebtedness acting
with the consent of the required persons necessary to bind such holders or
owners of such Senior Indebtedness and (ii) in the case of all other such Senior
Indebtedness, the holder or owner of such Senior Indebtedness.
"RESPONSIBLE OFFICER", when used with respect to the Trustee, means an
officer of the Trustee in the Corporate Trust Office assigned and duly
authorized by the Trustee to administer this Indenture.
"RESTRICTED SECURITIES" has the meaning specified in Section 2.5(d).
"RULE 144A" means Rule 144A as promulgated under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.
"SENIOR INDEBTEDNESS" means the principal, premium, if any, interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness of the Company, whether outstanding
on the date of this Indenture or thereafter created, incurred, assumed,
guaranteed or in effect guaranteed by the Company (including all deferrals,
renewals, extensions or refundings of, or amendments, modifications or
supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such Indebtedness shall not be senior
in right of payment to the Notes or expressly provides that such Indebtedness is
"pari passu" or "junior" to the Notes. Notwithstanding the foregoing, the term
Senior Indebtedness shall not include any Indebtedness of the Company to any
subsidiary of the Company, a majority of the voting stock of which is owned,
directly or indirectly, by the Company. If any payment made to any holder of any
Senior Indebtedness or its Representative with respect to such Senior
Indebtedness is rescinded or must otherwise be returned by such holder or
Representative upon the insolvency, bankruptcy or reorganization of the Company
or otherwise, the reinstated Indebtedness of the Company arising as a result of
such rescission or return shall constitute Senior Indebtedness effective as of
the date of such rescission or return.
"SIGNIFICANT SUBSIDIARY" means, as of any date of determination, a
Subsidiary of the Company, if as of such date of determination either (a) the
assets of such subsidiary equal 10% or more of the Company"s total consolidated
assets or (b) the total revenue of which represented 10% or more of the
Company"s consolidated total revenue for the most recently completed fiscal
year.
8
<PAGE> 20
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or managing general partner of which is such Person or a
subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more subsidiaries of such Person (or any combination
thereof).
"TRADING DAY" has the meaning specified in Section 15.5(g)(5).
"TRIGGER EVENT" has the meaning specified in Section 15.5(d).
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended, as it was in force at the date of this Indenture, except as provided in
Sections 11.3 and 15.6; provided, however, that, in the event the Trust
Indenture Act of 1939 is amended after the date hereof, the term "Trust
Indenture Act" shall mean, to the extent required by such amendment, the Trust
Indenture Act of 1939 as so amended.
"TRUSTEE" means The Bank of New York and its successors and any
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a party and any successor trustee at the time serving
as successor trustee hereunder.
The definitions of certain other terms are as specified in Sections 2.5
and 3.5 and Article Fifteen.
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
SECTION 2.1. Designation Amount and Issue of Notes. The Notes shall be
designated as "51/2% Convertible Subordinated Notes due 2005". Notes not to
exceed the aggregate principal amount of $200,000,000 ($240,000,000, if the
option is fully exercised by the Initial Purchasers) (except pursuant to
Sections 2.5, 2.6, 3.3, 3.5 and 15.2 hereof) upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and
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deliver said Notes to or upon the written order of the Company, signed by its
Chairman of the Board, Chief Executive Officer, President or any Vice President
and by its Treasurer or any Assistant Treasurer, Controller or any Assistant
Controller or Secretary or any Assistant Secretary, without any further action
by the Company hereunder.
SECTION 2.2. Form of Notes. The Notes and the Trustee"s certificate of
authentication to be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage.
Any Global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect transfers or exchanges permitted hereby. Any
endorsement of a Global Note to reflect the amount of any increase or decrease
in the amount of outstanding Notes represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in such manner and
upon instructions given by the holder of such Notes in accordance with this
Indenture. Payment of principal of and interest and premium, if any, on any
Global Note shall be made to the holder of such Note.
The terms and provisions contained in the form of Note attached as
Exhibit A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
SECTION 2.3. Date and Denomination of Notes; Payments of Interest. The
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication and shall bear interest from the applicable
date in each case as specified on the face of the form of Note attached as
Exhibit A
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hereto. Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve (12) 30-day months.
The Person in whose name any Note (or its Predecessor Note) is
registered on the Note register at the close of business on any record date with
respect to any interest payment date shall be entitled to receive the interest
payable on such interest payment date, except (i) that the interest payable upon
redemption (unless the date of redemption is an interest payment date) will be
payable to the Person to whom principal is payable and (ii) as set forth in the
next succeeding sentence. In the case of any Note (or portion thereof) that is
converted into Common Stock during the period from (but excluding) a record date
to (but excluding) the next succeeding interest payment date either (x) if such
Note (or portion thereof) has been called for redemption on a redemption date
which occurs during such period, or is to be redeemed in connection with a
Fundamental Change on a Repurchase Date (as defined in Section 3.5) that occurs
during such period, the Company shall not be required to pay interest on such
interest payment date in respect of any such Note (or portion thereof) except to
the extent required to be paid upon redemption of such Note or portion thereof
pursuant to Section 3.3 or 3.5 hereof or (y) if such Note (or portion thereof)
has not been called for redemption on a redemption date that occurs during such
period and is not to be redeemed in connection with a Fundamental Change on a
Repurchase Date that occurs during such period, such Note (or portion thereof)
that is submitted for conversion during such period shall be accompanied by
funds equal to the interest payable on such succeeding interest payment date on
the principal amount so converted, as provided in the penultimate paragraph of
Section 15.2 hereof. Interest shall be payable at the office of the Company
maintained by the Company for such purposes in New York, New York, which shall
initially be an office or agency of the Trustee and may, as the Company shall
specify to the paying agent in writing by each record date, be paid either (i)
by check mailed to the address of the Person entitled thereto as it appears in
the Note register (provided that the holder of Notes with an aggregate principal
amount in excess of $2,000,000 shall, at the written election of such holder, be
paid by wire transfer in immediately available funds) or (ii) by transfer to an
account maintained by such Person located in the United States; provided,
however, that payments to the Depositary will be made by wire transfer of
immediately available funds to the account of the Depositary or its nominee. The
term "record date" with respect to any interest payment date shall mean the
February 15 or August 15 preceding the relevant March 1 or September 1,
respectively.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any March 1 or September 1 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder, and such Defaulted
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Interest shall be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Note and
the date of the payment (which shall be not less than twenty-five (25)
days after the receipt by the Trustee of such notice, unless the
Trustee shall consent to an earlier date), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Person entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a special record date for the payment of such Defaulted
Interest which shall be not more than fifteen (15) days and not less
than ten (10) days prior to the date of the proposed payment, and not
less than ten (10) days after the receipt by the Trustee of the notice
of the proposed payment, the Trustee shall promptly notify the Company
of such special record date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the special record date therefor to be mailed, first-class
postage prepaid, to each Noteholder at his address as it appears in the
Note register, not less than ten (10) days prior to such special record
date. Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Notes (or
their respective Predecessor Notes) were registered at the close of
business on such special record date and shall no longer be payable
pursuant to the following clause (2) of this Section 2.3.
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes
may be listed or designated for issuance, and upon such notice as may
be required by such exchange or automated quotation system, if, after
notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
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SECTION 2.4. Execution of Notes. The Notes shall be signed in the name
and on behalf of the Company by the manual or facsimile signature of its
Chairman of the Board, Chief Executive Officer, President or any Vice President
and attested by the manual or facsimile signature of its Secretary or any of its
Assistant Secretaries or its Treasurer or any of its Assistant Treasurers (which
may be printed, engraved or otherwise reproduced thereon, by facsimile or
otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 16.11), shall be entitled
to the benefits of this Indenture or be valid or obligatory for any purpose.
Such certificate by the Trustee (or such an authenticating agent) upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company, and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
SECTION 2.5. Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary.
(a) The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 5.2 being herein sometimes
collectively referred to as the "Note register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Notes and of transfers of Notes. The Note register shall be in
written form or in any form capable of being converted into written form within
a reasonably prompt period of time. The Trustee is hereby appointed "Note
registrar" for the purpose of registering Notes and transfers of Notes as herein
provided. The Company may appoint one or more co-registrars in accordance with
Section 5.2.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more
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new Notes of any authorized denominations and of a like aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture.
Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency maintained by the Company pursuant to
Section 5.2. Whenever any Notes are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Notes which
the Noteholder making the exchange is entitled to receive bearing registration
numbers not contemporaneously outstanding.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
All Notes presented or surrendered for registration of transfer or for
exchange, redemption or conversion shall (if so required by the Company or the
Note registrar) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, and the Notes shall
be duly executed by the Noteholder thereof or his attorney duly authorized in
writing.
No service charge shall be made to any holder for any registration of
transfer or exchange of Notes, but the Company may require payment by the holder
of a sum sufficient to cover any tax, assessment or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Notes.
Neither the Company nor the Trustee nor any Note registrar shall be
required to exchange or register a transfer of (a) any Notes for a period of
fifteen (15) days next preceding the mailing of a notice of redemption of Notes
to be redeemed, (b) any Notes or portions thereof called for redemption pursuant
to Section 3.2, (c) any Notes or portions thereof surrendered for conversion
pursuant to Article Fifteen or (d) any Notes or portions thereof tendered for
redemption (and not withdrawn) pursuant to Section 3.5.
(b) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, all Notes that, upon
initial issuance are beneficially owned by QIBs or as a result of a sale or
transfer after initial issuance are beneficially owned by QIBs, will be
represented by one or more Notes in global form registered in the name of the
Depositary or the nominee of the Depositary (the "Global Note"), except as
otherwise specified
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<PAGE> 26
below. The transfer and exchange of beneficial interests in any such Global Note
shall be effected through the Depositary in accordance with this Indenture and
the procedures of the Depositary therefor. The Trustee shall make appropriate
endorsements to reflect increases or decreases in the principal amounts of any
such Global Note as set forth on the face of the Note ("Principal Amount") to
reflect any such transfers. Except as provided below, beneficial owners of a
Global Note shall not be entitled to have certificates registered in their
names, will not receive or be entitled to receive physical delivery of
certificates in definitive form and will not be considered holders of such
Global Note.
(c) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, upon any transfer of a
definitive Note to a QIB in accordance with Rule 144A, and upon receipt of the
definitive Note or Notes being so transferred, together with a certification,
substantially in the form on the reverse of the Note, from the transferor that
the transfer is being made in compliance with Rule 144A (or other evidence
satisfactory to the Trustee), the Trustee shall make an endorsement on the
Global Note to reflect an increase in the aggregate Principal Amount of the
Notes represented by such Global Note, and the Trustee shall cancel such
definitive Note or Notes in accordance with the standing instructions and
procedures of the Depositary, the aggregate Principal Amount of the Notes
represented by such Global Note to be increased accordingly; provided, however,
that no definitive Note, or portion thereof, in respect of which the Company or
an Affiliate of the Company held any beneficial interest shall be included in
such Global Note until such definitive Note is freely tradable in accordance
with Rule 144(k) under the Securities Act, provided further that the Trustee
shall issue Notes in definitive form upon any transfer of a beneficial interest
in the Global Note to the Company or any Affiliate of the Company.
Upon any sale or transfer of a Note to an Institutional Accredited
Investor (other than pursuant to a registration statement that has been declared
effective under the Securities Act), such Institutional Accredited Investor
shall, prior to such sale or transfer, furnish to the Company and/or the Trustee
a signed letter containing representations and agreements relating to
restrictions on transfer substantially in the form set forth in Exhibit B to
this Indenture. Upon any transfer of a beneficial interest in the Global Note to
an Institutional Accredited Investor, the Trustee shall make an endorsement on
the Global Note to reflect a decrease in the aggregate Principal Amount of the
Notes represented by such Global Note, and the Company shall execute a
definitive Note or Notes in exchange therefore, and the Trustee, upon receipt of
such definitive Note or Notes and the written order of the Company, shall
authenticate and deliver such, definitive Note or Notes.
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Any Global Note may be endorsed with or have incorporated in the text
thereof such legends or recitals or changes not inconsistent with the provisions
of this Indenture as may be required by the Custodian, the Depositary or by the
National Association of Securities Dealers, Inc. in order for the Notes to be
tradeable on The Portal Market or as may be required for the Notes to be
tradeable on any other market developed for trading of securities pursuant to
Rule 144A or required to comply with any applicable law or any regulation
thereunder or with the rules and regulations of any securities exchange or
automated quotation system upon which the Notes may be listed or traded or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this Section 2.5(d) to
bear the legend set forth in this Section 2.5(d) (together with any Common Stock
issued upon conversion of the Notes and required to bear the legend set forth in
Section 2.5(e), collectively, the "Restricted Securities") shall be subject to
the restrictions on transfer set forth in this Section 2.5(d) (including those
set forth in the legend set forth below) unless such restrictions on transfer
shall be waived by written consent of the Company, and the holder of each such
Restricted Security, by such Noteholder"s acceptance thereof, agrees to be bound
by all such restrictions on transfer. As used in Sections 2.5(d) and 2.5(e), the
term "transfer" encompasses any sale, pledge, loan, transfer or other
disposition whatsoever of any Restricted Security.
Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Note (and all securities issued in exchange therefor
or substitution thereof, other than Common Stock, if any, issued upon conversion
thereof, which shall bear the legend set forth in Section 2.5(e), if applicable)
shall bear a legend in substantially the following form, unless such Note has
been sold pursuant to a registration statement that has been declared effective
under the Securities Act (and which continues to be effective at the time of
such transfer), or unless otherwise agreed by the Company in writing, with
written notice thereof to the Trustee:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS
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EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR"); (2)
AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL
OR OTHERWISE TRANSFER THIS NOTE OR THE COMMON STOCK ISSUABLE
UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO IMCLONE SYSTEMS
INCORPORATED OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE
(OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), AND IF SUCH TRANSFER IS IN RESPECT OF
AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF LESS THAN $100,000,
AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE
THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND
WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER);
(3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE (2)(F) ABOVE), IT WILL FURNISH TO THE BANK OF NEW YORK,
AS TRUSTEE (OR A
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<PAGE> 29
SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (4)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO
THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF
THIS NOTE UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW
YORK AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF
THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR OR IS A PURCHASER WHO IS NOT A U.S. PERSON, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE BANK OF
NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE),
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
SUCH TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE (2)(F)
ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED
HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING RESTRICTION.
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Any Note (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance with
their terms or as to conditions for removal of the foregoing legend set forth
therein have been satisfied may, upon surrender of such Note for exchange to the
Note registrar in accordance with the provisions of this Section 2.5, be
exchanged for a new Note or Notes, of like tenor and aggregate principal amount,
which shall not bear the restrictive legend required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in the second paragraph of Section 2.5(c) and in this
Section 2.5(d)), a Global Note may not be transferred as a whole or in part
except by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Notes in global form. Initially, the Global Note
shall be issued to the Depositary, registered in the name of Cede & Co., as the
nominee of the Depositary, and deposited with the Custodian for Cede & Co.
If at any time the Depositary for a Global Note notifies the Company
that it is unwilling or unable to continue as Depositary for such Note, the
Company may appoint a successor Depositary with respect to such Note. If a
successor Depositary is not appointed by the Company within ninety (90) days
after the Company receives such notice, the Company will execute, and the
Trustee, upon receipt of an Officers" Certificate for the authentication and
delivery of Notes, will authenticate and deliver, Notes in certificated form, in
aggregate principal amount equal to the principal amount of such Global Note, in
exchange for such Global Note.
If a Note in certificated form is issued in exchange for any portion of
a Global Note after the close of business at the office or agency where such
exchange occurs on any record date and before the opening of business at such
office or agency on the next succeeding interest payment date, interest will not
be payable on such interest payment date in respect of such certificated Note,
but will be payable on such interest payment date, subject to the provisions of
Section 2.3, only to the Person to whom interest in respect of such portion of
such Global Note is payable in accordance with the provisions of this Indenture.
Notes in certificated form issued in exchange for all or a part of a
Global Note pursuant to this Section 2.5 shall be registered in such names and
in such
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authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. Upon
execution and authentication, the Trustee shall deliver such Notes in
certificated form to the Persons in whose names such Notes in certificated form
are so registered.
At such time as all interests in a Global Note have been redeemed,
converted, canceled, exchanged for Notes in certificated form, or transferred to
a transferee who receives Notes in certificated form thereof, such Global Note
shall, upon receipt thereof, be canceled by the Trustee in accordance with
standing procedures and instructions existing between the Depositary and the
Custodian. At any time prior to such cancellation, if any interest in a Global
Note is exchanged for Notes in certificated form, redeemed, converted,
repurchased or canceled, or transferred to a transferee who receives Notes in
certificated form therefor or any Note in certificated form is exchanged or
transferred for part of a Global Note, the principal amount of such Global Note
shall, in accordance with the standing procedures and instructions existing
between the Depositary and the Custodian, be appropriately reduced or increased,
as the case may be, and an endorsement shall be made on such Global Note, by the
Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction or increase.
(e Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any stock certificate representing Common Stock issued upon conversion of any
Note shall bear a legend in substantially the following form, unless such Common
Stock has been sold pursuant to a registration statement that has been declared
effective under the Securities Act (and which continues to be effective at the
time of such transfer) or such Common Stock has been issued upon conversion of
Notes that have been transferred pursuant to a registration statement that has
been declared effective under the Securities Act, or unless otherwise agreed by
the Company in writing with written notice thereof to the transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER
HEREOF AGREES THAT, UNTIL THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO
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SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER
THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), (1) IT WILL
NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED
HEREBY EXCEPT (A) TO IMCLONE SYSTEMS INCORPORATED OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) THAT PRIOR TO SUCH TRANSFER, FURNISHES TO
EQUISERVE, AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT,
AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM SUCH TRANSFER AGENT OR A
SUCCESSOR TRANSFER AGENT, AS APPLICABLE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
LAWS (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO SUCH
TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (1)(F)
ABOVE), IT WILL FURNISH TO EQUISERVE, AS TRANSFER AGENT (OR A
SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT
WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED
HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 1(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF
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<PAGE> 33
THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A U.S.
PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
EQUISERVE (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE
COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE (1)(F) ABOVE
OR UPON ANY TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY
AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES
OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN,
THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.5(e).
(f Any Note or Common Stock issued upon the conversion or exchange of
a Note that, prior to the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
is purchased or owned by the Company or any Affiliate thereof may not be resold
by the Company or such Affiliate unless registered under the Securities Act or
resold pursuant to an exemption from the registration requirements of the
Securities Act in a transaction which results in such Notes or Common Stock, as
the case may be, no longer being "restricted securities" (as defined under Rule
144).
SECTION 2.6. Mutilated, Destroyed, Lost or Stolen Notes. In case any
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
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<PAGE> 34
discretion may execute, and upon its written request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Note, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Note, or in lieu of
and in substitution for the Note so destroyed, lost or stolen. In every case the
applicant for a substituted Note shall furnish to the Company, to the Trustee
and, if applicable, to such authenticating agent such security or indemnity as
may be required by them to save each of them harmless for any loss, liability,
cost or expense caused by or connected with such substitution, and, in every
case of destruction, loss or theft, the applicant shall also furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent
evidence to their satisfaction of the destruction, loss or theft of such Note
and of the ownership thereof.
Following receipt by the Trustee or such authenticating agent, as the
case may be, of satisfactory security or indemnity and evidence, as described in
the preceding paragraph, the Trustee or such authenticating agent may
authenticate any such substituted Note and make available for delivery such
Note. Upon the issuance of any substituted Note, the Company may require the
payment by the holder of a sum sufficient to cover any tax, assessment or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Note which has matured or is about to
mature or has been called for redemption or has been tendered for redemption
(and not withdrawn) or is to be converted into Common Stock shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Note, pay or authorize the payment of or convert or authorize the
conversion of the same (without surrender thereof except in the case of a
mutilated Note), as the case may be, if the applicant for such payment or
conversion shall furnish to the Company, to the Trustee and, if applicable, to
such authenticating agent such security or indemnity as may be required by them
to save each of them harmless for any loss, liability, cost or expense caused by
or connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company, the Trustee and, if
applicable, any paying agent or conversion agent evidence to their satisfaction
of the destruction, loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section
2.6 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the
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<PAGE> 35
express condition that the foregoing provisions are exclusive with respect to
the replacement or payment or conversion of mutilated, destroyed, lost or stolen
Notes and shall preclude any and all other rights or remedies notwithstanding
any law or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment or conversion of negotiable instruments or other
securities without their surrender.
SECTION 2.7. Temporary Notes. Pending the preparation of Notes in
certificated form, the Company may execute and the Trustee or an authenticating
agent appointed by the Trustee shall, upon the written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the Notes in certificated form, but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined
by the Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the Notes in certificated form. Without unreasonable delay the Company will
execute and deliver to the Trustee or such authenticating agent Notes in
certificated form (other than in the case of Notes in global form) and thereupon
any or all temporary Notes (other than any such Global Note) may be surrendered
in exchange therefor, at each office or agency maintained by the Company
pursuant to Section 5.2 and the Trustee or such authenticating agent shall
authenticate and make available for delivery in exchange for such temporary
Notes an equal aggregate principal amount of Notes in certificated form. Such
exchange shall be made by the Company at its own expense and without any charge
therefor. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits and subject to the same limitations under this
Indenture as Notes in certificated form authenticated and delivered hereunder.
SECTION 2.8. Cancellation of Notes Paid, Etc. All Notes surrendered for
the purpose of payment, redemption, conversion, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent or any Note
registrar or any conversion agent, be surrendered to the Trustee and promptly
canceled by it, or, if surrendered to the Trustee, shall be promptly canceled by
it, and no Notes shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Indenture. The Trustee shall dispose of such
canceled Notes in accordance with its customary procedures. If the Company shall
acquire any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are delivered to the Trustee for cancellation.
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<PAGE> 36
SECTION 2.9. CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Noteholders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Notes or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Notes, and any such redemption
shall not be affected by any defect in or omission of such numbers. The Company
will promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE 3
REDEMPTION OF NOTES
SECTION 3.1. Optional Redemption by the Company. (a Provisional
Redemption by the Company. The Notes may be redeemed by the Company, in whole or
in part, at any time prior to March 6, 2003 (a "Provisional Redemption"), upon
notice as set forth in Section 3.2, at a redemption price equal to $1,000 per
$1,000 aggregate principal amount of notes to be redeemed plus accrued and
unpaid interest, if any (including Liquidated Damages Amount, if any), to the
date of redemption (the "Provisional Redemption Date") if (i) the closing price
of the Common Stock shall have exceeded 150% of the Conversion Price then in
effect for at least 20 Trading Days in any consecutive 30-Trading Day period and
(ii) if the redemption would occur before March 1, 2002, the shelf registration
statement covering resales of the Notes, and the Common Stock issuable upon
conversion of the Notes, is effective and available for use and is expected to
remain effective and available for use for the 30 days immediately following the
Provisional Redemption Date.
Upon any such Provisional Redemption, the Company shall make an
additional payment (the "Additional Payment") with respect to the Notes called
for redemption to holders as of the Notice Date in an amount equal to $152.54
per $1,000 Note, minus the amount of any interest the Company actually paid on
such Note prior to the Notice Date. The Company shall make the Additional
Payment on all Notes called for Provisional Redemption, including any Notes
converted into Common Stock pursuant to the terms hereof after the Notice Date
and prior to the Provisional Redemption Date.
(b Non-Provisional Redemption by the Company. At any time on or after
March 6, 2003, and prior to maturity, the Notes may be redeemed at the option of
the Company (a "Non-Provisional Redemption"), in whole or in part,
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<PAGE> 37
upon notice as set forth in Section 3.2, at the following redemption prices
(expressed as percentages of the principal amount), together in each case with
accrued and unpaid interest, if any (including Liquidated Damages, if any) to,
but excluding, the date fixed for redemption (the "Non-Provisional Redemption
Date"):
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ ------------
<S> <C>
Beginning on March 6, 2003 and ending on February 29, 2004 102.20%
Beginning on March 1, 2004 and ending on February 28, 2005 101.10%
</TABLE>
and 100% on March 1, 2005; provided, however, that if the date fixed for
redemption is on a March 1 or September 1, then the interest payable on such
date shall be paid to the holder of record on the preceding February 15 or
August 15, respectively.
Notwithstanding the foregoing, the Company may not redeem the Notes if
the Company has failed to pay any interest or premium on the Notes and such
failure to pay is continuing.
SECTION 3.2. Notice of Redemptions; Selection of Notes. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption and it or, at its written request received by the Trustee not fewer
than forty-five (45) days prior (or such shorter period of time as may be
acceptable to the Trustee) to the date fixed for redemption, the Trustee in the
name of and at the expense of the Company, shall mail or cause to be mailed a
notice of such redemption not fewer than thirty (30) nor more than sixty (60)
days prior to the date fixed for redemption to the holders of Notes so to be
redeemed as a whole or in part at their last addresses as the same appear on the
Note register; provided, however, that in the event of a Provisional Redemption,
notice of such redemption shall be mailed within five Trading Days of the
consecutive 30-Trading Day period, and provided further that if the Company
shall give such notice, it shall also give written notice, and written notice of
the Notes to be redeemed, to the Trustee. Such mailing shall be by first class
mail. The notice, if mailed in the manner herein provided, shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice. In any case, failure to give such notice by mail or any defect in the
notice to the holder of any Note designated for redemption as a whole or in part
shall not affect the validity of the proceedings for the redemption of any other
Note. Concurrently with the mailing of any such notice of redemption, the
Company shall issue a press release announcing such redemption, the form and
content of which press release shall be determined by the Company in its sole
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<PAGE> 38
discretion. The failure to issue any such press release or any defect therein
shall not affect the validity of the redemption notice or any of the proceedings
for the redemption of any Note called for redemption.
Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the CUSIP number or numbers of the Notes being
redeemed, the date fixed for redemption (which shall be a Business Day), the
redemption price at which Notes are to be redeemed, the place or places of
payment, that payment will be made upon presentation and surrender of such
Notes, that interest accrued to the date fixed for redemption will be paid as
specified in said notice, and that on and after said date interest thereon or on
the portion thereof to be redeemed will cease to accrue. Such notice shall also
state the current Conversion Price and the date on which the right to convert
such Notes or portions thereof into Common Stock will expire. If such redemption
is a Provisional Redemption, such notice shall also state the amount of the
Additional Payment. If fewer than all the Notes are to be redeemed, the notice
of redemption shall identify the Notes to be redeemed (including CUSIP numbers,
if any). In case any Note is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that, on and after the date fixed for redemption, upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of
redemption given as provided in this Section 3.2, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.4) (i) an amount of money in immediately available funds sufficient to
redeem on the redemption date all the Notes (or portions thereof) so called for
redemption (other than those theretofore surrendered for conversion into Common
Stock) at the appropriate redemption price, together with accrued interest to,
but excluding, the date fixed for redemption (ii) with respect to Notes called
for Provisional Redemption pursuant to Section 3.1(a), an amount of money
sufficient to pay the Additional Payment for all the Notes (or portions thereof)
called for redemption (including those surrendered for conversion into Common
Stock after the Notice Date and prior to the Provisional Redemption Date);
provided, however, that if such payment is made on the redemption date it must
be received by the Trustee or paying agent, as the case may be, by 10:00 a.m.
New York City time on such date. The Company shall be entitled to retain any
interest, yield or gain on amounts deposited with the Trustee or any paying
agent pursuant to this Section 3.2 in excess of amounts required hereunder to
pay the redemption price together with accrued interest to, but excluding, the
date fixed for redemption. If any Note called for redemption is converted
pursuant hereto prior to such
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<PAGE> 39
redemption, any money deposited with the Trustee or any paying agent or so
segregated and held in trust for the redemption of such Note shall be paid to
the Company upon its written request, or, if then held by the Company, shall be
discharged from such trust; provided that, with respect to a Provisional
Redemption, any money so deposited for payment of the Additional Payment shall
remain segregated and held in trust for payment of the Additional Payment which
shall be made on all Notes called for Provisional Redemption, including Notes
converted into shares of Common Stock after the Notice Date and prior to the
Provisional Redemption Date. Whenever any Notes are to be redeemed, the Company
will give the Trustee written notice in the form of an Officers" Certificate not
fewer than forty-five (45) days (or such shorter period of time as may be
acceptable to the Trustee) prior to the redemption date as to the aggregate
principal amount of Notes to be redeemed.
If less than all of the outstanding Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof of the Global Note or the
Notes in certificated form to be redeemed (in principal amounts of $1,000 or
integral multiples thereof) by lot, on a pro rata basis or by another method the
Trustee deems fair and appropriate. If any Note selected for partial redemption
is submitted for conversion in part after such selection, the portion of such
Note submitted for conversion shall be deemed (so far as may be) to be the
portion to be selected for redemption. The Notes (or portions thereof) so
selected shall be deemed duly selected for redemption for all purposes hereof,
notwithstanding that any such Note is submitted for conversion in part before
the mailing of the notice of redemption.
Upon any redemption of less than all of the outstanding Notes, the
Company and the Trustee may (but need not), solely for purposes of determining
the pro rata allocation among such Notes as are unconverted and outstanding at
the time of redemption, treat as outstanding any Notes surrendered for
conversion during the period of fifteen (15) days next preceding the mailing of
a notice of redemption and may (but need not) treat as outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
SECTION 3.3. Payment of Notes Called for Redemption. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date fixed for
redemption and at the place or places stated in such notice at the applicable
redemption price, together with interest accrued to (but excluding) the date
fixed for redemption, and, with respect to the Notes called for Provisional
Redemption (including Notes converted into Common Stock pursuant to the terms
hereof after
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<PAGE> 40
the Notice Date and prior to the Provisional Redemption Date), the Additional
Payment, and on and after said date (unless the Company shall default in the
payment of such Notes at the redemption price, together with interest accrued to
said date) interest on the Notes or portion of Notes so called for redemption
shall cease to accrue and, after the close of business on the Business Day next
preceding the date fixed for redemption, such Notes shall cease to be
convertible into Common Stock and, except as provided in Sections 8.5 and 13.4,
to be entitled to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Notes except the right to receive
the redemption price thereof and unpaid interest to (but excluding) the date
fixed for redemption and, with respect to the Notes called for Provisional
Redemption (including Notes converted into Common Stock pursuant to the terms
hereof after the Notice Date and prior to the Provisional Redemption Date), the
Additional Payment. On presentation and surrender of such Notes at a place of
payment in said notice specified, the said Notes or the specified portions
thereof shall be paid and redeemed by the Company at the applicable redemption
price, together with interest accrued thereon to (but excluding) the date fixed
for redemption and, with respect to the Notes called for Provisional Redemption
(including Notes converted into Common Stock pursuant to the terms hereof after
the Notice Date and prior to the Provisional Redemption Date), the Additional
Payment; provided, however, that if the applicable redemption date is an
interest payment date, the semi-annual payment of interest becoming due on such
date shall be payable to the holders of such Notes registered as such on the
relevant record date instead of the holders surrendering such Notes for
redemption on such date.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any notice of redemption during the continuance of a default in payment
of interest or premium, if any, on the Notes. If any Note called for redemption
shall not be so paid upon surrender thereof for redemption, the principal and
premium, if any (including the Additional Payment, if any), shall, until paid or
duly provided for, bear interest from the date fixed for redemption at the rate
borne by the Note and such Note shall remain convertible into Common Stock until
the principal and premium, if any (including the Additional Payment, if any),
and interest shall have been paid or duly provided for.
SECTION 3.4. Conversion Arrangement on Call for Redemption. In
connection with any redemption of Notes, the Company may arrange for the
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<PAGE> 41
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for redemption, an amount
not less than the applicable redemption price, together with interest accrued to
(but excluding) the date fixed for redemption, of such Notes and, in connection
with a Provisional Redemption, the Additional Payment. Notwithstanding anything
to the contrary contained in this Article Three, the obligation of the Company
to pay the redemption price of such Notes, together with interest accrued to
(but excluding) the date fixed for redemption and, in connection with a
Provisional Redemption, the Additional Payment, shall be deemed to be satisfied
and discharged to the extent such amount is so paid by such purchasers. If such
an agreement is entered into, a copy of which will be filed with the Trustee
prior to the date fixed for redemption, any Notes not duly surrendered for
conversion by the holders thereof may, at the option of the Company, be deemed,
to the fullest extent permitted by law, acquired by such purchasers from such
holders and (notwithstanding anything to the contrary contained in Article
Fifteen) surrendered by such purchasers for conversion, all as of immediately
prior to the close of business on the date fixed for redemption (and the right
to convert any such Notes shall be extended through such time), subject to
payment of the above amount as aforesaid (including the Additional Payment, if
any, with respect to all Notes called for Provisional Redemption). At the
direction of the Company, the Trustee shall hold and dispose of any such amount
paid to it in the same manner as it would monies deposited with it by the
Company for the redemption of Notes. Without the Trustee"s prior written
consent, no arrangement between the Company and such purchasers for the purchase
and conversion of any Notes shall increase or otherwise affect any of the
powers, duties, responsibilities or obligations of the Trustee as set forth in
this Indenture.
SECTION 3.5. Redemption at Option of Holders. (a If there shall occur a
Fundamental Change at any time prior to maturity of the Notes, then each
Noteholder shall have the right, at such holder"s option, to require the Company
to redeem all of such holder"s Notes, or any portion thereof that is an integral
multiple of $1,000 principal amount, on the date (the "Repurchase Date") that is
thirty (30) days after the date of the Company Notice (as defined in Section
3.5(b) below) of such Fundamental Change (or, if such 30th day is not a Business
Day, the next succeeding Business Day) at a redemption price equal to 100% of
the principal amount thereof, together with accrued interest to (but excluding)
the Repurchase Date; provided, however, that, if such Repurchase Date is a March
1 or September 1, then the interest payable on such date shall be paid to the
holders of record of the Notes on the next preceding February 15 or August 15,
respectively.
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<PAGE> 42
Upon presentation of any Note redeemed in part only, the Company shall
execute and, upon the Company"s written direction to the Trustee, the Trustee
shall authenticate and deliver to the holder thereof, at the expense of the
Company, a new Note or Notes, of authorized denominations, in principal amount
equal to the unredeemed portion of the Notes so presented.
(b On or before the tenth day after the occurrence of a Fundamental
Change, the Company or at its written request (which must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below, unless the Trustee shall agree in
writing to a shorter period), the Trustee, in the name of and at the expense of
the Company, shall mail or cause to be mailed to all holders of record on the
date of the Fundamental Change a notice (the "Company Notice") of the occurrence
of such Fundamental Change and of the redemption right at the option of the
holders arising as a result thereof. Such notice shall be mailed in the manner
and with the effect set forth in the first paragraph of Section 3.2 (without
regard for the time limits set forth therein). If the Company shall give such
notice, the Company shall also deliver a copy of the Company Notice to the
Trustee at such time as it is mailed to Noteholders. Concurrently with the
mailing of any Company Notice, the Company shall issue a press release
announcing such Fundamental Change referred to in the Company Notice, the form
and content of which press release shall be determined by the Company in its
sole discretion. The failure to issue any such press release or any defect
therein shall not affect the validity of the Company Notice or any proceedings
for the redemption of any Note which any Noteholder may elect to have the
Company redeem as provided in this Section 3.5.
Each Company Notice shall specify the circumstances constituting the
Fundamental Change, the Repurchase Date, the price at which the Company shall be
obligated to redeem Notes, that the holder must exercise the redemption right on
or prior to the close of business on the Repurchase Date (the "Fundamental
Change Expiration Time"), that the holder shall have the right to withdraw any
Notes surrendered prior to the Fundamental Change Expiration Time, a description
of the procedure which a Noteholder must follow to exercise such redemption
right and to withdraw any surrendered Notes, the place or places where the
holder is to surrender such holder"s Notes, the amount of interest accrued on
each Note to the Repurchase Date and the "CUSIP" number or numbers of the Notes
(if then generally in use).
No failure of the Company to give the foregoing notices and no defect
therein shall limit the Noteholders" redemption rights or affect the validity of
the proceedings for the redemption of the Notes pursuant to this Section 3.5.
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<PAGE> 43
(c For a Note to be so redeemed at the option of the holder, the
Company must receive at the office or agency of the Company maintained for that
purpose or, at the option of such holder, the Corporate Trust Office, such Note
with the form entitled "Option to Elect Repayment Upon A Fundamental Change" on
the reverse thereof duly completed, together with such Notes duly endorsed for
transfer, on or before the Fundamental Change Expiration Time. All questions as
to the validity, eligibility (including time of receipt) and acceptance of any
Note for repayment shall be determined by the Company, whose determination shall
be final and binding absent manifest error.
(d On or prior to the Repurchase Date, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.4) an amount of money sufficient to redeem on the Repurchase Date all
the Notes to be redeemed on such date at the appropriate redemption price,
together with accrued interest to (but excluding) the Repurchase Date; provided,
however, that if such payment is made on the Repurchase Date it must be received
by the Trustee or paying agent, as the case may be, by 10:00 a.m. New York City
time, on such date. Payment for Notes surrendered for redemption (and not
withdrawn) prior to the Fundamental Change Expiration Time will be made promptly
(but in no event more than five (5) Business Days) following the Repurchase Date
by mailing checks for the amount payable to the holders of such Notes entitled
thereto as they shall appear on the registry books of the Company.
(e In the case of a reclassification, change, consolidation, merger,
combination, sale or conveyance to which Section 15.6 applies, in which the
Common Stock of the Company is changed or exchanged as a result into the right
to receive stock, securities or other property or assets (including cash), which
includes shares of Common Stock of the Company or shares of common stock of
another Person that are, or upon issuance will be, traded on a United States
national securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such stock, securities or other property or
assets (including cash) (as determined by the Company, which determination shall
be conclusive and binding), then the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (accompanied
by an Opinion of Counsel that such supplemental indenture complies with the
Trust Indenture Act as in force at the date of execution of such supplemental
indenture) modifying the provisions of this Indenture relating to the right of
holders of the Notes to cause the Company to repurchase the Notes following a
Fundamental Change, including without limitation the applicable provisions of
this Section 3.5
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and the definitions of Common Stock and Fundamental Change, as appropriate, as
determined in good faith by the Company (which determination shall be conclusive
and binding), to make such provisions apply to such other Person if different
from the Company and the common stock issued by such Person (in lieu of the
Company and the Common Stock of the Company).
(f The Company will comply with the provisions of Rule 13e-4 and any
other tender offer rules under the Exchange Act to the extent then applicable in
connection with the redemption rights of the holders of Notes in the event of a
Fundamental Change.
ARTICLE 4
SUBORDINATION OF NOTES
SECTION 4.1. Agreement of Subordination. The Company covenants and
agrees, and each holder of Notes issued hereunder by its acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article Four, and each Person holding any Note, whether upon
original issue or upon registration of transfer, assignment or exchange thereof,
accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest
(including Liquidated Damages, if any) on all Notes (including, but not limited
to, the redemption price and Additional Payment, if any, with respect to the
Notes called for redemption in accordance with Section 3.2 or submitted for
redemption in accordance with Section 3.5, as the case may be, as provided in
this Indenture) issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full of all Senior Indebtedness, whether outstanding at the
date of this Indenture or thereafter incurred.
No provision of this Article Four shall prevent the occurrence of any
default or Event of Default hereunder.
SECTION 4.2. Payments to Noteholders. No payment shall be made with
respect to the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on the Notes (including, but not limited to, the redemption
price and Additional Payment, if any, with respect to the Notes to be called for
redemption in accordance with Section 3.2 or submitted for redemption in
accordance with Section 3.5, as the case may be, as provided in this Indenture),
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except payments and distributions made by the Trustee as permitted by the first
or second paragraph of Section 4.5, if:
(i) a default in the payment of principal, premium, if any,
interest, rent or other obligations in respect of Designated Senior
Indebtedness occurs and is continuing (or, in the case of Designated
Senior Indebtedness for which there is a period of grace, in the event
of such a default that continues beyond the period of grace, if any,
specified in the instrument or lease evidencing such Designated Senior
Indebtedness) (a "Payment Default"), unless and until such Payment
Default shall have been cured or waived or shall have ceased to exist;
or
(ii) a default, other than a Payment Default, on any Designated
Senior Indebtedness occurs and is continuing that then permits holders
of such Designated Senior Indebtedness to accelerate its maturity (or
in the case of any lease, a default occurs and is continuing that
permits the lessor to either terminate the lease or require the Company
to make an irrevocable offer to terminate the lease following an event
of default thereunder) and the Trustee receives a notice of the default
(a "Payment Blockage Notice") from a holder of Designated Senior
Indebtedness, a Representative of Designated Senior Indebtedness or the
Company (a "Non-Payment Default").
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 4.2 unless and until at least 365 days shall 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 to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Notes (including, but not limited to, the redemption price and
Additional Payment, if any, with respect to the Notes to be called for
redemption) upon the earlier of:
(1) the date upon which any such Payment Default is cured or
waived or ceases to exist, or
(2) in the case of a Non-Payment Default, the earlier of (a)
the date upon which such default is cured or waived or ceases to exist
or (b) 179 days after the applicable Payment Blockage Notice is
received by the Trustee if the maturity of such Designated Senior
Indebtedness has not
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been accelerated (or in the case of any lease, 179 days after notice is
received if the Company has not received notice that the lessor under
such lease has exercised its right to terminate the lease or require
the Company to make an irrevocable offer to terminate the lease
following an event of default thereunder),
unless this Article Four otherwise prohibits the payment or
distribution at the time of such payment or distribution.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness (and satisfactory to the
holders of Senior Indebtedness in the case such Senior Indebtedness includes
Designated Senior Indebtedness), or payment thereof in accordance with its terms
provided for in cash or other payment satisfactory to the holders of such Senior
Indebtedness (and satisfactory to the holders of Senior Indebtedness in the case
such Senior Indebtedness includes Designated Senior Indebtedness) before any
payment is made on account of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes (except payments made
pursuant to Article Thirteen from monies deposited with the Trustee pursuant
thereto prior to commencement of proceedings for such dissolution, winding up,
liquidation or reorganization), and upon any such dissolution or winding up or
liquidation or reorganization of the Company or bankruptcy, insolvency,
receivership or other similar proceeding, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Notes or the Trustee would
be entitled, except for the provisions of this Article Four, shall (except as
aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the holders of the Notes or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior Indebtedness
held by such holders, or as otherwise required by law or a court order) or their
Representative or Representatives, as their respective interests may appear, to
the extent necessary to pay all Senior Indebtedness in full, in cash or other
payment satisfactory to the holders of such Senior Indebtedness (and
satisfactory to the holders of Senior Indebtedness in the case such Senior
Indebtedness includes Designated Senior Indebtedness), after giving effect to
any concurrent payment or distribution to or
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for the holders of Senior Indebtedness, before any payment or distribution is
made to the holders of the Notes or to the Trustee.
For purposes of this Article Four, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Four with
respect to the Notes to the payment of all Senior Indebtedness which may at the
time be outstanding provided that (i) the Senior Indebtedness is assumed by the
new corporation, if any, resulting from any reorganization or readjustment, and
(ii) the rights of the holders of Senior Indebtedness (other than leases which
are not assumed by the Company or the new corporation, as the case may be) are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided for in Article Twelve shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 4.2 if such other
Person shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions stated in Article Twelve.
In the event of the acceleration of the Notes because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Notes in respect of the principal of, premium, if any, or interest (including
Liquidated Damages, if any) on the Notes (including, but not limited to, the
redemption price and Additional Payment, if any, with respect to the Notes
called for redemption in accordance with Section 3.2 or submitted for redemption
in accordance with Section 3.5, as the case may be, as provided in this
Indenture), except payments and distributions made by the Trustee as permitted
by the first or second paragraph of Section 4.5, until all Senior Indebtedness
has been paid in full in cash or other payment satisfactory to the holders of
Senior Indebtedness (and satisfactory to the holders of Designated Senior
Indebtedness in the case such Senior Indebtedness includes Designated Senior
Indebtedness) or such acceleration is rescinded in accordance with the terms of
this Indenture. If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
In the event that, notwithstanding the foregoing provisions, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (including, without limitation, by way
of setoff or otherwise), prohibited by the foregoing provisions in this Section
4.2, shall be
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received by the Trustee or the holders of the Notes before all Senior
Indebtedness is paid in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness (and satisfactory to the holders of Senior
Indebtedness in the case such Senior Indebtedness includes Designated Senior
Indebtedness), or provision is made for such payment thereof in accordance with
its terms in cash or other payment satisfactory to the holders of such Senior
Indebtedness (and satisfactory to the holders of Senior Indebtedness in the case
such Senior Indebtedness includes Designated Senior Indebtedness), such payment
or distribution shall be held in trust for the benefit of and shall be paid over
or delivered to the holders of Senior Indebtedness or their Representative or
Representatives, as their respective interests may appear, as calculated by the
Company, for application to the payment of any Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in full in cash or
other payment satisfactory to the holders of such Senior Indebtedness (and
satisfactory to the holders of Senior Indebtedness in the case such Senior
Indebtedness includes Designated Senior Indebtedness), after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject
to the further provisions of Section 4.5.
SECTION 4.3. Subrogation of Notes. Subject to the payment in full of
all Senior Indebtedness, the rights of the holders of the Notes shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this Article Four
(equally and ratably with the holders of all indebtedness of the Company which
by its express terms is subordinated to other indebtedness of the Company to
substantially the same extent as the Notes are subordinated and is entitled to
like rights of subrogation) to the rights of the holders of Senior Indebtedness
to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until the principal, premium, if
any, and interest (including Liquidated Damages, if any) on the Notes shall be
paid in full, and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the holders of the Notes or the Trustee would be entitled
except for the provisions of this Article Four, and no payment pursuant to the
provisions of this Article Four, to or for the benefit of the holders of Senior
Indebtedness by holders of the Notes or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness, and the
holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Indebtedness, and no payments or distributions of cash, property
or securities to or for the benefit of the holders of the Notes pursuant to the
subrogation provisions of this Article Four, which would
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otherwise have been paid to the holders of Senior Indebtedness, shall be deemed
to be a payment by the Company to or for the account of the Notes. It is
understood that the provisions of this Article Four are intended solely for the
purposes of defining the relative rights of the holders of the Notes, on the one
hand, and the holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Article Four or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the holders of the
Notes, the obligation of the Company, which is absolute and unconditional, to
pay to the holders of the Notes the principal of, premium, if any, and interest
(including Liquidated Damages, if any) on the Notes as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the holders of the Notes and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or the holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article Four of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article Four, the Trustee, subject to the provisions of Section 8.1, and
the holders of the Notes shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such bankruptcy, dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon and all other facts pertinent thereto or to this Article Four.
SECTION 4.4. Authorization to Effect Subordination. Each holder of a
Note by the holder"s acceptance thereof authorizes and directs the Trustee on
the holder"s behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article Four and appoints the
Trustee to act as the holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in the third paragraph of Section
7.2 hereof at least thirty (30) days before the expiration of the time to file
such claim, the holders of any Senior Indebtedness or their Representatives are
hereby authorized to file an appropriate claim for and on behalf of the holders
of the Notes.
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SECTION 4.5. Notice to Trustee. The Company shall give prompt written
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company that would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Notes pursuant to the provisions of this Article Four.
Notwithstanding the provisions of this Article Four or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment of monies to or by
the Trustee in respect of the Notes pursuant to the provisions of this Article
Four, unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office from the Company (in the
form of an Officers' Certificate) or a Representative or a holder or holders of
Senior Indebtedness, and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 8.1, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if on a
date not less than one Business Day prior to the date upon which by the terms
hereof any such monies may become payable for any purpose (including, without
limitation, the payment of the principal of, or premium, if any, or interest
(including Liquidated Damages, if any) on any Note) the Trustee shall not have
received, with respect to such monies, the notice provided for in this Section
4.5, then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to apply monies received to the
purpose for which they were received, and shall not be affected by any notice to
the contrary that may be received by it on or after such prior date.
Notwithstanding anything in this Article Four to the contrary, nothing
shall prevent any payment by the Trustee to the Noteholders of monies deposited
with it pursuant to Section 13.1, if a Responsible Officer of the Trustee shall
not have received written notice at the Corporate Trust Office on or before one
Business Day prior to the date such payment is due that such payment is not
permitted under Section 4.1 or 4.2.
The Trustee, subject to the provisions of Section 8.1, shall be
entitled to rely conclusively on the delivery to it of a written notice by a
Representative or a person representing himself to be a holder of Senior
Indebtedness (or a trustee on behalf of such holder) to establish that such
notice has been given by a Representative or a holder of Senior Indebtedness or
a trustee on behalf of any such holder or holders. The Trustee shall not be
required to make any payment or distribution to or on behalf of a holder of
Senior Indebtedness pursuant to this Article Four unless it has received
satisfactory evidence as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Four.
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SECTION 4.6. Trustee's Relation to Senior Indebtedness. The Trustee, in
its individual capacity, shall be entitled to all the rights set forth in this
Article Four in respect of any Senior Indebtedness at any time held by it, to
the same extent as any other holder of Senior Indebtedness, and nothing in
Section 8.13 or elsewhere in this Indenture shall deprive the Trustee of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Four, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 8.1, the Trustee shall not be liable to any holder of
Senior Indebtedness (i) for any failure to make any payments or distributions to
such holder or (ii) if it shall pay over or deliver to holders of Notes, the
Company or any other Person money in compliance with this Article Four.
SECTION 4.7. No Impairment of Subordination. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with. Senior
Indebtedness may be created, renewed or extended and holders of Senior
Indebtedness may exercise any rights under any instrument creating or evidencing
such Senior Indebtedness, including, without limitation, any waiver of default
thereunder, without any notice to or consent from the holders of the Notes or
the Trustee. No compromise, alteration, amendment, modification, extension,
renewal or other change of, or waiver, consent or other action in respect of,
any liability or obligation under or in respect of the Senior Indebtedness or
any terms or conditions of any instrument creating or evidencing such Senior
Indebtedness shall in any way alter or affect any of the provisions of this
Article Four or the subordination of the Notes provided thereby.
SECTION 4.8. Certain Conversions Not Deemed Payment. For the purposes
of this Article Four only, (1) the issuance and delivery of junior securities
upon conversion of Notes in accordance with Article Fifteen shall not be deemed
to constitute a payment or distribution on account of the principal of, premium,
if any, or interest (including Liquidated Damages, if any) on Notes or on
account of the purchase or other acquisition of Notes, and (2) the payment,
issuance or delivery of cash (except in satisfaction of fractional shares
pursuant to
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Section 15.3), property or securities (other than junior securities) upon
conversion of a Note shall be deemed to constitute payment on account of the
principal of, premium, if any, or interest (including Liquidated Damages, if
any) on such Note. For the purposes of this Section 4.8, the term "junior
securities" means (a) shares of any stock of any class of the Company or (b)
securities of the Company that are subordinated in right of payment to all
Senior Indebtedness that may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in this Article Four. Nothing
contained in this Article Four or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as among the Company, its creditors (other than
holders of Senior Indebtedness) and the Noteholders, the right, which is
absolute and unconditional, of the Holder of any Note to convert such Note in
accordance with Article Fifteen.
SECTION 4.9. Article Applicable to Paying Agents. If at any time any
paying agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article Four shall
(unless the context otherwise requires) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article Four in addition to
or in place of the Trustee; provided, however, that the first paragraph of
Section 4.5 shall not apply to the Company or any Affiliate of the Company if it
or such Affiliate acts as paying agent.
The Trustee shall not be responsible for the actions or inactions of
any other paying agents (including the Company if acting as its own paying
agent) and shall have no control of any funds held by such other paying agents.
SECTION 4.10. Senior Indebtedness Entitled to Rely. The holders of
Senior Indebtedness (including, without limitation, Designated Senior
Indebtedness) shall have the right to rely upon this Article Four, and no
amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders shall have agreed in writing thereto.
SECTION 4.11. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to in
this Article Four, the Trustee and the Noteholders shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the Noteholders,
for the purpose of ascertaining the Persons
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entitled to participate in such payment or distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Four.
ARTICLE 5
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.1. Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any (including the redemption price and
Additional Payment, if any, upon redemption pursuant to Article Three), and
interest (including Liquidated Damages, if any), on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes.
SECTION 5.2. Maintenance of Office or Agency. The Company will maintain
an office or agency in New York, New York, where the Notes may be surrendered
for registration of transfer or exchange or for presentation for payment or for
conversion or redemption and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency not designated or appointed by the Trustee.
If at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office or the office of agency of the Trustee in New York, New
York (which shall initially be located at The Bank of New York, 101 Barclay
Street, 21st Floor West, New York, New York, 10286, Attention: Corporate Trust
Trustee Administration.
The Company may also from time to time designate co-registrars and one
or more offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the Trustee as paying agent,
Note registrar, Custodian and conversion agent and each of the Corporate Trust
Office and the office of agency of the Trustee in New York, New York (which
shall initially be located at The Bank of New York, 101 Barclay Street, 21st
Floor
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West, New York, New York, 10286, Attention: Corporate Trust Trustee
Administration), shall be considered as one such office or agency of the Company
for each of the aforesaid purposes.
So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11. If co-registrars have been appointed in
accordance with this Section , the Trustee shall mail such notices only to the
Company and the holders of Notes it can identify from its records.
SECTION 5.3. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
SECTION 5.4. Provisions as to Paying Agent. (a) If the Company shall
appoint a paying agent other than the Trustee, or if the Trustee shall appoint
such a paying agent, the Company will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 5.4:
(i) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest
(including Liquidated Damages, if any) on the Notes (whether such sums
have been paid to it by the Company or by any other obligor on the
Notes) in trust for the benefit of the holders of the Notes;
(ii) that it will give the Trustee written notice of any
failure by the Company (or by any other obligor on the Notes) to make
any payment of the principal of and premium, if any, or interest on the
Notes when the same shall be due and payable; and
(iii) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the
Trustee all sums so held in trust.
The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Notes, deposit with the paying agent a sum
(in funds which are immediately available on the due date for such payment)
sufficient to pay such principal, premium, if any, or interest, and (unless such
paying agent is the Trustee) the Company will promptly notify the Trustee in
writing of any failure to take such action; provided, however, that if such
deposit
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is made on the due date, such deposit shall be received by the paying agent by
10:00 a.m. New York City time, on such date.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes, set aside, segregate and
hold in trust for the benefit of the holders of the Notes a sum sufficient to
pay such principal, premium, if any, or interest (including Liquidated Damages,
if any) so becoming due and will promptly notify the Trustee in writing of any
failure to take such action and of any failure by the Company (or any other
obligor under the Notes) to make any payment of the principal of, premium, if
any, or interest (including Liquidated Damages, if any) on the Notes when the
same shall become due and payable.
(c) Anything in this Section 5.4 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder
as required by this Section 5.4, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any paying agent
to the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.
(d) Anything in this Section 5.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.4 is subject to
Sections 13.3 and 13.4.
The Trustee shall not be responsible for the actions of any other
paying agents (including the Company if acting as its own paying agent) and
shall have no control of any funds held by such other paying agents.
SECTION 5.5. Existence. Subject to Article Twelve, the Company will do
or cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided, however, that
the Company shall not be required to preserve any such right if the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Noteholders.
SECTION 5.6. Maintenance of Properties. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Significant Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
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made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any subsidiary and
not disadvantageous in any material respect to the Noteholders.
SECTION 5.7. Payment of Taxes and Other Claims. The Company will pay or
discharge, or cause to be paid or discharged, before the same may become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Significant Subsidiary or upon the income,
profits or property of the Company or any Significant Subsidiary, (ii) all
claims for labor, materials and supplies which, if unpaid, might by law become a
lien or charge upon the property of the Company or any Significant Subsidiary
and (iii) all stamps and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or therein in connection with
the issuance, transfer, exchange or conversion of any Notes or with respect to
this Indenture; provided, however, that, in the case of clauses (i) and (ii),
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim (A) if the failure to do so
will not, in the aggregate, have a material adverse impact on the Company, or
(B) if the amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 5.8. Rule 144A Information Requirement. Within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Notes or any Common Stock issued upon conversion thereof
which continue to be Restricted Securities in connection with any sale thereof
and any prospective purchaser of Notes or such Common Stock designated by such
holder or beneficial holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any holder or beneficial
holder of the Notes or such Common Stock and it will take such further action as
any holder or beneficial holder of such Notes or such Common Stock may
reasonably request, all to the extent required from time to time to enable such
holder or beneficial holder to sell its Notes or Common Stock without
registration under the Securities Act within the limitation of the exemption
provided by Rule 144A, as such Rule may be amended from time to time. Upon the
request of any holder or any beneficial holder of the Notes or such Common
Stock, the Company will deliver
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to such holder a written statement as to whether it has complied with such
requirements.
SECTION 5.9. Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of, premium,
if any, or interest (including Liquidated Damages, if any) on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.10. Compliance Certificate. The Company shall deliver to the
Trustee, within one hundred twenty (120) days after the end of each fiscal year
of the Company, a certificate signed by either the principal executive officer,
principal financial officer or principal accounting officer of the Company,
stating whether or not to the best knowledge of the signer thereof the Company
is in default in the performance and observance of any of the terms, provisions
and conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and the status thereof of
which the signer may have knowledge.
The Company will deliver to the Trustee, forthwith upon becoming aware
of (i) any default in the performance or observance of any covenant, agreement
or condition contained in this Indenture, or (ii) any Event of Default, an
Officers' Certificate specifying with particularity such default or Event of
Default and further stating what action the Company has taken, is taking or
proposes to take with respect thereto.
Any notice required to be given under this Section 5.10 or Section 4.5
shall be delivered to a Responsible Officer of the Trustee at its Corporate
Trust Office. In the event that the payment of the Notes is accelerated because
of an Event of Default, the Company shall promptly provide written notice to the
Trustee specifying the names and addresses of the holders of Senior Indebtedness
if the Trustee (and not the Company) is to provide holders of Senior
Indebtedness notice of such acceleration under Section 4.5 of the Indenture.
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SECTION 5.11. Liquidated Damages Notice. In the event that the Company
is required to pay Liquidated Damages to holders of Notes pursuant to the
Registration Rights Agreement, the Company will provide written notice
("Liquidated Damages Notice") to the Trustee of its obligation to pay Liquidated
Damages no later than fifteen days prior to the proposed payment date for the
Liquidated Damages, and the Liquidated Damages Notice shall set forth the amount
of Liquidated Damages to be paid by the Company on such payment date. The
Trustee shall not at any time be under any duty or owe a responsibility to any
holder of Notes to determine the Liquidated Damages, or with respect to the
nature, extent or calculation of the amount of Liquidated Damages when made, or
with respect to the method employed in such calculation of the Liquidated
Damages.
ARTICLE 6
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 6.1. Noteholders' Lists. The Company covenants and agrees that
it will furnish or cause to be furnished to the Trustee, semiannually, not more
than fifteen (15) days after each February 15 and August 15 in each year
beginning with August 15, 2000, and at such other times as the Trustee may
request in writing, within thirty (30) days after receipt by the Company of any
such request (or such lesser time as the Trustee may reasonably request in order
to enable it to timely provide any notice to be provided by it hereunder), a
list in such form as the Trustee may reasonably require of the names and
addresses of the holders of Notes as of a date not more than fifteen (15) days
(or such other date as the Trustee may reasonably request in order to so provide
any such notices) prior to the time such information is furnished, except that
no such list need be furnished by the Company to the Trustee so long as the
Trustee is acting as the sole Note registrar.
SECTION 6.2. Preservation and Disclosure of Lists. (a) The Trustee
shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the holders of Notes contained in
the most recent list furnished to it as provided in Section 6.1 or maintained by
the Trustee in its capacity as Note registrar or co-registrar in respect of the
Notes, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Noteholders to communicate with other holders of
Notes with respect to their rights under this Indenture or under the Notes, and
the
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corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of holders of Notes made pursuant to the
Trust Indenture Act.
SECTION 6.3. Reports by Trustee. (a) Within sixty (60) days after
February 15 of each year commencing with the year 2001, the Trustee shall
transmit to holders of Notes such reports dated as of August 15 of the year in
which such reports are made concerning the Trustee and its actions under this
Indenture as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
(b) A copy of such report shall, at the time of such transmission to
holders of Notes, be filed by the Trustee with each stock exchange and automated
quotation system upon which the Notes are listed and with the Company. The
Company will promptly notify the Trustee in writing when the Notes are listed on
any stock exchange or automated quotation system or delisted therefrom.
SECTION 6.4. Reports by Company. The Company shall file with the
Trustee (and the Commission if at any time after the Indenture becomes qualified
under the Trust Indenture Act), and transmit to holders of Notes, such
information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act, whether or not the Notes are governed by such
Act; provided, however, that any such information, documents or reports required
to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act shall be filed with the Trustee within fifteen (15) days after the same is
so required to be filed with the Commission. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company"s compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers"
Certificates).
ARTICLE 7
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REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT
SECTION 7.1. Events of Default. In case one or more of the following
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:
(a) default in the payment of any installment of interest (including
Liquidated Damages, if any) upon any of the Notes as and when the same shall
become due and payable, and continuance of such default for a period of thirty
(30) days, whether or not such payment is permitted under Article Four hereof;
or
(b) default in the payment of the principal of or premium, if any
(including the Additional Payment, if any), on any of the Notes as and when the
same shall become due and payable either at maturity or in connection with any
redemption pursuant to Article Three, by acceleration or otherwise, whether or
not such payment is permitted under Article Four hereof; or
(c) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the Notes or
in this Indenture (other than a covenant or agreement a default in whose
performance or whose breach is elsewhere in this Section 7.1 specifically dealt
with) continued for a period of sixty (60) days after the date on which written
notice of such failure, requiring the Company to remedy the same, shall have
been given to the Company by the Trustee, or the Company and a Responsible
Officer of the Trustee by the holders of at least twenty-five percent (25%) in
aggregate principal amount of the Notes at the time outstanding determined in
accordance with Section 9.4; or
(d) the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to the Company
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of the Company or any
substantial part of the property of the Company, or shall consent to any such
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against the Company, or shall
make a general assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due; or
(e) an involuntary case or other proceeding shall be commenced against
the Company seeking liquidation, reorganization or other relief with respect to
the
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Company or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of the Company or any
substantial part of the property of the Company, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of ninety
(90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(d) or (e)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than twenty-five percent (25%) in aggregate principal amount of the Notes then
outstanding hereunder determined in accordance with Section 9.4, by notice in
writing to the Company (and to the Trustee if given by Noteholders), may declare
the principal of and premium, if any, on all the Notes and the interest accrued
thereon (including Liquidated Damages, if any) to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(d) or (e) occurs, the principal of all the Notes and the interest
accrued thereon shall (including Liquidated Damages, if any) be immediately and
automatically due and payable without necessity of further action. This
provision, however, is subject to the conditions that if, at any time after the
principal of the Notes shall have been so declared due and payable, and before
any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon (including Liquidated Damages, if any) all Notes and the principal
of and premium, if any, on any and all Notes which shall have become due
otherwise than by acceleration (with interest on overdue installments of
interest (including Liquidated Damages, if any) (to the extent that payment of
such interest is enforceable under applicable law) and on such principal and
premium, if any, at the rate borne by the Notes, to the date of such payment or
deposit) and amounts due to the Trustee pursuant to Section 8.6, and if any and
all defaults under this Indenture, other than the nonpayment of principal of and
premium, if any, and accrued interest on (including Liquidated Damages, if any)
Notes which shall have become due by acceleration, shall have been cured or
waived pursuant to Section 7.7, then and in every such case the holders of a
majority in aggregate principal amount of the Notes then outstanding, by written
notice to the Company and to the Trustee, may waive all defaults or Events of
Default and rescind and annul such declaration and its consequences; but no such
waiver or rescission and annulment shall extend to or shall affect any
subsequent default or Event of Default, or shall impair any right consequent
thereon. The Company shall notify a Responsible Officer of the Trustee in
writing, promptly upon becoming aware thereof, of any Event of Default.
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In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been taken.
SECTION 7.2. Payments of Notes on Default; Suit Therefor. The Company
covenants that (a) in case default shall be made in the payment of any
installment of interest upon (including Liquidated Damages, if any) any of the
Notes as and when the same shall become due and payable, and such default shall
have continued for a period of thirty (30) days, or (b) in case default shall be
made in the payment of the principal of or premium, if any, on any of the Notes
as and when the same shall have become due and payable, whether at maturity of
the Notes or in connection with any redemption, by or under this Indenture
declaration or otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the holders of the Notes, the whole amount
that then shall have become due and payable on all such Notes for principal and
premium, if any, or interest (including Liquidated Damages, if any), as the case
may be, with interest upon the overdue principal and premium, if any, and (to
the extent that payment of such interest is enforceable under applicable law)
upon the overdue installments of interest (including Liquidated Damages, if any)
at the rate borne by the Notes, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
all other amounts due the Trustee under Section 8.6. Until such demand by the
Trustee, the Company may pay the principal of and premium, if any, and interest
on (including Liquidated Damages, if any) the Notes to the registered holders,
whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
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In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest (including Liquidated Damages, if any) owing and unpaid in
respect of the Notes, and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and of the Noteholders allowed in
such judicial proceedings relative to the Company or any other obligor on the
Notes, its or their creditors, or its or their property, and to collect and
receive any monies or other property payable or deliverable on any such claims,
and to distribute the same after the deduction of any amounts due the Trustee
under Section 8.6, and any receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, custodian or similar official is hereby authorized
by each of the Noteholders to make such payments to the Trustee, and, in the
event that the Trustee shall consent to the making of such payments directly to
the Noteholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including reasonable counsel
fees and expenses incurred by it up to the date of such distribution. To the
extent that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the holders of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, be for the ratable benefit of the holders of the Notes.
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In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.
SECTION 7.3. Application of Monies Collected by Trustee. Any monies
collected by the Trustee pursuant to this Article Seven shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
FIRST: To the payment of all
amounts due the Trustee under Section 8.6;
SECOND: Subject to the provisions
of Article Four, in case the principal of
the outstanding Notes shall not have become
due and be unpaid, to the payment of
interest on (including Liquidated Damages,
if any) the Notes in default in the order of
the maturity of the installments of such
interest, with interest (to the extent that
such interest has been collected by the
Trustee) upon the overdue installments of
interest (including Liquidated Damages, if
any) at the rate borne by the Notes, such
payments to be made ratably to the Persons
entitled thereto;
THIRD: Subject to the provisions of
Article Four, in case the principal of the
outstanding Notes shall have become due, by
declaration or otherwise, and be unpaid to
the payment of the whole amount then owing
and unpaid upon the Notes for principal and
premium, if any, and interest (including
Liquidated Damages, if any), with
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interest on the overdue principal and
premium, if any, and (to the extent that
such interest has been collected by the
Trustee) upon overdue installments of
interest (including Liquidated Damages, if
any) at the rate borne by the Notes, and in
case such monies shall be insufficient to
pay in full the whole amounts so due and
unpaid upon the Notes, then to the payment
of such principal and premium, if any, and
interest (including Liquidated Damages, if
any) without preference or priority of
principal and premium, if any, over interest
(including Liquidated Damages, if any), or
of interest (including Liquidated Damages,
if any) over principal and premium, if any,
or of any installment of interest over any
other installment of interest, or of any
Note over any other Note, ratably to the
aggregate of such principal and premium, if
any, and accrued and unpaid interest; and
FOURTH: Subject to the provisions
of Article Four, to the payment of the
remainder, if any, to the Company or any
other Person lawfully entitled thereto.
SECTION 7.4. Proceedings by Noteholder. No holder of any Note shall
have any right by virtue of or by reference to any provision of this Indenture
to institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than twenty-five percent (25%)
in aggregate principal amount of the Notes then outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity
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satisfactory to it against the costs, expenses and liabilities to be incurred
therein or thereby, and the Trustee for sixty (60) days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding and no direction inconsistent with
such written request shall have been given to the Trustee pursuant to Section
7.7; it being understood and intended, and being expressly covenanted by the
taker and holder of every Note with every other taker and holder and the
Trustee, that no one or more holders of Notes shall have any right in any manner
whatever by virtue of or by reference to any provision of this Indenture to
affect, disturb or prejudice the rights of any other holder of Notes, or to
obtain or seek to obtain priority over or preference to any other such holder,
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all holders of Notes
(except as otherwise provided herein). For the protection and enforcement of
this Section 7.4, each and every Noteholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision
of any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any (including the redemption price upon redemption
pursuant to Article Three), and accrued interest on (including Liquidated
Damages, if any) such Note, on or after the respective due dates expressed in
such Note or in the event of redemption, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in its own behalf and for its own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, its rights of conversion as provided herein.
SECTION 7.5. Proceedings by Trustee. In case of an Event of Default
known to a Responsible Officer of the Trustee, the Trustee may, in its
discretion, proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as are necessary to protect
and enforce any of such rights, either by suit in equity or by action at law or
by proceeding in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in aid of the
exercise of any power granted in this Indenture, or to enforce any other legal
or equitable right vested in the Trustee by this Indenture or by law.
SECTION 7.6. Remedies Cumulative and Continuing. Except as provided in
Section 2.6, all powers and remedies given by this Article Seven to the Trustee
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or to the Noteholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein, and, subject to the provisions of Section
7.4, every power and remedy given by this Article Seven or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Noteholders.
SECTION 7.7. Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders. The holders of a majority in aggregate principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, (b) the Trustee
may take any other action which is not inconsistent with such direction and (c)
the Trustee may decline to take any action that would benefit some Noteholder to
the detriment of other Noteholders. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4 may, on behalf of the holders of all of the Notes, waive any
past default or Event of Default hereunder and its consequences except (i) a
default in the payment of interest (including Liquidated Damages, if any) or
premium, if any, on, or the principal of, the Notes, (ii) a failure by the
Company to convert any Notes into Common Stock, (iii) a default in the payment
of redemption price or Additional Payment pursuant to Article Three or (iv) a
default in respect of a covenant or provisions hereof which under Article Eleven
cannot be modified or amended without the consent of the holders of each or all
Notes then outstanding or affected thereby. Upon any such waiver, the Company,
the Trustee and the holders of the Notes shall be restored to their former
positions and rights hereunder; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Whenever any default or Event of Default hereunder shall have been
waived as permitted by this Section 7.7, said default or Event of Default shall
for all purposes of the Notes and this Indenture be deemed to have been cured
and to be not continuing; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
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SECTION 7.8. Notice of Defaults. The Trustee shall, within ninety (90)
days after a Responsible Officer of the Trustee has knowledge of the occurrence
of a default, mail to all Noteholders, as the names and addresses of such
holders appear upon the Note register, notice of all defaults known to a
Responsible Officer, unless such defaults shall have been cured or waived before
the giving of such notice; provided, however, that except in the case of default
in the payment of the principal of, or premium, if any, or interest (including
Liquidated Damages, if any) on any of the Notes, the Trustee shall be protected
in withholding such notice if and so long as a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Noteholders.
SECTION 7.9. Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; provided, however, that the provisions of this
Section 7.9 (to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate more than ten percent in principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4,
or to any suit instituted by any Noteholder for the enforcement of the payment
of the principal of or premium, if any, or interest on any Note on or after the
due date expressed in such Note or to any suit for the enforcement of the right
to convert any Note in accordance with the provisions of Article Fifteen.
ARTICLE 8
THE TRUSTEE
SECTION 8.1. Duties and Responsibilities of Trustee. The Trustee, prior
to the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default has occurred (which has not been cured or waived), the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of
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care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(i) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture and the
Trust Indenture Act, and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Indenture and no implied covenants or obligations shall
be read into this Indenture and the Trust Indenture Act against the
Trustee; and
(ii) in the absence of bad faith and willful misconduct on the
part of the Trustee, the Trustee may conclusively rely as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the case of
any such certificates or opinions which by any provisions hereof are
specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless the
Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the written
direction of the holders of not less than a majority in principal amount of the
Notes at the time outstanding determined as provided in Section 9.4 relating to
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture;
(d) whether or not therein provided, every provision of this Indenture
relating to the conduct or affecting the liability of, or affording protection
to, the Trustee shall be subject to the provisions of this Section;
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(e) the Trustee shall not be liable in respect of any payment (as to
the correctness of amount, entitlement to receive or any other matters relating
to payment) or notice effected by the Company or any paying agent or any records
maintained by any co-registrar with respect to the Notes; and
(f) if any party fails to deliver a notice relating to an event the
fact of which, pursuant to this Indenture, requires notice to be sent to the
Trustee, the Trustee may conclusively rely on its failure to receive such notice
as reason to act as if no such event occurred.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
SECTION 8.2. Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 8.1:
(a) the Trustee may conclusively rely and shall be protected in acting
upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, note, coupon or other paper or
document (whether in its original or facsimile form) believed by it in good
faith to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its own selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder in good
faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Noteholders pursuant to the provisions of this
Indenture, unless such Noteholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby;
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(e) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney;
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due care
hereunder;
(g) the Trustee shall not be liable for any action taken, suffered or
omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or power conferred upon it by this
Indenture unless the Trustee's actions or omissions constitute gross negligence;
(h) the Trustee shall not be deemed to have notice of any Default of
Event of Default unless a Responsible Officer has actual knowledge thereof or
unless written notice of any event constituting such a Default or Event of
Default has been given; and
(i) the Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person authorized to sign an
Officers' Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded.
SECTION 8.3. No Responsibility for Recitals, Etc. The recitals
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
SECTION 8.4. Trustee, Paying Agents, Conversion Agents or Registrar May
Own Notes. The Trustee, any paying agent, any conversion agent or Note
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registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
SECTION 8.5. Monies to Be Held in Trust. Subject to the provisions of
Section 13.4 and Section 4.2, all monies received by the Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received. Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as may be agreed in writing from time to time by the Company and the
Trustee.
SECTION 8.6. Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, compensation for all services rendered by it hereunder in
any capacity (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) as mutually agreed to from
time to time in writing between the Company and the Trustee, and the Company
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence, willful misconduct, recklessness or
bad faith. The Company also covenants to indemnify the Trustee (or any officer,
director or employee of the Trustee), in any capacity under this Indenture and
its agents and any authenticating agent for, and to hold them harmless against,
any and all loss, liability, damage, claim or expense incurred without
negligence, willful misconduct, recklessness or bad faith on the part of the
Trustee or such officers, directors, employees and agent or authenticating
agent, as the case may be, and arising out of or in connection with the
acceptance or administration of this trust or in any other capacity hereunder,
including the costs and expenses of defending themselves against any claim
(whether asserted by the Company, a holder of Notes or any other Person) of
liability in the premises. The obligations of the Company under this Section 8.6
to compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of
the Notes upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the holders of particular Notes.
The obligation of the Company under this Section shall survive the satisfaction
and discharge of this Indenture.
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When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.1(d) or (e) with respect to the Company occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.
SECTION 8.7. Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee.
SECTION 8.8. Conflicting Interests of Trustee. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
SECTION 8.9. Eligibility of Trustee. There shall at all times be a
Trustee hereunder which shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000 (or if such Person is a member of a bank holding company system, its
bank holding company shall have a combined capital and surplus of at least
$50,000,000). If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section 8.9, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 8.10. Resignation or Removal of Trustee. (a) The Trustee may at
any time resign by giving written notice of such resignation to the Company and
to the holders of Notes. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor trustee. If
no successor trustee shall have been so appointed and have accepted appointment
sixty (60) days after the mailing of such notice of resignation to the
Noteholders, the resigning Trustee may, upon ten (10) business days' notice to
the Company
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and the Noteholders, may petition, at the expense of the Company, any court of
competent jurisdiction for the appointment of a successor trustee, or, if any
Noteholder who has been a bona fide holder of a Note or Notes for at least six
(6) months may, at the expense of the Company and subject to the provisions of
Section 7.9, on behalf of himself and all others similarly situated, petition
any such court for the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Noteholder who has
been a bona fide holder of a Note or Notes for at least six (6) months;
or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.9 and shall fail to resign after written
request therefor by the Company or by any such Noteholder; or
(iii) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Company may remove the Trustee and appoint
a successor trustee by written instrument, in duplicate, executed by order of
the Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.9, any Noteholder who has been a bona fide holder of a
Note or Notes for at least six (6) months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee; provided,
however, that if no successor Trustee shall have been appointed and have
accepted appointment sixty (60) days after either the Company or the Noteholders
has removed the Trustee, the Trustee so removed may petition, at the expense of
the Company, any court of competent jurisdiction for an appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the
Notes at the time outstanding may at any time remove the Trustee and nominate a
successor trustee which shall be deemed appointed as successor trustee unless,
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within ten (10) days after notice to the Company of such nomination, the Company
objects thereto, in which case the Trustee so removed or any Noteholder, or if
such Trustee so removed or any Noteholder fails to act, the Company, upon the
terms and conditions and otherwise as in Section 8.10(a) provided, may petition
any court of competent jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.11.
SECTION 8.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amount then due it pursuant to the provisions of Section
8.6, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this
Section 8.11 unless, at the time of such acceptance, such successor trustee
shall be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, the Company (or the former trustee, at the written direction
of the Company) shall mail or cause to be mailed notice of the succession of
such trustee hereunder to the holders of Notes at their addresses as they shall
appear on the Note register. If the Company fails to mail such notice within ten
(10) days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
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SECTION 8.12. Succession by Merger, Etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee (including any trust created
by this Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any corporation succeeding to all
or substantially all of the corporate trust business of the Trustee, such
corporation shall be qualified under the provisions of Section 8.8 and eligible
under the provisions of Section 8.9.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or any authenticating agent appointed by such successor
trustee may authenticate such Notes in the name of the successor trustee; and in
all such cases such certificates shall have the full force that is provided in
the Notes or in this Indenture; provided, however, that the right to adopt the
certificate of authentication of any predecessor Trustee or authenticate Notes
in the name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
SECTION 8.13. Preferential Collection of Claims. If and when the
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
SECTION 8.14. Trustee's Application for Instructions from the Company .
Any application by the Trustee for written instructions from the Company (other
than with regard to any action proposed to be taken or omitted to be taken by
the Trustee that affects the rights of the holders of the Notes or holders of
Senior Indebtedness under this Indenture, including, without limitation, under
Article Four hereof) may, at the option of the Trustee, set forth in writing any
action proposed to be taken or omitted by the Trustee under this Indenture and
the date on and/or after which such action shall be taken or such omission shall
be effective. The Trustee shall not be liable for any action taken by, or
omission of, the Trustee in accordance with a proposal included in such
application on or after the date specified in such application (which date shall
not be less than three (3)
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Business Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE 9
THE NOTEHOLDERS
SECTION 9.1. Action by Noteholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article Ten, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.
SECTION 9.2. Proof of Execution by Noteholders. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or its agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Notes shall be proved by the registry of such Notes or by a
certificate of the Note registrar.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.6.
SECTION 9.3. Who Are Deemed Absolute Owners. The Company, the Trustee,
any paying agent, any conversion agent and any Note registrar may deem the
Person in whose name such Note shall be registered upon the Note register to be,
and may treat it as, the absolute owner of such Note (whether or not such Note
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shall be overdue and notwithstanding any notation of ownership or other writing
thereon made by any Person other than the Company or any Note registrar) for the
purpose of receiving payment of or on account of the principal of, premium, if
any, and interest on such Note, for conversion of such Note and for all other
purposes; and neither the Company nor the Trustee nor any paying agent nor any
conversion agent nor any Note registrar shall be affected by any notice to the
contrary. All such payments so made to any holder for the time being, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Note.
SECTION 9.4. Company-owned Notes Disregarded. In determining whether
the holders of the requisite aggregate principal amount of Notes have concurred
in any direction, consent, waiver or other action under this Indenture, Notes
which are owned by the Company or any other obligor on the Notes or any
Affiliate of the Company or any other obligor on the Notes shall be disregarded
and deemed not to be outstanding for the purpose of any such determination;
provided, however, that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent, waiver or other
action, only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or any Affiliate of the Company or any such other obligor. In the case of
a dispute as to such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee. Upon request of the Trustee,
the Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Notes, if any, known by the Company to be owned or
held by or for the account of any of the above described Persons, and, subject
to Section 8.1, the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Notes not listed therein are outstanding for the purpose of any
such determination.
SECTION 9.5. Revocation of Consents; Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.2, revoke such action so far as concerns such
Note. Except as aforesaid, any such action taken by the holder of any Note shall
be conclusive and binding upon such holder and upon all future holders and
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owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.
ARTICLE 10
MEETINGS OF NOTEHOLDERS
SECTION 10.1. Purpose of Meetings. A meeting of Noteholders may be
called at any time and from time to time pursuant to the provisions of this
Article Ten for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or
to consent to the waiving of any default or Event of Default hereunder
and its consequences, or to take any other action authorized to be
taken by Noteholders pursuant to any of the provisions of Article
Seven;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article Eight;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2; or
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Notes under any other provision of this Indenture or under
applicable law.
SECTION 10.2. Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Noteholders to take any action specified in Section 10.1, to
be held at such time and at such place as the Trustee shall determine. Notice of
every meeting of the Noteholders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting and
the establishment of any record date pursuant to Section 9.1, shall be mailed to
holders of Notes at their addresses as they shall appear on the Note register.
Such notice shall also be mailed to the Company. Such notices shall be mailed
not less than twenty (20) nor more than ninety (90) days prior to the date fixed
for the meeting.
Any meeting of Noteholders shall be valid without notice if the holders
of all Notes then outstanding are present in person or by proxy or if notice is
waived
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before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
SECTION 10.3. Call of Meetings by Company or Noteholders. In case at
any time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least ten percent (10%) in aggregate principal amount of the Notes
then outstanding, shall have requested the Trustee to call a meeting of
Noteholders, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed the
notice of such meeting within twenty (20) days after receipt of such request,
then the Company or such Noteholders may determine the time and the place for
such meeting and may call such meeting to take any action authorized in Section
10.1, by mailing notice thereof as provided in Section 10.2.
SECTION 10.4. Qualifications for Voting. To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes on the record
date pertaining to such meeting. The only persons who shall be entitled to be
present or to speak at any meeting of Noteholders shall be the persons entitled
to vote at such meeting and their counsel and any representatives of the Trustee
and its counsel and any representatives of the Company and its counsel.
SECTION 10.5. Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of
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Notes held or represented by him; provided, however, that no vote shall be cast
or counted at any meeting in respect of any Note challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Notes held by
him or instruments in writing as aforesaid duly designating him as the proxy to
vote on behalf of other Noteholders. Any meeting of Noteholders duly called
pursuant to the provisions of Section 10.2 or 10.3 may be adjourned from time to
time by the holders of a majority of the aggregate principal amount of Notes
represented at the meeting, whether or not constituting a quorum, and the
meeting may be held as so adjourned without further notice.
SECTION 10.6. Voting. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the outstanding principal amount of the Notes held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Noteholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 10.2. The record shall show the principal amount of the
Notes voting in favor of or against any resolution. The record shall be signed
and verified by the affidavits of the permanent chairman and secretary of the
meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 10.7. No Delay of Rights by Meeting. Nothing contained in this
Article Ten shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Noteholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or to the
Noteholders under any of the provisions of this Indenture or of the Notes.
ARTICLE 11
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SUPPLEMENTAL INDENTURES
SECTION 11.1. Supplemental Indentures Without Consent of Noteholders.
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may, from time to time, and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) make provision with respect to the conversion rights of the
holders of Notes pursuant to the requirements of Section 15.6 and the redemption
obligations of the Company pursuant to the requirements of Section 3.5(e);
(b) subject to Article Four, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;
(c) to evidence the succession of another Person to the Company, or
successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company pursuant to Article Twelve;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction or condition, such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Notes in
coupon form (including Notes registrable as to principal only) and to provide
for exchangeability of such Notes with the Notes issued hereunder in fully
registered form and to make all appropriate changes for such purpose;
(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture that may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
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arising under this Indenture that shall not materially adversely affect the
interests of the holders of the Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect the qualifications of this Indenture
under the Trust Indenture Act, or under any similar federal statute hereafter
enacted.
Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture, the Trustee
is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.
Notwithstanding any other provision of the Indenture or the Notes, the
Registration Rights Agreement and the obligation to pay Liquidated Damages
thereunder may be amended, modified or waived in accordance with the provisions
of the Registration Rights Agreement.
SECTION 11.2. Supplemental Indenture with Consent of Noteholders. With
the consent (evidenced as provided in Article Nine) of the holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding, the Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may, from time to time and at any time, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or any supplemental indenture or of modifying in any manner the
rights of the holders of the Notes; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or reduce the principal amount
thereof or premium, if any, thereon, or reduce any amount payable on redemption
thereof, or impair the right of any Noteholder to institute suit for the payment
thereof, or
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make the principal thereof or interest or premium, if any, thereon payable in
any coin or currency other than that provided in the Notes, or modify the
provisions of this Indenture with respect to the subordination of the Notes in a
manner adverse to the Noteholders in any material respect, or change the
obligation of the Company to redeem any Note upon the happening of a Fundamental
Change in a manner adverse to the holder of Notes, or impair the right to
convert the Notes into Common Stock subject to the terms set forth herein,
including Section 15.6, in each case, without the consent of the holder of each
Note so affected, or (ii) reduce the aforesaid percentage of Notes, the holders
of which are required to consent to any such supplemental indenture, without the
consent of the holders of all Notes then outstanding.
Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Noteholders under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 11.3. Effect of Supplemental Indenture. Any supplemental
indenture executed pursuant to the provisions of this Article Eleven shall
comply with the Trust Indenture Act, as then in effect, provided that this
Section 11.3 shall not require such supplemental indenture or the Trustee to be
qualified under the Trust Indenture Act prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act or the Indenture has
been qualified under the Trust Indenture Act, nor shall it constitute any
admission or acknowledgment by any party to such supplemental indenture that any
such qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article Eleven, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder, subject in all
respects to such
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modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 11.4. Notation on Notes. Notes authenticated and delivered
after the execution of any supplemental indenture pursuant to the provisions of
this Article Eleven may bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 16.11)
and delivered in exchange for the Notes then outstanding, upon surrender of such
Notes then outstanding.
SECTION 11.5. Evidence of Compliance of Supplemental Indenture to Be
Furnished to Trustee. Prior to entering into any supplemental indenture, the
Trustee shall receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article Eleven.
ARTICLE 12
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 12.1. Company May Consolidate, Etc on Certain Terms. Subject
to the provisions of Section 12.2, nothing contained in this Indenture or in any
of the Notes shall prevent any consolidation or merger of the Company with or
into any other Person or Persons (whether or not affiliated with the Company),
or successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance or
lease (or successive sales, conveyances or leases) of all or substantially all
of the property of the Company, to any other Person (whether or not affiliated
with the Company), authorized to acquire and operate the same and that shall be
organized under the laws of the United States of America, any state thereof or
the District of Columbia; provided, however, that upon any such consolidation,
merger, sale, conveyance or lease, the due and punctual payment of the principal
of and premium, if any, and interest (including Liquidated Damages, if any) on
all of the Notes, according to their tenor and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to be
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performed by the Company, shall be expressly assumed, by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee by
the Person (if other than the Company) formed by such consolidation, or into
which the Company shall have been merged, or by the Person that shall have
acquired or leased such property, and such supplemental indenture shall provide
for the applicable conversion rights set forth in Section 15.6.
SECTION 12.2. Successor Corporation to Be Substituted. In case of any
such consolidation, merger, sale, conveyance or lease and upon the assumption by
the successor Person, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest on all of the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Company, such successor Person shall succeed to
and be substituted for the Company, with the same effect as if it had been named
herein as the party of this first part. Such successor Person thereupon may
cause to be signed, and may issue either in its own name or in the name of
ImClone Systems Incorporated any or all of the Notes, issuable hereunder that
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor Person instead of the Company and
subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver, or cause to be
authenticated and delivered, any Notes that previously shall have been signed
and delivered by the officers of the Company to the Trustee for authentication,
and any Notes that such successor Person thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Notes so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Notes
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Notes had been issued at the date of the execution hereof.
In the event of any such consolidation, merger, sale, conveyance or lease, the
Person named as the "Company" in the first paragraph of this Indenture or any
successor that shall thereafter have become such in the manner prescribed in
this Article Twelve may be dissolved, wound up and liquidated at any time
thereafter and such Person shall be released from its liabilities as obligor and
maker of the Notes and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Notes thereafter to be issued as may be appropriate.
SECTION 12.3. Opinion of Counsel to Be Given Trustee. The Trustee shall
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence
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that any such consolidation, merger, sale, conveyance or lease and any such
assumption complies with the provisions of this Article Twelve.
ARTICLE 13
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.1. Discharge of Indenture. When (a) the Company shall
deliver to the Trustee for cancellation all Notes theretofore authenticated
(other than any Notes that have been destroyed, lost or stolen and in lieu of or
in substitution for which other Notes shall have been authenticated and
delivered) and not theretofore canceled, or (b) all the Notes not theretofore
canceled or delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee, in trust, funds sufficient to pay at maturity or upon
redemption of all of the Notes (other than any Notes that shall have been
mutilated, destroyed, lost or stolen and in lieu of or in substitution for which
other Notes shall have been authenticated and delivered) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest due or to become due to such date of maturity or
redemption date, as the case may be, accompanied by a verification report, as to
the sufficiency of the deposited amount, from an independent certified
accountant or other financial professional satisfactory to the Trustee, and if
the Company shall also pay or cause to be paid all other sums payable hereunder
by the Company, then this Indenture shall cease to be of further effect (except
as to (i) remaining rights of registration of transfer, substitution and
exchange and conversion of Notes, (ii) rights hereunder of Noteholders to
receive payments of principal of and premium, if any, and interest on, the Notes
and the other rights, duties and obligations of Noteholders, as beneficiaries
hereof with respect to the amounts, if any, so deposited with the Trustee and
(iii) the rights, obligations and immunities of the Trustee hereunder), and the
Trustee, on written demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel as required by Section 16.5 and at the
cost and expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture; the Company, however, hereby
agrees to reimburse the Trustee for any costs or expenses thereafter reasonably
and properly incurred by the Trustee and to compensate the Trustee for any
services thereafter reasonably and properly rendered by the Trustee in
connection with this Indenture or the Notes.
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SECTION 13.2. Deposited Monies to Be Held in Trust by Trustee. Subject
to Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1,
provided such deposit was not in violation of Article Four, shall be held in
trust for the sole benefit of the Noteholders and not to be subject to the
subordination provisions of Article Four, and such monies shall be applied by
the Trustee to the payment, either directly or through any paying agent
(including the Company if acting as its own paying agent), to the holders of the
particular Notes for the payment or redemption of which such monies have been
deposited with the Trustee, of all sums due and to become due thereon for
principal and interest and premium, if any.
SECTION 13.3. Paying Agent to Repay Monies Held. Upon the satisfaction
and discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon written request of the Company, be
repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.
SECTION 13.4. Return of Unclaimed Monies. Subject to the requirements
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the case
may be, shall have become due and payable, shall be repaid to the Company by the
Trustee on written demand and all liability of the Trustee shall thereupon cease
with respect to such monies; and the holder of any of the Notes shall thereafter
look only to the Company for any payment that such holder may be entitled to
collect unless an applicable abandoned property law designates another Person.
SECTION 13.5. Reinstatement. If the Trustee or the paying agent is
unable to apply any money in accordance with Section 13.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company"s obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.1 until such time as the Trustee or the paying
agent is permitted to apply all such money in accordance with Section 13.2;
provided, however, that if the Company makes any payment of interest on or
principal of any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Notes to
receive such payment from the money held by the Trustee or paying agent.
ARTICLE 14
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IMMUNITY OF INCORPORATIONS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 14.1. Indenture and Notes Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer, director or subsidiary, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.
ARTICLE 15
CONVERSION OF NOTES
SECTION 15.1. Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, including, without limitation, Article Four, the
holder of any Note shall have the right, at its option, at any time after the
original issuance of the Notes hereunder through the close of business on the
final maturity date of the Notes (except that, with respect to any Note or
portion of a Note that shall be called for redemption, such right shall
terminate, except as provided in Section 15.2, Section 3.2 or Section 3.4, at
the close of business on the Business Day next preceding the date fixed for
redemption of such Note or portion of a Note unless the Company shall default in
payment due upon redemption thereof) to convert the principal amount of any such
Note, or any portion of such principal amount which is $1,000 or an integral
multiple thereof, into that number of fully paid and non-assessable shares of
Common Stock (as such shares shall then be constituted) obtained by dividing the
principal amount of the Note or portion thereof surrendered for conversion by
the Conversion Price in effect at such time, by surrender of the Note so to be
converted in whole or in part in the manner provided, together with any required
funds, in Section 15.2. A Note in respect of which a holder is exercising its
option to require redemption upon a Fundamental Change pursuant to Section 3.5
may be converted only if such holder withdraws its election to exercise in
accordance with Section 3.5. A holder of Notes is not entitled to any rights of
a holder of Common Stock until such holder has
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converted his Notes to Common Stock, and only to the extent such Notes are
deemed to have been converted to Common Stock under this Article Fifteen.
SECTION 15.2. Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Interest or Dividends. In order to
exercise the conversion privilege with respect to any Note in certificated form,
the holder of any such Note to be converted in whole or in part shall surrender
such Note, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 5.2, accompanied by the funds, if any, required by the
penultimate paragraph of this Section 15.2, and shall give written notice of
conversion in the form provided on the Notes (or such other notice which is
acceptable to the Company) to the office or agency that the holder elects to
convert such Note or the portion thereof specified in said notice. Such notice
shall also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock which shall be issuable
on such conversion shall be issued, and shall be accompanied by transfer taxes,
if required pursuant to Section 15.7. Each such Note surrendered for conversion
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any
interest in a Global Note, the beneficial holder must complete, or cause to be
completed, the appropriate instruction form for conversion pursuant to the
Depository's book-entry conversion program, deliver, or cause to be delivered,
by book-entry delivery an interest in such Global Note, furnish appropriate
endorsements and transfer documents if required by the Company or the Trustee or
conversion agent, and pay the funds, if any, required by this Section 15.2 and
any transfer taxes if required pursuant to Section 15.7.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such Noteholder at the office or agency maintained by the Company for such
purpose pursuant to Section 5.2, a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such Note or portion
thereof as determined by the Company in accordance with the provisions of this
Article Fifteen and a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion, calculated by
the Company as provided in Section 15.3. In case any Note of a denomination
greater than
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$1,000 shall be surrendered for partial conversion, and subject to Section 2.3,
the Company shall execute and the Trustee shall authenticate and deliver to the
holder of the Note so surrendered, without charge to him, a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 15.2 have been satisfied as to such Note (or portion thereof),
and the Person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the Person in whose name
the certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
No adjustment in respect of interest on any Note converted or dividends
on any shares issued upon conversion of such Note will be made upon any
conversion except as set forth in the next sentence. If this Note (or portion
hereof) is surrendered for conversion during the period from the close of
business on any record date for the payment of interest to the close of business
on the Business Day preceding the following interest payment date and either (x)
has not been called for redemption on a redemption date that occurs during such
period or (y) is not to be redeemed in connection with a Fundamental Change on a
Repurchase Date that occurs during such period, this Note (or portion hereof
being converted) must be accompanied by an amount, in New York Clearing House
funds or other funds acceptable to the Company, equal to the interest payable on
such interest payment date on the principal amount being converted; provided,
however, that no such payment shall be required if there shall exist at the time
of conversion a default in the payment of interest on the Notes.
Upon the conversion of an interest in a Global Note, the Trustee (or
other conversion agent appointed by the Company), or the Custodian at the
direction of the Trustee (or other conversion agent appointed by the Company),
shall make a notation on such Global Note as to the reduction in the principal
amount represented thereby. The Company shall notify the Trustee in writing of
any conversions of Notes effected through any conversion agent other than the
Trustee.
SECTION 15.3. Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
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upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares that shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered. If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash at the current market price thereof to
the holder of Notes. The current market price of a share of Common Stock shall
be the Closing Price on the last Business Day immediately preceding the day on
which the Notes (or specified portions thereof) are deemed to have been
converted.
SECTION 15.4. Conversion Price. The conversion price shall be as
specified in the form of Note (herein called the "Conversion Price") attached as
Exhibit A hereto, subject to adjustment as provided in this Article Fifteen.
SECTION 15.5. Adjustment of Conversion Price. The Conversion Price
shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution by a
fraction, the numerator of which shall be the number of shares of the Common
Stock outstanding at the close of business on the date fixed for such
determination, and the denominator of which shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination. For the
purpose of this paragraph (a), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company. The
Company will not pay any dividend or make any distribution on shares of Common
Stock held in the treasury of the Company. If any dividend or distribution of
the type described in this Section 15.5(a) is declared but not so paid or made,
the Conversion Price shall again be adjusted to the Conversion Price that would
then be in effect if such dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all holders
of its outstanding shares of Common Stock entitling them (for a period expiring
within forty-five (45) days after the date fixed for determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of
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Common Stock at a price per share less than the Current Market Price (as defined
below) on the date fixed for determination of stockholders entitled to receive
such rights or warrants, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date fixed for determination of stockholders entitled
to receive such rights or warrants by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding at the close of business on
the date fixed for determination of stockholders entitled to receive such rights
or warrants plus the number of shares that the aggregate offering price of the
total number of shares so offered would purchase at such Current Market Price,
and the denominator of which shall be the number of shares of Common Stock
outstanding on the date fixed for determination of stockholders entitled to
receive such rights or warrants plus the total number of additional shares of
Common Stock offered for subscription or purchase. Such adjustment shall be
successively made whenever any such rights or warrants are issued, and shall
become effective immediately after the opening of business on the day following
the date fixed for determination of stockholders entitled to receive such rights
or warrants. To the extent that shares of Common Stock are not delivered after
the expiration of such rights or warrants, the Conversion Price shall be
readjusted to the Conversion Price that would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price that would
then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received by the Company for such
rights or warrants and any amount payable on exercise or conversion thereof, the
value of such consideration, if other than cash, to be determined by the Board
of Directors.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
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In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the Company
(other than any dividends or distributions to which Section 15.5(a) applies) or
evidences of its indebtedness or assets (including securities, but excluding any
rights or warrants referred to in Section 15.5(b), and excluding any dividend or
distribution (x) paid exclusively in cash or (y) referred to in Section 15.5(a)
(any of the foregoing hereinafter in this Section 15.5(d) called the
"Securities")), then, in each such case (unless the Company elects to reserve
such Securities for distribution to the Noteholders upon the conversion of the
Notes so that any such holder converting Notes will receive upon such
conversion, in addition to the shares of Common Stock to which such holder is
entitled, the amount and kind of such Securities which such holder would have
received if such holder had converted its Notes into Common Stock immediately
prior to the Record Date (as defined in Section 15.5(h)(4) for such distribution
of the Securities)), the Conversion Price shall be reduced so that the same
shall be equal to the price determined by multiplying the Conversion Price in
effect on the Record Date with respect to such distribution by a fraction, the
numerator of which shall be the Current Market Price per share of the Common
Stock on such Record Date less the fair market value (as determined by the Board
of Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) on the Record Date of the portion of the
Securities so distributed applicable to one share of Common Stock and the
denominator of which shall be the Current Market Price per share of the Common
Stock, such reduction to become effective immediately prior to the opening of
business on the day following such Record Date; provided, however, that in the
event the then fair market value (as so determined) of the portion of the
Securities so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the Record Date, in
lieu of the foregoing adjustment, adequate provision shall be made so that each
Noteholder shall have the right to receive upon conversion the amount of
Securities such holder would have received had such holder converted each Note
on the Record Date. In the event that such dividend or distribution is not so
paid or made, the Conversion Price shall again be adjusted to be the Conversion
Price that would then be in effect if such dividend or distribution had not been
declared. If the Board of Directors determines the fair market value of any
distribution for purposes of this Section 15.5(d) by reference to the actual or
when issued trading market for any securities, it must in doing so consider the
prices in such market over the same period used in computing the Current Market
Price of the Common Stock.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
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rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.5 (and no adjustment to the Conversion Price under
this Section 15.5 will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Price shall be made under this Section 15.5(d). If any such right or warrant,
including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each
such event shall be deemed to be the date of distribution and record date with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of the
type described in the preceding sentence) with respect thereto that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 15.5 was made, (1) in the case of any such
rights or warrants that shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per share redemption or repurchase price received by a holder or holders
of Common Stock with respect to such rights or warrants (assuming such holder
had retained such rights or warrants), made to all holders of Common Stock as of
the date of such redemption or repurchase, and (2) in the case of such rights or
warrants that shall have expired or been terminated without exercise by any
holders thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
No adjustment of the Conversion Price shall be made pursuant to this
Section 15.5(d) in respect of rights or warrants distributed or deemed
distributed on any Trigger Event to the extent that such rights or warrants are
actually distributed, or reserved by the Company for distribution to holders of
Notes upon conversion by such holders of Notes to Common Stock.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
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capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Price reduction required by this Section 15.5(d) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Conversion Price reduction required by Sections
15.5(a) and (b) with respect to such dividend or distribution shall then be
made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "the date fixed for the
determination of stockholders entitled to receive such rights or warrants" and
"the date fixed for such determination" within the meaning of Sections 15.5(a)
and (b), and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of Section 15.5(a).
(d) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding (x) any quarterly cash dividend
on the Common Stock to the extent the aggregate cash dividend per share of
Common Stock in any fiscal quarter does not exceed the greater of (A) the amount
per share of Common Stock of the next preceding quarterly cash dividend on the
Common Stock to the extent that such preceding quarterly dividend did not
require any adjustment of the Conversion Price pursuant to this Section 15.5(e)
(as adjusted to reflect subdivisions, or combinations of the Common Stock), and
(B) 3.75% of the arithmetic average of the Closing Price (determined as set
forth in Section 15.5(h)) during the ten Trading Days (as defined in Section
15.5(h)) immediately prior to the date of declaration of such dividend, and (y)
any dividend or distribution in connection with the liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary), then, in such
case, the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the close of business on such record date by a fraction, the numerator of
which shall be the Current Market Price of the Common Stock on the record date
less the amount of cash so distributed (and not excluded as provided above)
applicable to one share of Common Stock, and the denominator of which shall be
such Current Market Price of the Common Stock, such reduction to be effective
immediately prior to the opening of business on the day following the record
date; provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price of the Common Stock on the record date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Noteholder
shall have the right to receive upon conversion the amount of cash such holder
would have received had such holder converted each Note on the record date. In
the event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to
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be the Conversion Price that would then be in effect if such dividend or
distribution had not been declared. If any adjustment is required to be made as
set forth in this Section 15.5(e) as a result of a distribution that is a
quarterly dividend, such adjustment shall be based upon the amount by which such
distribution exceeds the amount of the quarterly cash dividend permitted to be
excluded pursuant hereto. If an adjustment is required to be made as set forth
in this Section 15.5(e) above as a result of a distribution that is not a
quarterly dividend, such adjustment shall be based upon the full amount of the
distribution.
(e) In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender or exchange offer (as amended upon the expiration thereof) shall require
the payment to stockholders of consideration per share of Common Stock having a
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors)
that as of the last time (the "Expiration Time") tenders or exchanges may be
made pursuant to such tender or exchange offer (as it may be amended) exceeds
the Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time, the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the Expiration Time by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) at the Expiration Time multiplied by the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator of which shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Expiration Time (the shares deemed so accepted, up to
any such maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any Purchased
Shares) at the Expiration Time and the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the Trading Day
following the Expiration Time. In the event that the Company is obligated to
purchase shares pursuant to any such tender or exchange offer, but the Company
is permanently prevented by applicable law from effecting any such purchases or
all such purchases are rescinded, the Conversion Price shall again be adjusted
to be the Conversion Price that would then be in effect if such tender or
exchange offer had not been made.
(f) In case of a tender or exchange offer made by a Person other than
the Company or any Subsidiary for an amount that increases the offeror's
ownership
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of Common Stock to more than twenty-five percent (25%) of the Common Stock
outstanding and shall involve the payment by such Person of consideration per
share of Common Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) that as of the last time (the "Offer
Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it shall have been amended) that exceeds the Current Market
Price of the Common Stock on the Trading Day next succeeding the Offer
Expiration Time, and in which, as of the Offer Expiration Time the Board of
Directors is not recommending rejection of the offer, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the Offer Expiration Time by a
fraction the numerator of which shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Offer Expiration
Time multiplied by the Current Market Price of the Common Stock on the Trading
Day next succeeding the Offer Expiration Time and the denominator of which shall
be the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up to
any maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the Offer
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Accepted Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Accepted Purchased
Shares) at the Offer Expiration Time and the Current Market Price of the Common
Stock on the Trading Day next succeeding the Offer Expiration Time, such
reduction to become effective immediately prior to the opening of business on
the Trading Day following the Offer Expiration Time. In the event that such
Person is obligated to purchase shares pursuant to any such tender or exchange
offer, but such Person is permanently prevented by applicable law from effecting
any such purchases or all such purchases are rescinded, the Conversion Price
shall again be adjusted to be the Conversion Price that would then be in effect
if such tender or exchange offer had not been made. Notwithstanding the
foregoing, the adjustment described in this Section 15.5(g) shall not be made
if, as of the Offer Expiration Time, the offering documents with respect to such
offer disclose a plan or intention to cause the Company to engage in any
transaction described in Article Twelve.
(g) For purposes of this Section 15.5, the following terms shall have
the meaning indicated:
(i) "Closing Price" with respect to any security on any day
shall mean the closing sale price, regular way, on such day or, in case
no such sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in each case as quoted on
the Nasdaq National
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Market or, if such security is not quoted or listed or admitted to
trading on such Nasdaq National Market, on the principal national
securities exchange or quotation system on which such security is
quoted or listed or admitted to trading or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation
system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such
manner as furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors or, to the
extent permitted by applicable law, a duly authorized committee
thereof, whose determination shall be conclusive.
(ii) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question except as
hereinafter provided for purposes of any computation under Section
15.5(f) or (g); provided, however, that (1) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or
distribution requiring such computation and other than the tender or
exchange offer requiring such computation under Section 15.5(f) or (g))
that requires an adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) occurs during such ten
consecutive Trading Days, the Closing Price for each Trading Day prior
to the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the Conversion Price
is so required to be adjusted as a result of such other event, (2) if
the "ex" date for any event (other than the issuance or distribution
requiring such computation and other than the tender or exchange offer
requiring such computation under Section 15.5(f) or (g)) that requires
an adjustment to the Conversion Price pursuant to Section 15.5(a), (b),
(c), (d), (e), (f) or (g) occurs on or after the "ex" date for the
issuance or distribution requiring such computation and prior to the
day in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event, and (3) if the "ex" date for the issuance or distribution
requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (1) or
(2) of this proviso, the Closing Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any
cash and the fair market value (as determined by the Board of Directors
or, to the extent permitted by applicable law, a duly
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authorized committee thereof in a manner consistent with any
determination of such value for purposes of Section 15.5(d), (f) or
(g), whose determination shall be conclusive and described in a
resolution of the Board of Directors or such duly authorized committee
thereof, as the case may be) of the evidences of indebtedness, shares
of capital stock or assets being distributed applicable to one share of
Common Stock as of the close of business on the day before such "ex"
date. For purposes of any computation under Section 15.5(f) or (g), the
"Current Market Price" of the Common Stock on any date shall be deemed
to be the average of the daily Closing Prices per share of Common Stock
for such day and the next two succeeding Trading Days; provided,
however, that if the "ex" date for any event (other than the tender or
exchange offer requiring such computation under Section 15.5(f) or (g))
that requires an adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or after the
Expiration Time or Offer Expiration Time, as the case may be, for the
tender or exchange offer requiring such computation and prior to the
day in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted as provided in
clauses (1), (2) and (3) of the proviso contained in the first sentence
of this Section 15.5(h)(2). For purpose of this paragraph, the term
"ex" date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades, regular way, on
the relevant exchange or in the relevant market from which the Closing
Price was obtained without the right to receive such issuance or
distribution, (2) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which
the Common Stock trades, regular way, on such exchange or in such
market after the time at which such subdivision or combination becomes
effective, and (3) when used with respect to any tender or exchange
offer means the first date on which the Common Stock trades, regular
way, on such exchange or in such market after the Expiration Time or
the Offer Expiration Time of such offer.
(iii) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
(iv) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other
property or in which the Common Stock (or other applicable security) is
exchanged for or converted into any combination of cash, securities or
other property, the date fixed for determination of stockholders
entitled to receive such cash,
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securities or other property (whether such date is fixed by the Board
of Directors or by statute, contract or otherwise).
(v) "Trading Day" shall mean (x) if the applicable security is
quoted on the Nasdaq National Market, a day on which trades may be made
thereon or (y) if the applicable security is listed or admitted for
trading on the New York Stock Exchange or another national securities
exchange, a day on which the New York Stock Exchange or another
national securities exchange is open for business or (z) if the
applicable security is not so listed, admitted for trading or quoted,
any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by
law or executive order to close.
(h) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 15.5(a), (b), (c), (d), (e), (f) or (g)
as the Board of Directors considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time if the
period is at least twenty (20) days, the reduction is irrevocable during the
period and the Board of Directors shall have made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to holders of record of the Notes a
notice of the reduction at least fifteen (15) days prior to the date the reduced
Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period during which it will be in effect.
(i) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in such price; provided, however, that any adjustments that by reason of
this Section 15.5(j) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Article Fifteen shall be made by the Company and shall be made to the nearest
cent or to the nearest one-hundredth (1/100) of a share, as the case may be. No
adjustment need be made for rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest. To the extent the Notes
become convertible into cash, assets, property or securities (other than capital
stock of the Company), no adjustment need be made thereafter as to the cash,
assets, property or such securities. Interest will not accrue on the cash.
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(j) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other than
the Trustee an Officers' Certificate setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. Unless and until a Responsible Officer of the Trustee shall have
received such Officers' Certificate, the Trustee shall not be deemed to have
knowledge of any adjustment of the Conversion Price and may assume that the last
Conversion Price of which it has knowledge is still in effect. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion Price
and the date on which each adjustment becomes effective and shall mail such
notice of such adjustment of the Conversion Price to the holder of each Note at
his last address appearing on the Note register provided for in Section 2.5 of
this Indenture, within twenty (20) days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of any such
adjustment.
(k) In any case in which this Section 15.5 provides that an adjustment
shall become effective immediately after (1) a record date or Record Date for an
event, (2) the date fixed for the determination of stockholders entitled to
receive a dividend or distribution pursuant to Section 15.5(a), (3) a date fixed
for the determination of stockholders entitled to receive rights or warrants
pursuant to Section 15.5(b), (4) the Expiration Time for any tender or exchange
offer pursuant to Section 15.5(f), or (5) the Offer Expiration Time for a tender
or exchange offer pursuant to Section 15.5(g) (each a "Determination Date"), the
Company may elect to defer until the occurrence of the relevant Adjustment Event
(as hereinafter defined) (x) issuing to the holder of any Note converted after
such Determination Date and before the occurrence of such Adjustment Event, the
additional shares of Common Stock or other securities issuable upon such
conversion by reason of the adjustment required by such Adjustment Event over
and above the Common Stock issuable upon such conversion before giving effect to
such adjustment and (y) paying to such holder any amount in cash in lieu of any
fraction pursuant to Section 15.3. For purposes of this Section 15.5(l), the
term "Adjustment Event" shall mean:
(i) in any case referred to in clause (1) hereof, the
occurrence of such event,
(ii) in any case referred to in clause (2) hereof, the date
any such dividend or distribution is paid or made,
(iii) in any case referred to in clause (3) hereof, the date
of expiration of such rights or warrants, and
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(iv) in any case referred to in clause (4) or clause (5)
hereof, the date a sale or exchange of Common Stock pursuant to such
tender or exchange offer is consummated and becomes irrevocable.
(l) For purposes of this Section 15.5, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.
SECTION 15.6. Effect of Reclassification, Consolidation, Merger or
Sale. If any of the following events occur, namely (i) any reclassification or
change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 15.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another Person as a result of which holders of
Common Stock shall be entitled to receive stock, other securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, or (iii) any sale or conveyance of all or substantially all of the
properties and assets of the Company to any other Person as a result of which
holders of Common Stock shall be entitled to receive stock, other securities or
other property or assets (including cash) with respect to or in exchange for
such Common Stock, then the Company or the successor or purchasing Person, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that such Note shall be convertible
into the kind and amount of shares of stock, other securities or other property
or assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such Notes (assuming, for
such purposes, a sufficient number of authorized shares of Common Stock are
available to convert all such Notes) immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance assuming such
holder of Common Stock did not exercise his rights of election, if any, as to
the kind or amount of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance (provided that, if the kind or amount of
stock, other securities or other property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purposes of this Section 15.6 the kind and amount of stock, other
securities or other property or assets
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(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance for each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such supplemental indenture shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article Fifteen.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at its address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.
SECTION 15.7. Taxes on Shares Issued. The issue of stock certificates
on conversions of Notes shall be made without charge to the converting
Noteholder for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Note converted, and the Company shall not be required to
issue or deliver any such stock certificate unless and until the Person or
Persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
SECTION 15.8. Reservation of Shares; Shares to Be Fully Paid;
Compliance with Governmental Requirements; Listing of Common Stock. The Company
shall provide, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to provide
for the conversion of the Notes from time to time as such Notes are presented
for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
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<PAGE> 105
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and non-assessable
by the Company and free from all taxes, liens and charges with respect to the
issue thereof.
The Company covenants that, if any shares of Common Stock to be
provided for the purpose of conversion of Notes hereunder require registration
with or approval of any governmental authority under any federal or state law
before such shares may be validly issued upon conversion, the Company will in
good faith and as expeditiously as possible, to the extent then permitted by the
rules and interpretations of the Securities and Exchange Commission (or any
successor thereto), endeavor to secure such registration or approval, as the
case may be.
The Company further covenants that, if at any time the Common Stock
shall be listed on the Nasdaq National Market or any other national securities
exchange or automated quotation system, the Company will, if permitted by the
rules of such exchange or automated quotation system, list and keep listed, so
long as the Common Stock shall be so listed on such exchange or automated
quotation system, all Common Stock issuable upon conversion of the Note;
provided, however, that, if the rules of such exchange or automated quotation
system permit the Company to defer the listing of such Common Stock until the
first conversion of the Notes into Common Stock in accordance with the
provisions of this Indenture, the Company covenants to list such Common Stock
issuable upon conversion of the Notes in accordance with the requirements of
such exchange or automated quotation system at such time.
SECTION 15.9. Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine the Conversion Price or whether any facts exist
which may require any adjustment of the Conversion Price, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Note; and the Trustee and any other conversion agent make no representations
with respect thereto. Neither the Trustee nor any conversion agent shall be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Note for the purpose of conversion or to comply
with any of the duties, responsibilities or covenants of the Company contained
in this Article Fifteen.
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Without limiting the generality of the foregoing, neither the Trustee nor any
conversion agent shall be under any responsibility to determine the correctness
of any provisions contained in any supplemental indenture entered into pursuant
to Section 15.6 relating either to the kind or amount of shares of stock or
securities or property (including cash) receivable by Noteholders upon the
conversion of their Notes after any event referred to in such Section 15.6 or to
any adjustment to be made with respect thereto, but, subject to the provisions
of Section 8.1, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officers' Certificate
(which the Company shall be obligated to file with the Trustee prior to the
execution of any such supplemental indenture) with respect thereto.
SECTION 15.10. Notice to Holders Prior to Certain Actions. In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock that would require an adjustment in the Conversion Price
pursuant to Section 15.5; or
(b) the Company shall authorize the granting to the holders of all or
substantially all of its Common Stock of rights or warrants to subscribe for or
purchase any share of any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common Stock of
the Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company or any Significant Subsidiary; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company or any Significant Subsidiary; the Company shall cause
to be filed with the Trustee and to be mailed to each holder of Notes at his
address appearing on the Note register provided for in Section 2.5 of this
Indenture, as promptly as possible but in any event at least ten (10) days prior
to the applicable date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution or
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution
or rights are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective or occur, and the date as of which it is expected
that holders of
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Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
ARTICLE 16
MISCELLANEOUS PROVISIONS
SECTION 16.1. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.
SECTION 16.2. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any Person that shall at the time be the lawful sole successor of the
Company.
SECTION 16.3. Addresses for Notices, Etc. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to ImClone Systems Incorporated , 180 Varick Street, 7th Floor, New
York, New York 10014, Attention: Treasurer. Any notice, direction, request or
demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited, postage prepaid, by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office, which office is, at the date
as of which this Indenture is dated, located at The Bank of New York, 101
Barclay Street, 21st Floor West, New York, New York, 10286, Attention: Corporate
Trust Trustee Administration.
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note
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register and shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 16.4. Governing Law. This Indenture and each Note shall be
deemed to be a contract made under the laws of the State of New York, and for
all purposes shall be construed in accordance with the laws of the State of New
York, without regard to the conflict of laws provisions thereof.
SECTION 16.5. Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 16.6. Legal Holidays. In any case in which the date of maturity
of interest on or principal of the Notes or the date fixed for redemption of any
Note will not be a Business Day, then payment of such interest on or principal
of the Notes need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period from and after such date.
SECTION 16.7. Trust Indenture Act. This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to
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be part of and to govern indentures qualified under the Trust Indenture Act;
provided, however, that, unless otherwise required by law, notwithstanding the
foregoing, this Indenture and the Notes issued hereunder shall not be subject to
the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the
Trust Indenture Act as now in effect or as hereafter amended or modified;
provided further that this Section 16.7 shall not require this Indenture or the
Trustee to be qualified under the Trust Indenture Act prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act,
nor shall it constitute any admission or acknowledgment by any party to the
Indenture that any such qualification is required prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act. If
any provision hereof limits, qualifies or conflicts with another provision
hereof which is required to be included in an indenture qualified under the
Trust Indenture Act, such required provision shall control.
SECTION 16.8. No Security Interest Created. Nothing in this Indenture
or in the Notes, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction in which property of
the Company or its subsidiaries is located.
SECTION 16.9. Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar and their
successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 16.10. Table of Contents, Headings, Etc. The table of contents
and the titles and headings of the articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 16.11. Authenticating Agent. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7, 3.3 and 3.5, as fully to all
intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Notes. For all purposes of this Indenture, the authentication and delivery of
Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in
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the Notes for the Trustee's certificate of authentication. Such authenticating
agent shall at all times be a Person eligible to serve as trustee hereunder
pursuant to Section 8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to all or substantially all the
corporate trust business of any authenticating agent, shall be the successor of
the authenticating agent hereunder, if such successor corporation is otherwise
eligible under this Section 16.11, without the execution or filing of any paper
or any further act on the part of the parties hereto or the authenticating agent
or such successor corporation.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section , the
Trustee shall either promptly appoint a successor authenticating agent or itself
assume the duties and obligations of the former authenticating agent under this
Indenture and, upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Company agrees to pay to the authenticating agent from time to time
such reasonable compensation for its services as shall be agreed upon in writing
between the Company and the authenticating agent.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 16.11
shall be applicable to any authenticating agent.
SECTION 16.12. Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
SECTION 16.13. Severability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, then (to the extent
permitted by law) the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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The Bank of New York hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions herein above set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed.
IMCLONE SYSTEMS INCORPORATED
By:
-------------------------------
Name:
Title:
THE BANK OF NEW YORK,
As Trustee
By:
-------------------------------
Name:
Title:
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<PAGE> 112
EXHIBIT A
For Global Note only: UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) (THE "DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY
FOR THE CERTIFICATES) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY (AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U. S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL
ACCREDITED INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS
NOTE OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO
IMCLONE SYSTEMS INCORPORATED OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER
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CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THE NOTES (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), AND IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF LESS THAN $100,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3)
PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (2)(F) ABOVE),
IT WILL FURNISH TO THE BANK OF NEW YORK,AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR
TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER
RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW YORK AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS
AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A U. S.
PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE BANK OF NEW
YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS NOTE
PURSUANT TO CLAUSE
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<PAGE> 114
(2)(F) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTION.
A-3
<PAGE> 115
IMCLONE SYSTEMS INCORPORATED
5 1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2005
CUSIP:_______________
No. __________ $___________________
ImClone Systems Incorporated , a corporation duly organized and validly
existing under the laws of the State of Delaware (herein called the "Company",
which term includes any successor corporation under the Indenture referred to on
the reverse hereof), for value received hereby promises to pay to ___________or
its registered assigns, the principal sum of __________________ Dollars
($_________) on March 1, 2005, at the office or agency of the Company maintained
for that purpose in accordance with the terms of the Indenture, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay interest,
semi-annually on March 1 and September 1 of each year, commencing September 1,
2000, on said principal sum at said office or agency, in like coin or currency,
at the rate per annum of 5 1/2%, from March 1 or September 1, as the case may
be, next preceding the date of this Note to which interest has been paid or duly
provided for, unless the date hereof is a date to which interest has been paid
or duly provided for, in which case from the date of this Note, or unless no
interest has been paid or duly provided for on the Notes, in which case from
February 29, 2000, until payment of said principal sum has been made or duly
provided for. Notwithstanding the foregoing, if the date hereof is after any
February 15 or August 15, as the case may be, and before the following March 1
or September 1, this Note shall bear interest from such March 1 or September 1;
provided, however, that if the Company shall default in the payment of interest
due on such March 1 or September 1, then this Note shall bear interest from the
next preceding March 1 or September 1 to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on such Note,
from February 29, 2000. Except as otherwise provided in the Indenture, the
interest payable on the Note pursuant to the Indenture on any March 1 or
September 1 will be paid to the Person entitled thereto as it appears in the
Note register at the close of business on the record date, which shall be the
February 15 or August 15 (whether or not a Business Day) next preceding such
March 1 or September 1, as provided in the Indenture; provided, however, that
any such interest not punctually paid or duly provided for shall be payable as
provided in the Indenture. Interest may, at the option of the Company, be paid
either (i) by check mailed to the registered address of such Person (provided
that the holder of Notes with an aggregate principal amount in excess of
$2,000,000 shall, at the written election of such holder, be paid by wire
transfer of immediately available funds) or (ii) by transfer
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<PAGE> 116
to an account maintained by such Person located in the United States; provided,
however, that payments to the Depositary will be made by wire transfer of
immediately available funds to the account of the Depositary or its nominee.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and provisions giving the holder of this Note the right to convert this Note
into Common Stock of the Company on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in the Indenture.
Such further provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of the State of New York, without regard to principles
of conflicts of laws.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
A-5
<PAGE> 117
Name:
Title:
Attest:
---------------------------
Name:
-----------------------------
Title:
----------------------------
Dated:
----------------------------
A-6
<PAGE> 118
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
THE BANK OF NEW YORK, as Trustee
By:
-------------------------------
Authorized Signatory
or
By:
-------------------------------
As Authenticating Agent
(if different from Trustee)
A-7
<PAGE> 119
FORM OF REVERSE OF NOTE
IMCLONE SYSTEMS INCORPORATED
5 1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2005
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 5 1/2% Convertible Subordinated Notes due 2005 (herein called
the "Notes"), limited to the aggregate principal amount of $200,000,000
($240,000,000, if the option is fully exercised by the Initial Purchasers) all
issued or to be issued under and pursuant to an Indenture dated as of February
29, 2000 (herein called the "Indenture"), between the Company and The Bank of
New York, as trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages (as defined in the Registration Rights
Agreement), if any) on all Notes may be declared by either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the Notes;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable upon redemption thereof, or impair the
right of any Noteholder to institute suit for the payment thereof, or make the
principal thereof or interest or premium, if any, thereon payable in any coin or
currency other than that provided in the Notes, or modify the provisions of the
Indenture with respect to the subordination of the Notes in a manner adverse to
the Noteholders in any material respect, or change the obligation of the Company
to redeem any Note upon the happening of a Fundamental Change (as defined in the
Indenture) in a manner adverse to the holder of the Notes, or impair the right
to convert the Notes into Common Stock subject to the terms set forth in the
Indenture, including Section 15.6 thereof,
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<PAGE> 120
without the consent of the holder of each Note so affected or (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent to
any such supplemental indenture, without the consent of the holders of all Notes
then outstanding. Subject to the provisions of the Indenture, the holders of a
majority in aggregate principal amount of the Notes at the time outstanding may
on behalf of the holders of all of the Notes waive any past default or Event of
Default under the Indenture and its consequences except a default in the payment
of interest (including Liquidated Damages, if any) or any premium on, or the
principal of, any of the Notes, or a failure by the Company to convert any Notes
into Common Stock of the Company, or a default in the payment of the redemption
price pursuant to Article Three of the Indenture, or a default in respect of a
covenant or provisions of the Indenture which under Article Eleven of the
Indenture cannot be modified without the consent of the holders of each or all
Notes then outstanding or affected thereby. Any such consent or waiver by the
holder of this Note (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such holder and upon all future holders and owners
of this Note and any Notes which may be issued in exchange or substitution
hereof, irrespective of whether or not any notation thereof is made upon this
Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
whether outstanding at the date of the Indenture or thereafter incurred, and
this Note is issued subject to the provisions of the Indenture with respect to
such subordination. Each holder of this Note, by accepting the same, agrees to
and shall be bound by such provisions and authorizes the Trustee on its behalf
to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee his attorney-in-fact for such
purpose.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
(including Liquidated Damages, if any) on this Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
The Notes are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and any integral multiple of $1,000. At
the office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax,
A-9
<PAGE> 121
assessment or other governmental charge that may be imposed in connection with
any registration or exchange of Notes, Notes may be exchanged for a like
aggregate principal amount of Notes of any other authorized denominations.
The Notes may be provisionally redeemed by the Company, in whole or in
part, at any time prior to March 6, 2003, at a redemption price equal to $1,000
per $1,000 aggregate principal amount of notes to be redeemed plus accrued and
unpaid interest, if any (including Liquidated Damages Amount, if any) to the
date of redemption if (i) the closing price of the Common Stock shall have
exceeded 150% of the conversion price then in effect for at least 20 trading
days in any consecutive 30-trading day period and (ii) if the redemption would
occur before March 1, 2002, the shelf registration statement covering resales of
the Notes and the Common Stock, issuable upon conversion of the Notes, is
effective and available for use and is expected to remain effective and
available for use for the 30 days immediately following the date of redemption.
The Company shall mail notice of any provisional redemption within five trading
days of a consecutive 30-trading day period.
Upon any such provisional redemption, the Company shall make an
additional Additional Payment (as defined in the Indenture) with respect to the
Notes called for redemption to holders as of the date of mailing of the notice
of provisional redemption in an amount equal to $ 152.54 per $1,000 Note, minus
the amount of any interest the Company actually paid on such Note prior to the
Notice Date. The Company shall make the Additional Payment on all Notes called
for provisional redemption, including any Notes converted after the date of
mailing of the notice of provisional redemption and prior to the date of
redemption.
At any time on or after March 6, 2003, and prior to maturity, the Notes
may be redeemed at the option of the Company, in whole or in part, upon mailing
a notice of such redemption not less than 30 days but not more than 60 days
before the date fixed for redemption to the holders of Notes at their last
registered addresses, all as provided in the Indenture, at the following
optional redemption prices (expressed as percentages of the principal amount),
together in each case with accrued and unpaid interest (including Liquidated
Damages, if any) to, but excluding, the date fixed for redemption:
<TABLE>
<CAPTION>
Period Redemption Price
<S> <C>
Beginning on March 6, 2003 and ending on February 29, 2004 102.20%
Beginning on March 1, 2004 and ending on February 28, 2005 110.10%
</TABLE>
and 100% on March 1, 2005; provided, however, that if the date fixed for
redemption is on a March 1 or September 1, then the interest payable on such
date
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<PAGE> 122
shall be paid to the holder of record on the preceding February 15 or August 15,
respectively.
The Company may not redeem the Notes if a default in the payment of
interest or premium, if any, on the Notes has occurred and is continuing.
The Notes are not subject to redemption through the operation of any
sinking fund.
If a Fundamental Change occurs at any time prior to maturity of the
Notes, the Notes will be redeemable on the 30th day after notice thereof (the
"Repurchase Date") at the option of the holder of the Notes at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to (but excluding) the date of redemption; provided, however, that, if
such Repurchase Date is a March 1 or September 1, the interest payable on such
date shall be paid to the holder of record of the Notes on the preceding
February 15 or August 15, respectively. The Notes will be redeemable in
multiples of $1,000 principal amount. The Company shall mail to all holders of
record of the Notes a notice of the occurrence of a Fundamental Change and of
the redemption right arising as a result thereof on or before the 10th day after
the occurrence of such Fundamental Change. For a Note to be so redeemed at the
option of the holder, the Company must receive at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
Indenture, such Note with the form entitled "Option to Elect Repayment Upon a
Fundamental Change" on the reverse thereof duly completed, together with such
Note, duly endorsed for transfer, on or before the 30th day after the date of
such notice of a Fundamental Change (or if such 30th day is not a Business Day,
the immediately succeeding Business Day).
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after the original issuance of any Notes
through the close of business on the final maturity date of the Notes, or, as to
all or any portion hereof called for redemption, prior to the close of business
on the Business Day immediately preceding the date fixed for redemption (unless
the Company shall default in payment due upon redemption thereof), to convert
the principal hereof or any portion of such principal which is $1,000 or an
integral multiple thereof into that number of shares of the Company"s Common
Stock (as such shares shall be constituted at the date of conversion) obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the Conversion Price of $110.18, as may adjusted from time to time as
provided in the Indenture, upon surrender of this Note, together with a
conversion notice as provided in the Indenture (the form entitled "Conversion
Notice" on the reverse hereof), to the Company at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
Indenture, or at the option of such holder, the
A-11
<PAGE> 123
Corporate Trust Office, and, unless the shares issuable on conversion are to be
issued in the same name as this Note, duly endorsed by, or accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or by his duly authorized attorney. No adjustment in respect of
interest on any Note converted or dividends on any shares issued upon conversion
of such Note will be made upon any conversion except as set forth in the next
sentence. If this Note (or portion hereof) is surrendered for conversion during
the period from the close of business on any record date for the payment of
interest to the close of business on the Business Day preceding the following
interest payment date and either (x) has not been called for redemption on a
redemption date that occurs during such period or (y) is not to be redeemed in
connection with a Fundamental Change on a Repurchase Date that occurs during
such period, this Note (or portion hereof being converted) must be accompanied
by an amount, in New York Clearing House funds or other funds acceptable to the
Company, equal to the interest payable on such interest payment date on the
principal amount being converted; provided, however, that no such payment shall
be required if there shall exist at the time of conversion a default in the
payment of interest on the Notes. No fractional shares will be issued upon any
conversion, but an adjustment and payment in cash will be made, as provided in
the Indenture, in respect of any fraction of a share which would otherwise be
issuable upon the surrender of any Note or Notes for conversion. A Note in
respect of which a holder is exercising its right to require redemption upon a
Fundamental Change may be converted only if such holder withdraws its election
to exercise such right in accordance with the terms of the Indenture. Any Notes
called for redemption, unless surrendered for conversion by the holders thereof
on or before the close of business on the Business Day preceding the date fixed
for redemption, may be deemed to be redeemed from the holders of such Notes for
an amount equal to the applicable redemption price, together with accrued but
unpaid interest (including Liquidated Damages, if any) to (but excluding) the
date fixed for redemption, by one or more investment banks or other purchasers
who may agree with the Company (i) to purchase such Notes from the holders
thereof and convert them into shares of the Company"s Common Stock and (ii) to
make payment for such Notes as aforesaid to the Trustee in trust for the
holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in exchange
thereof; subject to the limitations provided in the Indenture, without charge
except for any tax, assessment or other governmental charge imposed in
connection therewith.
A-12
<PAGE> 124
The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar) for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any supplemental indenture or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
This Note shall be deemed to be a contract made under the laws of New
York, and for all purposes shall be construed in accordance with the laws of New
York, without regard to principles of conflicts of laws.
Terms used in this Note and defined in the Indenture are used herein as
therein defined.
A-13
<PAGE> 125
\ ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C> <C>
UNIF GIFT MIN ACT --
____________________ Custodian
TEN COM- as tenants in common (Cust)
____________________
(Minor)
TEN ENT- as tenants by the entireties
JT TEN- as joint tenants with right of Under Uniform Gifts to Minors Act
survivorship and not as tenants ____________________
in common (State)
</TABLE>
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
A-14
<PAGE> 126
CONVERSION NOTICE
TO: IMCLONE SYSTEMS INCORPORATED THE BANK OF NEW YORK
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion thereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of ImClone Systems Incorporated in accordance with the terms of the
Indenture referred to in this Note, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Notes representing any unconverted principal amount
hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this Note
not converted are to be issued in the name of a person other than the
undersigned, the undersigned will provide the appropriate information below and
pay all transfer taxes payable with respect thereto. Any amount required to be
paid by the undersigned on account of interest accompanies this Note.
Dated: ___________________
______________________________
A-15
<PAGE> 127
Fill in the registration of shares of Common Stock if to be issued, and Notes if
to be delivered, other than to and in the name of the registered holder:
- ---------------------------------
(Name)
- ---------------------------------
(Street Address)
- ---------------------------------
(City, State and Zip Code)
- ---------------------------------
Please print name and address
Principal amount to be converted
(if less than all):
$-------------------------------
A-16
<PAGE> 128
Social Security or Other Taxpayer
Identification Number:
- ---------------------------------
A-17
<PAGE> 129
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: IMCLONE SYSTEMS INCORPORATED THE BANK OF NEW YORK
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from ImClone Systems Incorporated (the
"Company") as to the occurrence of a Fundamental Change with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or an integral
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note at the price of 100% of such entire principal
amount or portion thereof, together with accrued interest to, but excluding,
such repayment date, to the registered holder hereof.
Dated: ___________________
______________________________
______________________________
Signature(s)
A-18
<PAGE> 130
- ------------------------------
Social Security or Other
Taxpayer Identification Number
A-19
<PAGE> 131
ASSIGNMENT
For value received __________________________________________ hereby
sell(s) assign(s) and transfer(s) unto
____________________________________________ (Please insert social security or
other Taxpayer Identification Number of assignee) the within Note, and hereby
irrevocably constitutes and appoints ____________________________________
attorney to transfer said Note on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the Note prior to the expiration of
the holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant to
a registration statement that has been declared effective under the Securities
Act), the undersigned confirms that such Note is being transferred:
\ \ To ImClone Systems Incorporated or a subsidiary thereof; or
\ \ Inside the United States pursuant to and in compliance with Rule
144A under the Securities Act of 1933, as amended; or
\ \ Inside the United States to an Institutional Accredited
Investor pursuant to and in compliance with the Securities Act
of 1933, as amended, in a minimum denomination of $100,000; or
\ \ Outside the Unites States in compliance with Rule 904 under the
Securities Act; or
\ \ Pursuant to and in compliance with Rule 144 under the Securities
Act of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").
A-20
<PAGE> 132
\ \ The transferee is an Affiliate of the Company.
Dated: ___________________
____________________________________
____________________________________
Signature(s)
A-21
<PAGE> 133
- ----------------------------------
Signature Guarantee
NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
A-22
<PAGE> 134
EXHIBIT B
ImClone Systems Incorporated
180 Varick Street, 7th Floor
New York, New York 10014
The Bank of New York, as Trustee
101 Barclay Street
21st Floor West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Ladies and Gentlemen:
In connection with our proposed purchase of 5 1/2% Convertible
Subordinated Notes due 2005 (the "Notes") of IMCLONE SYSTEMS INCORPORATED, a
Delaware corporation (the "Company") we confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the
"Securities Act"), or an entity in which all of the equity owners are accredited
investors within the meaning of Rule 501(a)(1), (2) or (3) under the Securities
Act (an "Institutional Accredited Investor") and we are able to bear the
economic risk of an investment in the notes;
(ii) (A) any purchase of Notes by us will be for our own account or for
the account of one or more other Institutional Accredited Investors for each of
which we exercise sole investment discretion (and have the authority to make,
and do make, the statements in this letter) or as fiduciary for the account of
one or more trusts, each of which is an "accredited investor" within the meaning
of Rule 501(a)(7) under the Securities Act and for each of which we exercise
sole investment discretion or (B) we are a "bank," within the meaning of Section
3(a)(2) of the Securities Act, or a "savings and loan association" or other
institution described in Section 3(a)(5)(A) of the Securities Act that is
acquiring Notes as fiduciary for the account of one or more institutions for
which we exercise sole investment discretion;
(iii) the event that we purchase any Notes, we will acquire Notes
having a minimum purchase price of not less than $100,000 for our own account or
for any separate account for which we are acting;
B-1
<PAGE> 135
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing
Notes; and
(v) we are not acquiring Notes with a view to distribution thereof or
with any present intention of offering or selling Notes or the Common Stock of
the Company issuable upon conversion thereof, except as permitted below;
provided that the disposition of our property and property of any accounts for
which we are acting as fiduciary shall remain at all times within our control.
We understand that the Notes are being offered in a transaction not
involving any public offering within the United States within the meaning of the
Securities Act and that the Notes and the Common Stock of the Company issuable
upon conversion thereof have not been registered under the Securities Act, and
we agree, on our own behalf and on behalf of each account for which we acquire
any Notes, that if in the future we decide to resell or otherwise transfer such
Notes or the Common Stock of the Company issuable upon conversion thereof, such
Notes or Common Stock of the Company may be resold or otherwise transferred only
(i) to the Company or any subsidiary thereof, (ii) inside the United States to a
person who is a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in a transaction meeting the requirements of Rule 144A,
(iii) inside the United States to an Institutional Accredited Investor that,
prior to such transfer, furnishes to the Trustee for the Notes (or in the case
of Common Stock of the Company, the transfer agent therefor) a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of such securities (the form of which letter can be obtained from
the Trustee or the transfer agent, as the case may be), (iv) outside the United
States in a transaction meeting the requirements of Rule 904 under the
Securities Act, (v) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if applicable), or (vi) pursuant to a registration
statement that has been declared effective under the Securities Act (and which
continues to be effective at the time of such transfer), and in each case, in
accordance with any applicable securities law of any state of the United States
and in accordance with the legends set forth on the Notes or the Common Stock of
the Company issuable upon conversion thereof, as the case may be. We further
agree to provide any person purchasing any of the Notes or the Common Stock of
the Company issuable upon conversion thereof (other than pursuant to clause (v)
or (vi) above) from us a notice advising such purchaser that resales of such
securities are restricted as stated herein. We understand that the Trustee and
transfer agent for the Notes and the Common Stock of the Company will not be
required to accept for registration of transfer any Notes or any Common Stock of
the Company issued upon conversion of the Notes, except upon presentation of
evidence satisfactory to the Company that the foregoing restrictions on transfer
have been complied with. We further
B-2
<PAGE> 136
understand that any Notes and any Common Stock of the Company issued upon
conversion of the Notes will be in the form of definitive physical certificates
and that such certificates will bear a legend reflecting the substance of this
paragraph other than certificates transferred pursuant to (v) or (vi) above.
The Company and the Trustee and their respective counsel are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
(Name of Purchaser)
Company:____________________________
Name:___________________________
Title:____________________________
Address:_________________________
_________________________________
_________________________________
B-3
<PAGE> 1
EXHIBIT 10.75
NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO IMCLONE SYSTEMS
INCORPORATED OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3)
PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (2)(F) ABOVE),
IT WILL FURNISH TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR
TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE
<PAGE> 2
UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW
YORK AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT
A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE BANK OF
NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS SUCH TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER
OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE (2)(F) ABOVE OR UPON ANY
TRANSFER OF THIS NOTE UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTION.
<PAGE> 3
IMCLONE SYSTEMS INCORPORATED
5 1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2005
CUSIP: 45245WAB5
No. P-1
ImClone Systems Incorporated, a corporation duly organized and validly
existing under the laws of the State of Delaware (herein called the "Company",
which term includes any successor corporation under the Indenture referred to on
the reverse hereof), for value received hereby promises to pay to Morgan Stanley
& Co. Incorporated or its registered assigns, the principal sum of One Hundred
Thousand Dollars ($100,000) on March 1, 2005, at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
Indenture, in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts, and to pay interest, semi-annually on March 1 and September 1 of each
year, commencing September 1, 2000, on said principal sum at said office or
agency, in like coin or currency, at the rate per annum of 5 1/2%, from March 1
or September 1, as the case may be, next preceding the date of this Note to
which interest has been paid or duly provided for, unless the date hereof is a
date to which interest has been paid or duly provided for, in which case from
the date of this Note, or unless no interest has been paid or duly provided for
on the Notes, in which case from February 29, 2000, until payment of said
principal sum has been made or duly provided for. Notwithstanding the foregoing,
if the date hereof is after any February 15 or August 15, as the case may be,
and before the following March 1 or September 1, this Note shall bear interest
from such March 1 or September 1; provided, however, that if the Company shall
default in the payment of interest due on such March 1 or September 1, then this
Note shall bear interest from the next preceding March 1 or September 1 to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for on such Note, from February 29, 2000. Except as otherwise
provided in the Indenture, the interest payable on the Note pursuant to the
Indenture on any March 1 or September 1 will be paid to the Person entitled
thereto as it appears in the Note register at the close of business on the
record date, which shall be the February 15 or August 15 (whether or not a
Business Day) next preceding such March 1 or September 1, as provided in the
Indenture; provided, however, that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Interest may, at the
option of the Company, be paid either (i) by check mailed to the registered
address of such Person (provided that the holder of Notes with an aggregate
principal amount in excess of $2,000,000 shall, at the written election of such
holder, be paid by wire transfer of immediately available funds) or (ii) by
transfer to an account maintained by such Person located in the United States;
provided, however, that payments to the Depositary will be made by wire transfer
of immediately available funds to the account of the Depositary or its nominee.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium,
1
<PAGE> 4
if any, and interest on the Notes to the prior payment in full of all Senior
Indebtedness, as defined in the Indenture, and provisions giving the holder of
this Note the right to convert this Note into Common Stock of the Company on the
terms and subject to the limitations referred to on the reverse hereof and as
more fully specified in the Indenture. Such further provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of the State of New York, without regard to principles
of conflicts of laws.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
IMCLONE SYSTEMS INCORPORATED
By: /s/ Samuel D. Waksal
-------------------------
Name: Samuel D. Waksal
-------------------------
Title: President & CEO
---------------------------
Attest: /s/ Carl S. Goldfischer
------------------------
Name: Carl S. Goldfischer
------------------------
Title: Vice President, Finance & CEO
-----------------------------
Dated: February 29, 2000
-----------------------------
2
<PAGE> 5
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
THE BANK OF NEW YORK, as Trustee
By: /s/ Robert A. Massimillo
------------------------
Authorized Signatory
3
<PAGE> 6
IMCLONE SYSTEMS INCORPORATED
5 1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2005
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 5 1/2% Convertible Subordinated Notes due 2005 (herein called
the "Notes"), limited to the aggregate principal amount of $200,000,000
($240,000,000, if the option is fully exercised by the Initial Purchasers) all
issued or to be issued under and pursuant to an Indenture dated as of February
29, 2000 (herein called the "Indenture"), between the Company and The Bank of
New York, as trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages (as defined in the Registration Rights
Agreement), if any) on all Notes may be declared by either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the Notes;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable upon redemption thereof, or impair the
right of any Noteholder to institute suit for the payment thereof, or make the
principal thereof or interest or premium, if any, thereon payable in any coin or
currency other than that provided in the Notes, or modify the provisions of the
Indenture with respect to the subordination of the Notes in a manner adverse to
the Noteholders in any material respect, or change the obligation of the Company
to redeem any Note upon the happening of a Fundamental Change (as defined in the
Indenture) in a manner adverse to the holder of the Notes, or impair the right
to convert the Notes into Common Stock subject to the terms set forth in the
Indenture, including Section 15.6 thereof, without the consent of the holder of
each Note so affected or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Notes then outstanding. Subject to the
provisions of the Indenture, the holders of a majority in aggregate principal
amount of the Notes at the time outstanding may on behalf of the holders of all
of the Notes waive any past default or Event of Default under the Indenture and
its consequences except a default in the payment of interest (including
Liquidated Damages, if any) or any premium on, or the principal of, any of the
Notes, or a failure by the Company to convert any Notes into Common Stock of the
Company, or
4
<PAGE> 7
a default in the payment of the redemption price pursuant to Article Three of
the Indenture, or a default in respect of a covenant or provisions of the
Indenture which under Article Eleven of the Indenture cannot be modified without
the consent of the holders of each or all Notes then outstanding or affected
thereby. Any such consent or waiver by the holder of this Note (unless revoked
as provided in the Indenture) shall be conclusive and binding upon such holder
and upon all future holders and owners of this Note and any Notes which may be
issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
whether outstanding at the date of the Indenture or thereafter incurred, and
this Note is issued subject to the provisions of the Indenture with respect to
such subordination. Each holder of this Note, by accepting the same, agrees to
and shall be bound by such provisions and authorizes the Trustee on its behalf
to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee his attorney-in-fact for such
purpose.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
(including Liquidated Damages, if any) on this Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
The Notes are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and any integral multiple of $1,000. At
the office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in connection with
any registration or exchange of Notes, Notes may be exchanged for a like
aggregate principal amount of Notes of any other authorized denominations.
The Notes may be provisionally redeemed by the Company, in whole or in
part, at any time prior to March 6, 2003, at a redemption price equal to $1,000
per aggregate principal amount of notes to be redeemed plus accrued and unpaid
interest, if any (including Liquidated Damages Amount, if any) to the date of
redemption if (i) the closing price of the Common Stock shall have exceeded 150%
of the conversion price then in effect for at least 20 trading days in any
consecutive 30-trading day period and (ii) if the redemption would occur before
March 1, 2002, the shelf registration statement covering resales of the Notes
and the Common Stock, issuable upon conversion of the Notes, is effective and
available for use and is expected to remain effective and available for use for
the 30 days immediately following the date of
5
<PAGE> 8
redemption. The Company shall mail notice of any provisional redemption
within five trading days of a consecutive 30-trading day period.
Upon any such provisional redemption, the Company shall make an
additional Additional Payment (as defined in the Indenture) with respect to the
Notes called for redemption to holders as of the date of mailing of the notice
of provisional redemption in an amount equal to $152.54 per $1,000 Note, minus
the amount of any interest the Company actually paid on such Note prior to the
Notice Date. The Company shall make the Additional Payment on all Notes called
for provisional redemption, including any Notes converted after the date of
mailing of the notice of provisional redemption and prior to the date of
redemption.
At any time on or after March 6, 2003, and prior to maturity, the Notes
may be redeemed at the option of the Company, in whole or in part, upon mailing
a notice of such redemption not less than 30 days but not more than 60 days
before the date fixed for redemption to the holders of Notes at their last
registered addresses, all as provided in the Indenture, at the following
optional redemption prices (expressed as percentages of the principal amount),
together in each case with accrued and unpaid interest (including Liquidated
Damages, if any) to, but excluding, the date fixed for redemption:
<TABLE>
<CAPTION>
Period Redemption Price
<S> <C>
Beginning on March 6, 2003 and ending on February 29, 2004 102.20%
Beginning on March 1, 2004 and ending on February 28, 2005 110.10%
</TABLE>
and 100% on March 1, 2005; provided, however, that if the date fixed for
redemption is on a March 1 or September 1, then the interest payable on such
date shall be paid to the holder of record on the preceding February 15 or
August 15, respectively.
The Company may not redeem the Notes if a default in the payment of
interest or premium, if any, on the Notes has occurred and is continuing.
The Notes are not subject to redemption through the operation of any
sinking fund.
If a Fundamental Change occurs at any time prior to maturity of the
Notes, the Notes will be redeemable on the 30th day after notice thereof (the
"Repurchase Date") at the option of the holder of the Notes at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to (but excluding) the date of redemption; provided, however, that, if
such Repurchase Date is a March 1 or September 1, the interest payable on such
date shall be paid to the holder of record of the Notes on the preceding
February 15 or August 15, respectively. The Notes will be redeemable in
multiples of $1,000 principal amount. The Company shall mail to all holders of
record of the Notes a notice of the occurrence of a Fundamental Change and of
the redemption right arising as a result thereof on or before the 10th day after
the occurrence of such
6
<PAGE> 9
Fundamental Change. For a Note to be so redeemed at the option of the holder,
the Company must receive at the office or agency of the Company maintained for
that purpose in accordance with the terms of the Indenture, such Note with the
form entitled "Option to Elect Repayment Upon a Fundamental Change" on the
reverse thereof duly completed, together with such Note, duly endorsed for
transfer, on or before the 30th day after the date of such notice of a
Fundamental Change (or if such 30th day is not a Business Day, the immediately
succeeding Business Day).
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after the original issuance of any Notes
through the close of business on the final maturity date of the Notes, or, as to
all or any portion hereof called for redemption, prior to the close of business
on the Business Day immediately preceding the date fixed for redemption (unless
the Company shall default in payment due upon redemption thereof), to convert
the principal hereof or any portion of such principal which is $1,000 or an
integral multiple thereof into that number of shares of the Company"s Common
Stock (as such shares shall be constituted at the date of conversion) obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the Conversion Price of $110.18, as may adjusted from time to time as
provided in the Indenture, upon surrender of this Note, together with a
conversion notice as provided in the Indenture (the form entitled "Conversion
Notice" on the reverse hereof), to the Company at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
Indenture, or at the option of such holder, the Corporate Trust Office, and,
unless the shares issuable on conversion are to be issued in the same name as
this Note, duly endorsed by, or accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney. No adjustment in respect of interest on any Note converted
or dividends on any shares issued upon conversion of such Note will be made upon
any conversion except as set forth in the next sentence. If this Note (or
portion hereof) is surrendered for conversion during the period from the close
of business on any record date for the payment of interest to the close of
business on the Business Day preceding the following interest payment date and
either (x) has not been called for redemption on a redemption date that occurs
during such period or (y) is not to be redeemed in connection with a Fundamental
Change on a Repurchase Date that occurs during such period, this Note (or
portion hereof being converted) must be accompanied by an amount, in New York
Clearing House funds or other funds acceptable to the Company, equal to the
interest payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment shall be required if there
shall exist at the time of conversion a default in the payment of interest on
the Notes. No fractional shares will be issued upon any conversion, but an
adjustment and payment in cash will be made, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of any Note or Notes for conversion. A Note in respect of which a
holder is exercising its right to require redemption upon a Fundamental Change
may be converted only if such holder withdraws its election to exercise such
right in accordance with the terms of the Indenture. Any Notes called for
redemption, unless surrendered for conversion by the holders thereof on or
before the close of business on the Business Day preceding the date fixed for
redemption, may be deemed to be redeemed from the holders of such Notes for an
amount equal to the applicable redemption price, together with accrued but
unpaid interest
7
<PAGE> 10
(including Liquidated Damages, if any) to (but excluding) the date fixed for
redemption, by one or more investment banks or other purchasers who may agree
with the Company (i) to purchase such Notes from the holders thereof and convert
them into shares of the Company"s Common Stock and (ii) to make payment for such
Notes as aforesaid to the Trustee in trust for the holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in exchange
thereof; subject to the limitations provided in the Indenture, without charge
except for any tax, assessment or other governmental charge imposed in
connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar) for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any supplemental indenture or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
This Note shall be deemed to be a contract made under the laws of New
York, and for all purposes shall be construed in accordance with the laws of New
York, without regard to principles of conflicts of laws.
Terms used in this Note and defined in the Indenture are used herein as
therein defined.
8
<PAGE> 11
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations.
- --------------------------------------------------------------------------------
TEN COM- as tenants in common UNIF GIFT MIN ACT --
____________________ Custodian
(Cust)
____________________
(Minor)
- --------------------------------------------------------------------------------
TEN ENT- as tenants by the entireties
- --------------------------------------------------------------------------------
JT TEN- as joint tenants with right of under Uniform Gifts to Minors Act
survivorship and not as tenants in
common ____________________
(State)
- --------------------------------------------------------------------------------
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE ABOVE LIST.
A-1
<PAGE> 12
CONVERSION NOTICE
TO: IMCLONE SYSTEMS INCORPORATED
THE BANK OF NEW YORK
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion thereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of ImClone Systems Incorporated in accordance with the terms of the
Indenture referred to in this Note, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Notes representing any unconverted principal amount
hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this Note
not converted are to be issued in the name of a person other than the
undersigned, the undersigned will provide the appropriate information below and
pay all transfer taxes payable with respect thereto. Any amount required to be
paid by the undersigned on account of interest accompanies this Note.
Dated: ___________________
___________________________________
___________________________________
Signature(s)
Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Note registrar, which requirements include
membership or participation in the Security Transfer
Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined
by the Note registrar in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
___________________________________
Signature Guarantee
B-1
<PAGE> 13
Fill in the registration of shares of Common Stock if to be issued, and
Notes if to be delivered, other than to and in the name of the registered
holder:
- ----------------------------------------
(Name)
- ----------------------------------------
(Street Address)
- ----------------------------------------
(City, State and Zip Code)
- ----------------------------------------
Please print name and address
Principal amount to be converted
(if less than all):
$
----------------------------------------
Social Security or Other Taxpayer
Identification Number:
- ----------------------------------------
B-2
<PAGE> 14
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: IMCLONE SYSTEMS INCORPORATED
THE BANK OF NEW YORK
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from ImClone Systems Incorporated (the
"Company") as to the occurrence of a Fundamental Change with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or an integral
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note at the price of 100% of such entire principal
amount or portion thereof, together with accrued interest to, but excluding,
such repayment date, to the registered holder hereof.
Dated: ___________________
___________________________________
___________________________________
Signature(s)
NOTICE: The above signatures of the holder(s) hereof
must correspond with the name as written upon the
face of the Note in every particular without
alteration or enlargement or any change whatever.
Principal amount to be repaid (if less than all):
$ _____________________________
_______________________________
Social Security or Other
Taxpayer Identification Number
C-1
<PAGE> 15
ASSIGNMENT
For value received __________________________________________ hereby sell(s)
assign(s) and transfer(s) unto ____________________________________ (Please
insert social security or other Taxpayer Identification Number of assignee) the
within Note, and hereby irrevocably constitutes and appoints
____________________________________ attorney to transfer said Note on the books
of the Company, with full power of substitution in the premises.
In connection with any transfer of the Note prior to the expiration of
the holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant to
a registration statement that has been declared effective under the Securities
Act), the undersigned confirms that such Note is being transferred:
/ / To ImClone Systems Incorporated or a subsidiary thereof; or
/ / Inside the United States pursuant to and in compliance with
Rule 144A under the Securities Act of 1933, as amended; or
/ / Inside the United States to an Institutional Accredited
Investor pursuant to and in compliance with the Securities Act
of 1933, as amended, in a minimum denomination of $100,000; or
/ / Outside the United States in compliance with Rule 904 under
the Securities Act; or
/ / Pursuant to and in compliance with Rule 144 under the
Securities Act of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").
/ / The transferee is an Affiliate of the Company.
Dated: ___________________
D-1
<PAGE> 16
___________________________________
___________________________________
Signature(s)
Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Note registrar, which requirements include
membership or participation in the Security Transfer
Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined
by the Note registrar in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
___________________________________
Signature Guarantee
NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
D-2
<PAGE> 1
Exhibit 23.1
Accountants' Consent
The Board of Directors
ImClone Systems Incorporated
We consent to the incorporation by reference in the registration
statement Nos. 33-95860, 333-07339, 333-21417, 333-39067 and 333-67335 on Form
S-3 and Nos. 333-10275, 33-95894, 333-64825, 333-64827 and 333-30172 on Form
S-8 of ImClone Systems Incorporated of our report dated March 3, 2000, relating
to the consolidated balance sheets of ImClone Systems Incorporated and
subsidiary as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1999, which report appears in
the December 31, 1999 Annual Report on Form 10-K of ImClone Systems
Incorporated.
/s/ KPMG LLP
------------------------------------
KPMG LLP
Princeton, New Jersey
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 12,016
<SECURITIES> 107,352
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 127,125
<PP&E> 31,944
<DEPRECIATION> (14,729)
<TOTAL-ASSETS> 145,694
<CURRENT-LIABILITIES> 30,061
<BONDS> 2,200
0
300
<COMMON> 30
<OTHER-SE> 111,968
<TOTAL-LIABILITY-AND-EQUITY> 145,694
<SALES> 0
<TOTAL-REVENUES> 2,143
<CGS> 0
<TOTAL-COSTS> 39,381
<OTHER-EXPENSES> (2,919)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 292
<INCOME-PRETAX> (34,611)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,611)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,611)
<EPS-BASIC> (1.51)
<EPS-DILUTED> (1.51)
</TABLE>
<PAGE> 1
EXHIBIT 99.4
IMCLONE SYSTEMS INCORPORATED
1998 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED(1)
The following constitutes the provisions of the 1998 Employee Stock
Purchase Plan of ImClone Systems Incorporated.
1. PURPOSE.
The purpose of the Plan is to provide employees of the Company and its
Affiliates with an opportunity to purchase Common Stock of the Company.
It is the intention of the Company that the Options granted under the
Plan be considered options issued under an "Employee Stock Purchase
Plan" as that term is defined under Section 423(b) of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend
and limit participation in a manner consistent with the requirements of
that section of the Code.
2. DEFINITIONS.
(a) "AFFILIATE" as used in the Plan means any parent corporation or
subsidiary corporation of the Company, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" shall mean the Board of Directors of the Company, or a
committee of the Board of Directors named by the Board to administer
the Plan.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(d) "COMMON STOCK" shall mean the Common Stock, $0.001 par value, of the
Company.
(e) "COMPANY" shall mean ImClone Systems Incorporated, a Delaware
corporation.
(f) "COMPENSATION" shall mean all compensation that is taxable income for
federal income tax purposes, including, payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses,
commissions and other compensation.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an employee of the Company or
any Affiliate. Continuous Status as an Employee shall not be considered
interrupted in the case of a leave of absence agreed to in writing by
the Company or any Affiliate, provided that such leave is for a period
of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
- --------
(1) This Plan was amended by the Board on March 29, 1999.
<PAGE> 2
(h) "CONTRIBUTIONS" shall mean all amounts credited to the account of a
participant pursuant to the Plan.
(i) "EXERCISE DATE" shall mean the last day of each Offering Period of the
Plan.
(j) "OFFERING DATE" shall mean the first business day of an Offering Period
under the Plan.
(k) "OFFERING PERIOD" shall mean any of the three month periods commencing
on each of July 1, October 1, January 1 and April 1 of each year (or
such other periods as may be determined by the Board which shall comply
with Section 423(b)(7) of the Code); provided that the initial offering
period shall commence at a time to be determined by the Board.
(l) "OPTION" shall mean an option granted under Section 6 of this Plan.
(m) "PLAN" shall mean this ImClone Systems Incorporated 1998 Employee Stock
Purchase Plan.
3. ELIGIBILITY.
(a) Options may be granted only to employees of the Company or any
Affiliate. An employee of the Company or any Affiliate shall be
eligible to participate in the Plan upon commencement of employment
with the Company; provided, that no employee of the Company or any
Affiliate shall be eligible to be granted an Option under the Plan,
unless, on the Offering Date of such Offering Period, such employee's
customary employment with the Company or such Affiliate is at least
twenty (20) hours per week and at least five (5) months per calendar
year.
(b) No employee shall be eligible for the grant of an Option under the Plan
if, immediately after any such grant, such employee owns stock
possessing five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Company or of any Affiliate.
For purposes of this subparagraph 3(b), the rules of Section 424(d) of
the Code shall apply in determining the stock ownership of any
employee, and stock which such employee may purchase under all
outstanding rights and options shall be treated as stock owned by such
employee.
(c) An eligible employee may be granted an Option under the Plan only if
such Option, together with any other options granted under "employee
stock purchase plans" of the Company and any Affiliates, as specified
by Section 423(b)(8) of the Code, do not permit such employee's rights
to purchase stock of the Company or any Affiliate to accrue at a rate
which exceeds twenty-five thousand dollars ($25,000) of fair market
value of such stock (determined at the time such Options are granted)
for each calendar year in which such Options are outstanding at any
time. Any Option granted under the Plan shall be deemed to be modified
to the extent necessary to satisfy this paragraph 3(c).
2
<PAGE> 3
(d) Officers of the Company shall be eligible to participate in the Plan;
provided, however, that the Board may provide in an Offering Period
that certain employees who are highly compensated employees within the
meaning of Section 423(b)(4)(D) of the Code shall not be eligible to
participate.
4. OFFERING PERIODS.
The Plan shall be implemented by a series of Offering Periods, with a
new Offering Period commencing on July 1, October 1, January l and
April 1 of each year (or such other periods as may be determined by the
Board which shall comply with Section 423(b)(7) of the Code); provided
that the initial Offering Period shall commence at a time to be
determined by the Board. The Plan shall continue until terminated in
accordance with paragraph 17 or paragraph 21 hereof. In addition,
employees shall not be entitled to enroll in the Plan or exercise any
Options granted under the Plan during any period in which the Company
has restricted the purchase or sale of its securities by its employees.
5. PARTICIPATION; CONTRIBUTIONS.
(a) An eligible employee may become a participant in the Plan by completing
an enrollment form ("Enrollment Form") provided by the Company and
filing it with the Company prior to the applicable Offering Date,
unless a later time for filing the Enrollment Form is set by the Board
for all eligible employees with respect to a given Offering Period. The
Enrollment Form shall set forth the percentage of the participant's
Compensation (which shall be a whole percentage not less than 1% and
not more than 15%) to be paid as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following the
Offering Date and shall end on the last payroll paid on or prior to
the Exercise Date of the Offering Period to which the Enrollment Form
is applicable, unless sooner terminated by the participant as provided
in paragraph 8. All payroll deductions made by a participant shall be
credited to such participant in an account under the Plan. A
participant may not make payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in paragraph 8.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and paragraph 3(c) herein, a
participant's payroll deductions may be decreased to 0% at such time
during any Offering Period which is scheduled to end during the current
calendar year that the aggregate of all payroll deductions accumulated
with respect to such Offering Period and any other Offering Period
ending within the same calendar year equals $21,250. Payroll deductions
shall recommence at the rate provided in such participant's Enrollment
Form at the beginning of the first Offering
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Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in paragraph 8.
6. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each eligible employee
participating in such Offering Period shall be granted an Option to
purchase on the Exercise Date of such Offering Period a number of
shares of Common Stock determined by dividing such employee's
Contributions accumulated prior to such Exercise Date and retained in
the participant's account as of the Exercise Date by 85% of the fair
market value of a share of the Common Stock on the Exercise Date;
provided however, that such purchase shall be subject to the
limitations set forth in Sections 3(b), 3 (c), 3(d) and 10 hereof. The
fair market value of a share of the Common Stock shall be determined as
provided in Section 6(b) below.
(b) The fair market value of the Common Stock on a given date shall be
determined by the Board in its discretion; provided that (i) if the
Common Stock is listed on a stock exchange, the fair market value per
share shall be the closing price on such exchange on such date as
reported in the Wall Street Journal (or, (A) if not so reported, as
otherwise reported by the exchange, and (B) if not reported on such
date, then on the last prior date on which a sale of the Common Stock
was reported); or (ii) if not listed on an exchange but traded on the
National Association of Securities Dealers Automated Quotation
("Nasdaq") National Market, the fair market value per share shall be
the last reported sale price on such date as reported in the Wall
Street Journal (or (A) if not so reported, as otherwise reported by the
Nasdaq National Market and (B) if not reported on such date, then on
the last prior date on which a sale of the Common Stock was reported)
or (iii) if traded on Nasdaq SmallCap and not the National Market the
fair market value per share shall be the mean of the closing bid and
asked price per share of the Common Stock on such date, as reported in
the Wall Street Journal (or, (A) if not so reported, as otherwise
reported by Nasdaq, and (B) if not so reported on such date, then on
the last prior date on which a sale of the Common Stock was reported);
or (iv) if the Common Stock is otherwise publicly traded, but not
listed on a stock exchange or traded on Nasdaq, the fair market value
per share shall be determined in good faith by the Board in its
discretion.
7. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Plan as provided in paragraph
8, such participant's Option for the purchase of shares of Common Stock
will be exercised automatically on the Exercise Date of the Offering
Period and the maximum number of full shares of Common Stock subject to
the Option will be purchased for such participant at the applicable
purchase price with the accumulated Contributions in such participant's
account. If a fractional number of shares of Common Stock results, then
such number shall be rounded down to the next whole number and the
excess Contributions shall be carried forward to the next Exercise
Date, unless such participant withdraws the Contributions pursuant to
paragraph 8(a) or is no longer eligible to participate in the Plan, in
which case such amount shall be distributed to the participant without
interest. The
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shares purchased upon exercise of an Option hereunder shall be deemed
to be transferred to the participant on the Exercise Date. During a
participant's lifetime, a participant's Option to purchase shares
hereunder is exercisable only by such participant.
(b) Shares shall not be issued with respect to an Option unless the
exercise of such Option and the issuance and delivery of such shares of
Common Stock pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation,
the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the shares of Common
Stock may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of
any such exercise that the shares of Common Stock are being purchased
only for investment and without any present intention to sell or
distribute such shares of Common Stock if, in the opinion of counsel
for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
8. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the Contributions
credited to his or her account under the Plan at any time prior to the
Exercise Date of the Offering Period by written notice to the Company.
All of the participant's Contributions credited to such participant's
account will be paid to such participant promptly after receipt of such
participant's notice of withdrawal and such participant's Option for
the current Offering Period will be automatically terminated, and no
further Contributions for the purchase of shares of Common Stock will
be made during the Offering Period.
(b) Upon termination of the participant's Continuous Status as an Employee,
prior to the Exercise Date of the Offering Period for any reason,
including retirement or death, the Contributions credited to such
participant's account will be returned to such participant or, in the
case of his or her death, to the person or persons entitled thereto
under paragraph 12, and his or her Option will be automatically
terminated.
(c) In the event an employee fails to remain in Continuous Status as an
Employee of the Company for at least 20 hours per week during the
Offering Period in which the employee is a participant, such
participant will be deemed to have elected to withdraw from the Plan
and the Contributions credited to such participant's account will be
returned to such participant and the Option terminated.
(d) A participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in a succeeding
Offering Period or in any similar plan which may hereafter be adopted
by the Company.
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9. INTEREST.
No interest shall accrue on the Contributions of a participant in the
Plan.
10. STOCK.
The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be 500,000 shares subject to
adjustment upon changes in capitalization of the Company as provided in
paragraph 16. Shares sold under the Plan may be newly issued shares or
shares reacquired in private transactions or open market purchases, but
all shares sold under the Plan regardless of source shall be counted
against the 500,000 share limitation. If the total number of shares of
Common Stock which would otherwise be subject to Options granted
pursuant to Section 6(a) hereof on the Offering Date of an Offering
Period exceeds the number of shares of Common Stock then available
under the Plan (after deduction of all shares of Common Stock for which
Options have been exercised or are then outstanding), the Company shall
make a pro rata allocation of the shares of Common Stock remaining
available for Option grant in as uniform a manner as shall be
reasonably practicable and as it shall determine to be equitable. Any
amounts remaining in an employee's account not applied to the purchase
of Common Stock pursuant to this Section 10 shall be refunded on or
promptly after the Exercise Date. In such event, the Company shall give
written notice of such reduction of the number of shares of Common
Stock subject to the Option to each employee affected thereby and shall
similarly reduce the rate of Contributions, if necessary.
11. ADMINISTRATION.
The Board shall supervise and administer the Plan and shall have full
power to adopt, amend and rescind any rules deemed desirable and
appropriate for the administration of the Plan and not inconsistent
with the Plan, to construe and interpret the Plan, and to make all
other determinations necessary or advisable for the administration of
the Plan.
12. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares of Common Stock and cash, if any, from the
participant's account under the Plan in the event of such participant's
death subsequent to the end of the Offering Period but prior to
delivery of such participant's shares of Common Stock and cash. In
addition, a participant may file a written designation of a beneficiary
who is to receive any cash from the participant's account under the
Plan in the event of such participant's death prior to the Exercise
Date of the Offering Period. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be
required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant (and
his or her spouse, if any) at any time by written notice. In the event
of the death of a participant and in the
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absence of a beneficiary validly designated under the Plan who is
living at the time of such participant's death, the Company shall
deliver such shares of Common Stock and/or cash to the executor or
administrator of the estate of the participant, or if no such executor
or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to
the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
13. TRANSFERABILITY.
Neither Contributions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive shares
under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way other than by will, the laws of descent and
distribution or as provided in paragraph 12 hereof by the participant.
Any such attempt at assignment, transfer, pledge or other disposition
shall be without effect, except that the Company may treat such act as
an election to withdraw Contributions in accordance with paragraph 8.
14. USE OF FUNDS.
All Contributions received or held by the Company under the Plan may be
used by the Company for any corporate purpose, and the Company shall
not be obligated to segregate such Contributions.
15. REPORTS.
Individual accounts will be maintained for each participant in the
Plan. Statements of account will be given to participants, the per
share purchase price, the number of shares purchased and the remaining
cash balance, if any.
16. ADJUSTMENTS UPON CHANGES IN STOCK.
If any change is made in the shares of Common Stock subject to the Plan
or subject to any Option granted under the Plan (through merger,
consolidation, reorganization, distribution of substantially all of the
assets of the Company, spin-off of a subsidiary's voting securities to
the Company's shareholders, recapitalization, stock dividend, split-up,
combination of shares, exchange of shares, issuance of rights to
subscribe, or change in capital structure), appropriate adjustments
shall be made by the Board as to the maximum number of shares subject
to the Plan and the number of shares and price per share subject to
outstanding Options as shall be equitable to prevent dilution or
enlargement of Option rights. Any determination made by the Board
hereunder shall be final, binding and conclusive upon each participant.
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7. AMENDMENT OR TERMINATION.
The Board may at any time terminate or amend the Plan. Except as
provided in paragraph 16, no such termination may affect Options
previously granted, nor may an amendment make any change in any Option
therefore granted which adversely affects the rights of any
participant. In addition, to the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any
applicable law or regulation), the Company shall obtain stockholder
approval in such a manner and to such a degree as so required.
18. NOTICES.
All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt
thereof.
19. RIGHT TO TERMINATE EMPLOYMENT.
Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any participant the right to continue in the
employment of the Company or any Affiliate, or affect any right which
the Company or any Affiliate may have to terminate the employment of
such participant.
20. RIGHTS AS A STOCKHOLDER.
Neither the granting of an Option nor a deduction from payroll shall
constitute a participant the owner of shares covered by an Option. No
participant shall have any right as a stockholder unless and until an
Option has been exercised, and the shares of Common Stock underlying
the Option have been registered in the Company's share register.
21. TERM OF PLAN.
The Plan shall become effective upon its adoption by each of the Board
and the stockholders and shall continue in effect for a term of ten
(10) years unless sooner terminated earlier under paragraph 17.
22. APPLICABLE LAW.
This Plan shall be governed in accordance with the laws of Delaware.
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