SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
--------------------
[x] QUARTERLY REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No. 0-18728
INTERNEURON PHARMACEUTICALS, INC.
(exact name of registrant as specified in its charter)
Delaware 04-3047911
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
One Ledgemont Center, 99 Hayden Avenue 02173
Lexington, Massachusetts (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (617) 861-8444
(Former name, former address and former fiscal year, if changed since last
report):Not Applicable
Indicate by check 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 periods 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 the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at May 13, 1997:
Common Stock $.001 par value 41,043,708 shares, excluding
182,585 treasury shares
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INTERNEURON PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997
and September 30, 1996......................................................................... 3
Consolidated Statements of Operations for the Three and Six Months ended
March 31, 1997 and 1996.........................................................................4
Consolidated Statements of Cash Flows for the Six Months ended
March 31, 1997 and 1996.........................................................................5
Notes to Unaudited Consolidated Financial Statements............................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................................9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders.............................................................21
Item 6. Exhibits and Reports on Form 8-K.............................................21
SIGNATURES.......................................................................................................23
</TABLE>
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<TABLE>
<CAPTION>
INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands except per share data)
March 31, September 30,
1997 1996
---- ----
ASSETS
Current assets:
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Cash and cash equivalents $ 93,414 $145,901
Marketable securities 29,471 17,068
Accounts receivable 1,926 4,338
Inventories 6,356 8,376
Prepaids and other current assets 5,961 1,324
----------- ------------
Total current assets 137,128 177,007
Marketable securities 37,475 6,639
Property and equipment, net 3,024 2,689
Other assets 165 103
------------ -------------
$177,792 $186,438
======== =========
LIABILITIES
Current liabilities:
Accounts payable $ 2,249 $ 2,575
Accrued expenses 16,268 11,604
Deferred revenue 5,694 6,921
Current portion of capital lease obligations 931 661
---------- -------------
Total current liabilities 25,142 21,761
Long-term portion of capital lease obligations 1,194 526
Other long-term liabilities 19 16
Minority interest 19,016 19,373
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, authorized 5,000,000 shares: Series B, 239,425
shares issued and outstanding at March 31, 1997 and September 30, 1996
(liquidation preference at
March 31, 1997 $3,041) 3,000 3,000
Series C, 5,000 shares issued and outstanding at March 31, 1997
and September 30, 1996 (liquidation preference at
March 31, 1997 $504) 500 500
Common stock, $.001 par value, 80,000,000 shares authorized:
41,226,293 issued and 41,015,969 shares issued and outstanding at
March 31, 1997 and September 30, 1996, respectively 41 41
Additional paid-in capital 249,020 247,999
Accumulated deficit (117,559) (106,778)
Unrealized losses on marketable securities (218) -
Treasury stock, at cost, 128,835 shares at March 31, 1997 and no
shares at September 30, 1996 (2,363) -
------------ --------------
Total stockholders' equity 132,421 144,762
--------- ---------
$177,792 $186,438
======== ========
The accompanying notes are an integral part of these unaudited consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the three and six months ended March 31, 1997 and 1996
(Unaudited)
(Amounts in thousands except per share data)
For the three months ended March 31, For the six months ended March 31,
------------------------------------ ----------------------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
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Product revenue $ 17,477 $ - $ 31,188 $ -
Contract and license fees 2,297 905 6,278 6,249
---------- --------- -------- ---------
Total revenues 19,774 905 37,466 6,249
Costs and expenses:
Cost of product revenue 11,999 - 21,903 -
Research and development 9,966 3,599 17,484 6,726
Selling, general and administrative 5,827 4,170 11,344 6,881
Purchase of in-process research
and development 2,261 6,084 2,261 8,234
--------- -------- --------- ---------
Total costs and expenses 30,053 13,853 52,992 21,841
Net loss from operations (10,279) (12,948) (15,526) (15,592)
Investment income, net 2,008 555 4,597 989
Minority interest 421 432 148 (542)
--------- --------- ---------- ----------
Net loss $(7,850) $(11,961) $(10,781) $(15,145)
======== ========= ========= =========
Net loss per common share $ ( 0.19) $ ( 0.34) $ ( 0.26) $ (0.44)
========= ========== =========== ===========
Weighted average common
shares outstanding 41,098 35,308 41,059 34,411
======= ======== ======= ========
The accompanying notes are an integral part of these unaudited consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the six months ended March 31, 1997 and 1996
(Unaudited)
(Dollar amounts in thousands)
Six months ended March 31,
--------------------------
1997 1996
---- ----
Cash flows from operating activities:
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Net loss $ (10,781) $ (15,145)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 646 381
Gain on disposal of fixed assets - (6)
Minority interest in net income/loss of
consolidated subsidiaries (148) 542
Purchase of in-process research and development 1,861 8,098
Noncash compensation 176 896
Change in assets and liabilities:
Accounts receivable 2,412 (908)
Inventories 2,020 (3,629)
Prepaids and other current assets (4,637) (281)
Other assets (62) 97
Accounts payable (326) 937
Deferred revenue (1,227) 1,942
Accrued expenses and other liabilities 4,452 (559)
--------------- ----------------
Net cash (used) by operating activities (5,614) (7,635)
-------------- --------------
Cash flows from investing activities:
Capital expenditures (726) (141)
Purchase of marketable securities (53,600) (36,233)
Proceeds from maturities and sales of
marketable securities 10,143 21,789
Purchases of Intercardia stock (2,436) -
Proceeds from disposal of fixed assets - 40
----------------- ---------------
Net cash (used) by investing activities (46,619) (14,545)
------------- ----------------
Cash flows from financing activities:
Net proceeds from issuance of common and treasury stock 1,101 13,608
Net proceeds from issuance of stock by subsidiaries 276 30,362
Purchase of treasury stock (2,315) -
Proceeds from sale/leaseback 1,050 132
Principal payments of capital lease obligations (366) (244)
--------------- ----------------
Net cash (used) provided by financing activities (254) 43,858
--------------- ---------------
Net change in cash and cash equivalents (52,487) 21,678
Cash and cash equivalents at beginning of period 145,901 16,781
------------- --------------
Cash and cash equivalents at end of period $ 93,414 $ 38,459
=========== -------------
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
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INTERNEURON PHARMACEUTICALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation:
The consolidated financial statements included herein have been prepared
by Interneuron Pharmaceuticals, Inc. without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
the accompanying unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position, results of operations and
cash flows of the Company. The unaudited consolidated financial statements
included herein should be read in conjunction with the audited consolidated
financial statements and the notes thereto included in the Company's Form 10-K
for the fiscal year ended September 30, 1996.
The unaudited consolidated financial statements include the accounts of
Interneuron Pharmaceuticals, Inc. ("Interneuron" or the "Company") and its
subsidiaries (the "Subsidiaries"), Progenitor, Inc. ("Progenitor"), Transcell
Technologies, Inc. ("Transcell"), Intercardia, Inc. ("Intercardia"), and
InterNutria, Inc. ("InterNutria"). All significant intercompany activity has
been eliminated.
The Company will adopt Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("SFAS 128") in the quarter ending December 31, 1997. SFAS
128 requires the Company to change its method of computing, presenting and
disclosing earnings per share information. Upon adoption, all prior period data
presented will be restated to conform to the provisions of SFAS 128.
Management has not determined the effect of adopting SFAS 128.
B. Significant Accounting Policies:
Certain prior year amounts have been reclassified to conform with fiscal
1997 classifications.
C. Inventories:
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Inventories consisted of: March 31, September 30,
1997 1996
------------ ----------
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Raw materials $4,168,000 $5,420,000
Finished goods 2,188,000 2,956,000
------------ ----------
$6,356,000 $8,376,000
========== ==========
</TABLE>
Raw materials consisted primarily of dexfenfluramine drug substance and
finished goods consisted primarily of finished and packaged Redux(TM) capsules.
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D. Subsidiaries:
In December 1996, Progenitor entered into an agreement with Amgen, Inc.
("Amgen") (the "Amgen Agreement"), granting Amgen certain exclusive rights for
the development and commercialization of products using Progenitor's leptin
receptor technology. Amgen paid Progenitor a $500,000 initial license fee in
January 1997, which was reflected in contract and license fee revenue in the six
month period ended March 31, 1997. Progenitor may also receive from Amgen
certain development and regulatory milestone payments and potential royalties on
sales. Amgen also agreed to purchase Progenitor common stock in the event of a
Progenitor initial public offering.
In December 1996, Intercardia executed an agreement with BASF Pharma/Knoll
AG ("Knoll") ("the Knoll Collaboration") to provide for the development,
manufacture and marketing of bucindolol in all countries with the exception of
the United States and Japan (the "Territory"). The Knoll Collaboration relates
to both the twice-daily bucindolol formulation and the once-daily bucindolol
formulation currently under development. Under the terms of the Knoll
Collaboration, Knoll made in December 1996 a $2,143,000 payment to CPEC, Inc.
("CPEC", Intercardia's majority-owned subsidiary, of which Interneuron owns the
minority portion) which was recognized as contract and license fee revenue in
the six month period ended March 31, 1997, and a $1,000,000 payment to CPEC in
January 1997 which was recognized as contract and license fee revenue in the
three and six month periods ended March 31, 1997. Knoll will make future
payments to CPEC upon the achievement of product approval and sales milestones.
Knoll and Intercardia will share the development and marketing costs of
bucindolol in the Territory. In general, Knoll shall pay approximately 60% of
the development and marketing costs prior to product launch and Intercardia
shall pay approximately 40% of such costs, subject to certain maximum dollar
limitations. CPEC will be entitled to a royalty equal to 40% of net profits, as
defined in the Knoll Collaboration, and would be responsible for, and pay to
Knoll, 40% of any net loss, as defined.
In February 1997, Progenitor announced an agreement to acquire Mercator,
Inc. ("Mercator") a privately-held genomics company, subject to certain
conditions, including completion of an initial public offering by Progenitor for
approximately $22,000,000, payable in Progenitor common stock, plus the
assumption of Mercator liabilities. Progenitor also agreed to provide Mercator
with an interim operating line of credit through July 1997 of up to $6,600,000,
funding for which will be provided by Interneuron. At March 31, 1997, advances
under this line of credit totaled approximately $1,300,000 and are reflected in
prepaids and other current assets.
In March 1997, Progenitor filed registration statements with the Securities
and Exchange Commission relating to a proposed initial public offering of
2,750,000 shares of Progenitor common stock (plus up to an additional 412,500
shares to cover over-allotments) and the proposed acquisition by Progenitor of
Mercator. Based on the proposed terms of the offering and the acquisition,
assuming the completion of the offering and the Mercator acquisition on the
filed terms, Interneuron will own approximately 43% of Progenitor's outstanding
common stock without giving effect to any exercise of the over-allotment option
or any options or warrants, and subject to change based upon the timing of the
offering, the offering price, the number of Progenitor shares
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issued in connection with the Mercator acquisition and the amount of
Progenitor's indebtedness to Interneuron. In connection with the acquisition,
Progenitor will incur non-recurring charges to operations currently estimated to
aggregate approximately $30,000,000, a portion of which are non-cash charges
related to the purchase of in-process research and development subject to
increase based upon several factors including the timing of the transactions and
unanticipated costs. Due to market conditions and other factors, there is no
assurance that Progenitor's initial public offering or acquisition of Mercator
will be completed, in which case Progenitor will incur charges to operations for
amounts expended in connection with the two proposed transactions, including
funds advanced under the line of credit. Interneuron will record a portion of
these charges based on its ownership interest in Progenitor.
E. Other:
In February 1997, the Company announced that its Board of Directors had
authorized it to purchase from time to time through open-market transactions up
to 200,000 shares of the common stock of Intercardia. As of March 31, 1997, the
Company had purchased 104,400 shares of Intercardia common stock for an
aggregate purchase price of approximately $2,436,000, of which approximately
$1,861,000 was recorded as purchase of in-process research and development in
the three and six month periods ended March 31, 1997. As a result of these
purchases, the Company's ownership of Intercardia increased from 59.6% at
September 30, 1996 to 61.0% at March 31, 1997 based upon the number of
outstanding shares of Intercardia at such dates.
At the Company's annual meeting of stockholders, on March 5, 1997, the
Company's stockholders approved an increase to the number of authorized shares
of Common Stock from 60,000,000 to 80,000,000.
In March 1997, the Company announced that its Board of Directors had
authorized it to repurchase from time to time through open-market transactions
up to 1,500,000 shares of the Company's Common Stock. As of March 31, 1997, the
Company had repurchased 142,500 shares for an aggregate purchase price of
approximately $2,619,000, of which 13,665 shares were reissued pursuant to
employee stock option and stock purchase plans. Such repurchases and re-
issuances are recorded as treasury stock transactions.
At March 31, 1997, the Company had outstanding a Standby Letter of Credit
for $800,000 to secure certain facility and laboratory build-out costs being
incurred by a subsidiary as part of a lease for its headquarters. This Standby
Letter of Credit is collateralized by a certificate of deposit and expires the
sooner of September 15, 1997 or receipt by the subsidiary's landlord of payment
of the build-out costs.
F. Subsequent Event:
On May 9, 1997, the Company purchased in private transactions from Swiss
Bank Corporation, London Branch ("SBC") capped call options on Interneuron
Common Stock. These call options give Interneuron the right to purchase from SBC
up to a total of 1,240,000 shares of Interneuron Common Stock at a strike price
of $17.75. The call options are exercisable only at their maturities, which are
September 24, 1997, March 9, 1998, May 21, 1998 and August 24, 1998 each with
respect to 310,000 shares, and are subject to caps of $26.00, $34.00, $38.00 and
$40.00, respectively, which limit the economic benefit to the Company of these
call options. The call options which the Company purchased are expected to be
settled, if exercised, with cash in an amount equal to the difference between
the strike price and the market price, subject to caps which will limit the
total amount of cash the Company could receive or increase the strike prices in
the case of stock settlement when the market price of the Company's Common Stock
exceeds the applicable cap price.
-8-
In exchange for the purchases of these call options, in lieu of cash
purchase prices, the Company sold to SBC call options entitling SBC to purchase
from the Company at a strike price of $40.30 per share, an aggregate of
2,000,000 shares of Interneuron Common Stock, 1,000,000 shares on each of May 21
and May 24, 1999. The Company will have the right to settle these call options
with cash or stock, subject to certain conditions. If exercised, the Company
expects to settle the call options that it sold through issuances by the Company
to SBC of up to an aggregate of 2,000,000 authorized and unissued shares of
Common Stock, subject to the effectiveness of a registration statement covering
the resale of these shares. The sale or potential sale of such shares could have
an adverse effect on the market price of the Company's Common Stock.
SBC has advised that it has engaged, and may engage, in transactions,
including buying and selling shares of the Company's Common Stock, to offset its
risk relating to the options. Purchases and sales could affect the market price
of the Company's Common Stock.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
Statements in this Form 10-Q that are not descriptions of historical facts
are forward-looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors, including those set forth in the Company's filings under the
Securities Act of 1933 and under the Securities Exchange Act of 1934 "Risk
Factors" and elsewhere, including, in particular risks relating to the
commercialization of Redux, such as marketing and revenue fluctuations, safety,
regulatory, competition patent, product liability, supply and other risks;
uncertainties relating to clinical trials; manufacturing and supply risks; the
early stage of products under development; risks related to contractual
obligations; risks relating to product launches and managing growth; government
regulation, patent risks, dependence on third parties and competition.
The following discussion should be read in conjunction with the Company's
unaudited consolidated financial statements and notes thereto appearing
elsewhere in this report and audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996. Unless the context indicates otherwise, all references
to the Company include Interneuron and its Subsidiaries.
Redux
On April 29, 1996, the Company's first pharmaceutical product, Redux
(dexfenfluramine hydrochloride capsules) C-IV received clearance by the U.S.
Food and Drug Administration ("FDA") for marketing as a twice-daily prescription
therapy to treat obesity. The approved indication is for the management of
obesity, including weight loss and maintenance of weight loss in patients on a
reduced calorie diet who have a body mass index ("BMI") of greater than or equal
to 30 kg/m2 or greater than or equal to 27 kg/m2 in the presence of other risk
factors, such as hypertension, diabetes and elevated cholesterol. Under license
and co-promotion agreements, Redux is being marketed in the U.S. by Wyeth-Ayerst
Laboratories ("Wyeth-Ayerst"), a division
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of American Home Products Corp. ("AHP") and co-promoted by the Company.
The Company's revenues relating to Redux are currently primarily derived
from: (1) royalties paid by AHP to the Company based on the net sales of Redux
capsules by AHP to distributors; (2) sales of Redux capsules to AHP; and (3)
financial support of the Company's sales force provided by AHP.
The Company's license agreement with AHP provides for royalties to the
Company consisting of (i) "base" royalties equal to 11.5% of AHP's net sales,
(an amount equal to the total royalties required to be paid by the Company to
Les Laboratoires Servier ("Servier"), and (ii) "additional" royalties based on
net sales of Redux by AHP. The percentage of "additional" royalties varies
depending upon (x) the status of Redux as a scheduled or descheduled drug and
(y) whether or not the Company supplies the finished capsules of Redux to AHP.
At March 31, 1997, Redux was scheduled as a controlled substance and the Company
manufactures the finished dosage formulation of the drug. In April 1997, the
Drug Enforcement Agency ("DEA") published a recommendation for the removal of
fenfluramine and its isomers including dexfenfluramine from Schedule IV and all
other controls of the Controlled Substances Act. If after a comment period the
DEA were to issue a final rule consistent with its proposal, then Redux would no
longer carry the C-IV designation and would no longer be subject to such DEA
controls. Certain states will deschedule the drug automatically upon federal
descheduling while other states have varying proceedures for descheduling.
The following sets forth the applicable "additional" royalties payable to
the Company based on annual net sales, on an annual contract basis commencing in
May of each contract year, assuming the Company is supplying finished capsules
of Redux, based on the status of dexfenfluramine as a scheduled or descheduled
drug:
Scheduled
---------
First $50,000,000 5.0%
Next $100,000,000 8.0%
Over $150,000,000 10.0%
Descheduled
-----------
First $150,000,000 8.0%
Next $ 50,000,000 10.0%
Over $200,000,000 11.0%
Royalty rates are subject to a 50% reduction if generic drug competition
exceeds a 10% market share in two consecutive quarters. The Company recognizes
royalty revenue and associated expense in the fiscal quarter when AHP reports to
Interneuron AHP's shipments to distributors. Accordingly, royalty revenue is
reported by the Company in the quarter following actual shipments by AHP.
Pursuant to the Company's agreement with AHP, if the potential descheduling of
Redux were to occur within a year of FDA approval, AHP would be required to make
a milestone payment to, and equity investment in, the Company. Due to the timing
of the potential descheduling, the
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Company believes it may not receive the descheduling-related milestone payment
and equity investment from AHP.
Under a copromotion agreement with Wyeth-Ayerst effective June 1, 1996, the
Company's sales force is promoting Redux to selected specialists, in return for
financial support of the sales force and a percentage of resulting revenues less
certain expenses. The copromotion agreement with AHP calls for a reduction of
the Redux sales force costs paid by AHP to Interneuron from 100% during the
first year of the agreement to 50% during the second year of the agreement.
Total maximum payments from AHP will be reduced to approximately $1,650,000 for
the twelve month period beginning June 1997 from approximately $3,300,000 for
the twelve month period which commenced in June 1996. The copromotion agreement
is cancelable by Wyeth-Ayerst under certain conditions. There is no assurance
the Company will meet such conditions which includes a minimum revenue
requirement for which sufficient information is currently not available.
The Company has a manufacturing agreement with Boehringer Ingelheim
Pharmaceuticals, Inc. ("Boehringer") under which Boehringer manufactures and
packages finished capsules of Redux on behalf of the Company for sale to AHP.
This agreement obligates Boehringer to provide, and the Company to purchase,
manufactured Redux capsules to the extent defined in the agreement, through the
current contract expiration date of December 31, 1998. At the expiration or
termination of the agreement, the Company would be obligated to purchase from
Boehringer any unused manufacturing materials, work in process, or finished
product and to assume any unfilled Boehringer purchase commitments that could
not be canceled prior to the expiration or termination of the agreement. If the
Boehringer agreement is not extended, the Company will be required to obtain a
replacement good manufacturing practices ("GMP") qualified manufacturing
facility for Redux. The Company is currently evaluating manufacturing
alternatives. There can be no assurance a replacement manufacturer will be
approved by the FDA in sufficient time to avoid an interruption in the
commercial supply of Redux. The Company recognizes revenue from the sale of
these capsules upon acceptance by AHP, typically 45 days after shipment.
Included in the FDA-approved labeling for Redux are references to certain
risks that may be associated with dexfenfluramine and which were highlighted
during the FDA's review of the drug. One issue relates to whether there is an
association between appetite suppressants, including dexfenfluramine, and the
development of primary pulmonary hypertension ("PPH"), a rare but serious lung
disorder estimated to occur in the general population at one to two cases per
million adults per year. An epidemiologic study conducted in Europe known as
IPPHS (International Primary Pulmonary Hypertension Study) examined risk factors
for PPH and showed that among other factors, weight reduction drugs, including
dexfenfluramine, and obesity itself were associated with a higher risk of PPH.
In the final report of IPPHS, published in the New England Journal of Medicine
(August 29, 1996), the authors estimated yearly occurrence of PPH for patients
taking appetite suppressants for greater than three months duration to be
between 23 and 46 cases per million patients per year. The revised labeling for
Redux discloses this revised estimate.
The FDA-approved labeling for Redux also includes discussion as to whether
dexfenfluramine is associated with certain neurochemical changes in the brain.
Certain studies conducted by third parties related to this issue purport to show
that very high doses of dexfenfluramine cause prolonged serotonin depletion in
certain animals, which some researchers believe is an indication of
neurotoxicity. The Company has presented data relating to the lack of
neurocognitive effects in patients taking Redux to the FDA and believes that, as
demonstrated in human trials, these animal
-11-
studies are clinically irrelevant to humans because of pharmacokinetic
differences between animals and humans and because of the high dosages used in
the animal studies. The Company and Wyeth- Ayerst have agreed with the FDA to
conduct a certain Phase 4, or post-marketing, study of Redux. This study and
related costs are estimated to be approximately $10,000,000 and are expected to
be incurred primarily by Interneuron over an approximately two to three year
period. Wyeth-Ayerst is responsible to pay for 50% of these estimated costs.
The use patent on dexfenfluramine currently expires in mid 2000. In
accordance with the Waxman-Hatch Act, the U.S. Patent and Trademark Office
("PTO") is currently considering an extension of the dexfenfluramine patent to
compensate the Company for a portion of the time dexfenfluramine was being
tested and considered for approval. The PTO has instituted a petition period,
which ends on August 27, 1997, during which it will accept comments regarding
such extension. If such extension is granted by the PTO, the dexfenfluramine
patent will be extended for approximately an additional 3.5 years. Also, the
Company believes it is entitled under the Waxman-Hatch Act to a minimum three
year period of exclusivity from the date of FDA approval, during which
applications for generic versions of the drug may not be approved, although the
Company has applied for a five year period of exclusivity. There can be no
assurance of receipt of such exclusivity or patent extension on a timely
basis or at all.
Redux may be subject to substantial competition. AHP also sells Pondimin to
treat obesity. In May 1997, an FDA advisory panel recommended approval of
Xenical, a Hoffman-La Roche, Inc. drug, for the treatment of obesity. In
addition, other drugs, including sibutramine, for which an NDA has been filed,
and technologies are under regulatory review or development to treat obesity.
Inventories of $6,356,000 at March 31, 1997 consisted primarily of
dexfenfluramine drug substance and finished and packaged capsules of Redux.
Inventories decreased from $8,376,000 at September 30, 1996. Inventory levels
depend to a large extent on sales forecasts provided by AHP, AHP's management of
its inventory levels, production planning by the Company, and production
capabilities of Boehringer. There can be no assurance that Boehringer will be
able to manufacture product in adequate quantities or on a timely basis, or that
AHP's sales forecasts and the Company's production planning will be accurate,
which may result in higher inventory costs to the Company or inadequate or
excessive supplies of the product. In addition, there can be no assurance that
the manufacture of the capsules and their sale to AHP will result in profits to
Interneuron. Because of the relativity limited (less than one year) marketing
experience with Redux, the Company is unable to predict with certainty trends
for Redux sales or AHP and Interneuron inventory balances. Further, there may be
fluctuations in Redux sales which could
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affect inventory balances as a result of many factors, including seasonality,
promotion and advertising, publicity, the introduction of competitive products,
and other factors. AHP pays the Company for certain portions of dexfenfluramine
drug substance prior to its incorporation into the manufacturing process. Such
payments are included in, and are the majority components of, the deferred
revenue balance of $5,694,000 at March 31, 1997.
Results of Operations
Total revenues increased substantially in the three and six month periods
ended March 31, 1997 over the same periods in the prior fiscal year primarily as
a result of the launch of Redux in June 1996. Total revenues of $19,774,000 in
the three month period ended March 31, 1997 consisted of $17,477,000 of product
revenue and $2,297,000 of contract and license fees, and total revenues of
$37,466,000 in the six month period ended March 31, 1997 consisted of
$31,188,000 of product revenue and $6,278,000 of contract and license fees.
Product revenue of $17,477,000 in the three month period ended March 31,
1997 consists primarily of royalty revenue of approximately $10,200,000 based on
AHP's net sales of Redux and approximately $7,100,000 of revenue from the
Company's sale of Redux capsules to AHP. Product revenue of $31,188,000 in the
six month period ended March 31, 1997 consists primarily of royalty revenue of
approximately $17,000,000 based on AHP's net sales of Redux and approximately
$13,900,000 of revenue from the Company's sale of Redux capsules to AHP. The
Company recognizes Redux royalty revenue when net sales are reported to the
Company by AHP, which occurs in the quarter after AHP shipments of Redux to
distributors. The Company did not report any product revenue in the comparable
fiscal 1996 periods.
Contract and license fee revenue increased $1,392,000, or 154%, from
$905,000 for the three month period ended March 31, 1996 to $2,297,000 for the
three month period ended March 31, 1997 and was $6,278,000 for the six month
period ended March 31, 1997, essentially unchanged from $6,249,000 for the six
month period ended March 31, 1996. The increase in the 1997 three month period
reflects primarily CPEC's contract payment from Knoll and the Company's revenue
from Wyeth-Ayerst supporting the Interneuron Redux sales force pursuant to the
Copromotion Agreement with Wyeth-Ayerst. Contract and license fee revenue in the
six month period ended March 31, 1996 consisted primarily of $5,000,000 CPEC
received pursuant to its agreement with Astra Merck for the development of
bucindolol and in the six month period ended March 31, 1997 consisted primarily
of CPEC's contract payments from Knoll and the Company's revenue from
Wyeth-Ayerst supporting the Interneuron Redux sales force pursuant to the
Copromotion Agreement with Wyeth-Ayerst.
Total costs and expenses increased $16,200,000, or 117%, from $13,853,000
for the three month period ended March 31,1996 to $30,053,000 for the three
month period ended March 31, 1997 and $31,151,000, or 143%, from $21,841,000 for
the six month period ended March 31, 1996 to $52,992,000 for the six month
period ended March 31, 1997. Cost of product revenue, which did not exist in the
fiscal 1996 periods, comprised approximately 74% and 70%, respectively, of the
three and six month period increases in total costs and expenses. The three and
six month periods ended March 31, 1997 included expense for the purchase of
in-process research and development of $2,261,000 resulting primarily from the
Company's open market purchases of Intercardia common stock (see Note E of Notes
to Unaudited Consolidated Financial Statements). The three
-13-
and six month periods ended March 31, 1996 included expense for the purchase of
in-process research and development of $6,084,000 from the Company's acquisition
of the remaining 20% of CPEC which was not owned by Intercardia in exchange for
the issuance of Interneuron Common Stock, and the six month period ended March
31, 1996 included expense of $2,150,000 for InterNutria's acquisition of
technology and know-how related to PMS Escape which is being paid by the
issuance of Interneuron Common Stock.
Research and development expenses increased $6,367,000, or 177%, from
$3,599,000 for the three month period ended March 31,1996 to $9,966,000 for the
three month period ended March 31, 1997 and $10,758,000, or 160%, from
$6,726,000 for the six month period ended March 31, 1996 to $17,484,000 for the
six month period ended March 31, 1997. Increases in the 1997 three and six month
periods reflect expenses relating to two pivotal Phase 3 citicoline trials, the
pivotal Phase 2/3 pagoclone clinical trial initiated in the first quarter of
fiscal 1997, Intercardia's expenses relating to once-a-day and tablet
formulations of bucindolol, certain post-approval clinical expenses relating to
Redux and additional staffing and related expenses at the Company and the
Subsidiaries. Research and development expenses include only a relatively small
amount for bucindolol, as a substantial portion of the non-government sponsored
development expenses for bucindolol have been assumed, and are being paid, by
Astra Merck.
Selling, general and administrative expenses increased $1,657,000, or 40%,
from $4,170,000 for the three month period ended March 31,1996 to $5,827,000 for
the three month period ended March 31, 1997 and $4,463,000, or 65%, from
$6,881,000 for the six month period ended March 31, 1996 to $11,344,000 for the
six month period ended March 31, 1997. These increases are primarily due to
costs relating to the Company's Redux sales force, increased personnel costs,
additional staffing, consultants and insurance relating to the Company's growth
and promotional expenses incurred for regional test launches of PMS Escape(TM)
and Melzone(TM). Partially offsetting these increases was a non-recurring
expense recorded in the three month period ended March 31, 1996 for severance
and related charges incurred by Transcell relating to certain management
changes.
Investment income, net of interest expense, increased substantially over
the three and six month periods herein reported due to significantly higher
invested balances of cash, cash equivalents and marketable securities resulting
primarily from funds received from public offerings in fiscal 1996 by
Interneuron and Intercardia.
The Company from time to time explores various technology, product or
company acquisitions and/or financing opportunities and is currently engaged in
discussions relating to such opportunities. Any such initiatives may involve the
issuance of shares of Interneuron's Common Stock and/or financial commitments to
fund product development, either of which may adversely affect the Company's
consolidated financial condition or results of operations.
Liquidity and Capital Resources
Cash, Cash Equivalents and Marketable Securities:
At March 31, 1997, the Company had cash, cash equivalents and marketable
securities aggregating $160,360,000, compared to $169,608,000 at September 30,
1996. Approximately $4,600,000 of this decrease is the result of the Company's
open-market purchases of Intercardia
-14-
and Interneuron Common Stock (see Note E of Notes to Unaudited Consolidated
Financial Statements).
Clinical Studies:
The Company is incurring substantial expenditures for product development
and clinical trials. In particular, the Company is performing two additional
pivotal Phase 3 clinical trials of citicoline (along with other supportive
trials), for treatment of ischemic stroke, one of which is expected to be
completed during the third quarter of fiscal 1997 (the "Fiscal 1997 Phase 3
Trial") and one of which is expected to extend into fiscal 1998 (the "Fiscal
1998 Phase 3 Trial"). There can be no assurance the Fiscal 1997 Phase 3 Trial or
the Fiscal 1998 Phase 3 Trial will confirm the results of the initial completed
pivotal Phase 3 trial on citicoline. Depending upon the results of the Fiscal
1997 Phase 3 Trial the Company may file an NDA for citicoline to treat ischemic
stroke within approximately six months after completion of the analysis of the
data. The Fiscal 1998 Phase 3 Trial may be used to support product labeling
requirements. Assuming the Company files an NDA after completion of the Fiscal
1997 Phase 3 Trial, the costs of all currently known clinical trials and related
studies and the preparation of the NDA are estimated, based upon current trial
protocols, to aggregate approximately $17,500,000, of which approximately
$4,400,000 has been paid through March 31, 1997. The Company is unable to
predict with certainty the costs of any related or additional clinical studies
which will depend upon the results of the ongoing trials and upon FDA
requirements. If the Company does not file an NDA after completion of the Fiscal
1997 Phase 3 Trial, it may conduct additional trials which would increase the
total estimated costs relating to the development of citicoline.
The Company is currently evaluating the marketing strategy for citicoline.
The Company is considering sole marketing of the product to office-based and
hospital-based physicians but has also commenced negotiations with certain major
pharmaceutical companies regarding the co-promotion of the product to market
segments requiring extensive sales force coverage. In the event the Company
markets citicoline directly, significant additional funds would be required for
manufacturing, distribution, marketing and selling efforts. The Company is
dependent upon third party suppliers of citicoline for manufacturing in
accordance with the Company's and applicable regulatory requirements and is
subject to an agreement requiring the Company to purchase citicoline for
commercial purposes at fixed prices, subject to certain conditions. There can be
no assurance the Company will establish or maintain marketing or manufacturing
capabilities required to successfully commercialize citicoline.
The Company is also incurring substantial costs to develop pagoclone for
which a Phase 2/3 trial commenced in November 1996. The Company designates a
trial as Phase 2/3 if it is a well-controlled trial which the Company may choose
to utilize, depending upon results, as a pivotal or supporting trial in an NDA
submission. The Company has estimated the total costs of certain clinical
studies, license fees to Rhone-Poulenc Rorer Pharmaceuticals, Inc., and NDA
preparation for pagoclone to be approximately $33,000,000, which will be
incurred over the next several years. The Company is unable to predict with
certainty the costs of any related or additional studies which may be required
by the FDA. Further, in the event the Company markets pagoclone directly,
significant additional funds would be required for manufacturing, distribution
and selling efforts.
-15-
In December 1996, the Company entered into an agreement with Algos
Pharmaceutical Corporation to collaborate in the development and
commercialization of LidodexNS(TM), which combines two drugs that are currently
marketed for other indications. This combination product is in pre-clinical
development for the acute intra-nasal treatment of migraine headaches. The
development of this and other products, including those which may be acquired by
the Company in the future will require substantial additional funds.
There can be no assurance that results of ongoing current preclinical or
clinical trials will be successful, that additional trials will not be required,
that any drug under development will receive FDA approval in a timely manner or
at all, or that such drug could be successfully manufactured in accordance with
good manufacturing practice regulations or marketed in a timely manner, or at
all, any of which could materially adversely affect the Company.
Analysis of Cash Flows:
Cash used by operating activities during the six months ended March 31,
1997 of $5,614,000 consisted primarily of a net loss of $10,781,000 and changes
in assets and liabilities as follows:
(i) a decrease in accounts receivable of $2,412,000 from $4,338,000 at
September 30, 1996 to $1,926,000 at March 31, 1997 primarily resulting from
collections from AHP and reduced billings to AHP .
(ii) a decrease in inventories of $2,020,000 from $8,376,000 at September
30, 1996 to $6,356,000 at March 31, 1997, reflecting a reduction in production
of Redux capsules and their sale to AHP.
(iii) an increase of $4,637,000 in prepaid and other current assets from
$1,324,000 at September 30, 1996 to $5,961,000 at March 31, 1997 primarily due
to Progenitor's approximately $1,700,000 of prepaid and accrued costs relating
to its proposed initial public offering and Mercator acquisition and
approximately $1,300,000 advanced by Progenitor to Mercator under a line of
credit arrangement.
(iv) an increase of $4,452,000 in accrued expenses and other liabilities
primarily due to increased accruals relating to research and development
contracts, Progenitor's accrual of initial public offering and Mercator
acquisition costs, and accrued Redux inventory purchases. Accrued expenses
consist primarily of obligations related to clinical trials and sponsored
research, consultants and other service providers, compensation and other items.
Cash used by investing activities during the six months ended March 31,
1997 of $46,619,000 consisted primarily of purchases of marketable securities
(investments purchased with maturities greater than three months) of $53,600,000
resulting mainly from funds available from maturities of securities classified
as cash equivalents and the Company's $2,436,000 purchase of Intercardia stock.
Cash used by financing activities during the six months ended March 31,
1997 of $254,000 consisted of $2,315,000 used to purchase treasury stock which
was partially offset by inflows of $1,101,000 from issuances common and treasury
stock and $1,050,000 from proceeds from sales
-16-
and leasebacks of fixed assets.
Other:
In February 1997, Interneuron announced that its Board of Directors had
authorized it to purchase from time to time up to 200,000 shares of the common
stock of Intercardia. As of March 31, 1997, the Company had purchased 104,400
shares of Intercardia common stock for an aggregate purchase price of
approximately $2,436,000, of which approximately $1,861,000 was recorded as
purchase of in-process research and development in the three and six month
periods ended March 31, 1997. As a result of these purchases, the Company's
ownership of Intercardia increased from 59.6% at September 30, 1996 to 61.0% at
March 31, 1997 based upon the number of outstanding shares of Intercardia at
such dates.
In March 1997, the Company announced that its Board of Directors had
authorized it to repurchase from time to time through open-market transactions
up to 1,500,000 shares of the Company's Common Stock. As of March 31, 1997, the
Company had repurchased 142,500 shares for an aggregate purchase price of
approximately $2,619,000, of which 13,665 shares were re-issued pursuant to
employee stock option and stock purchase plans. Such repurchases and
re-issuances are recorded as treasury stock transactions.
On May 9, 1997, the Company purchased in private transactions from Swiss
Bank Corporation, London Branch ("SBC") capped call options on Interneuron
Common Stock. These call options give Interneuron the right to purchase from SBC
up to a total of 1,240,000 shares of Interneuron Common Stock at a strike price
of $17.75. The call options are exercisable only at their maturities, which are
September 24, 1997, March 9, 1998, May 21, 1998 and August 24, 1998 each with
respect to 310,000 shares, and are subject to caps of $26.00, $34.00, $38.00 and
$40.00, respectively, which limit the economic benefit to the Company of these
call options. The call options which the Company purchased are expected to be
settled, if exercised, with cash in an amount equal to the difference between
the strike price and the market price, subject to caps which will limit the
total amount of cash the Company could receive or increase the strike prices in
the case of stock settlement when the market price of the Company's Common Stock
exceeds the applicable cap price.
In exchange for the purchases of these call options, in lieu of cash
purchase prices, the Company sold to SBC call options entitling SBC to purchase
from the Company at a strike price of $40.30 per share, an aggregate of
2,000,000 shares of Interneuron Common Stock, 1,000,000 shares on each of May 21
and May 24, 1999. The Company will have the right to settle these call options
with cash or stock, subject to certain conditions. If exercised, the Company
expects to settle the call options that it sold through issuances by the Company
to SBC of up to an aggregate of 2,000,000 authorized and unissued shares of
Common Stock, subject to the effectiveness of a registration statement covering
the resale of these shares. The sale or potential sale of such shares could have
an adverse effect on the market price of the Company's Common Stock.
SBC has advised that it has engaged, and may engage, in transactions,
including buying and selling shares of the Company's Common Stock, to offset its
risk relating to the options. Purchases and sales could affect the market price
of the Company's Common Stock.
In February 1997, the Company entered into a new five year lease for
approximately 42,000 square feet of space in its current facility in Lexington,
MA to accommodate current needs and expected growth. Total aggregate rental
payments under this five year lease is approximately $3,400,000. Additionally,
the Company is expending approximately $1,000,000 of build-out costs for this
space.
The Company's strategy includes evaluation of various technology, product
or company acquisition and/or financing opportunities (including private
placements and initial and follow-on equity offerings) and the Company and
certain of its subsidiaries are currently engaged in
-17-
discussions relating to such opportunities. Any such initiatives may involve the
issuance of securities of Interneuron or its subsidiaries and/or financial
commitments and would result in increased expenses for research and development,
on a consolidated basis.
While the Company believes it has sufficient cash for currently planned
expenditures in fiscal 1997, it may seek additional funds through other equity
and/or debt financings and corporate collaborations to provide working capital
financing and funding for new business opportunities and future growth. In
addition, certain subsidiaries are exploring various financings (including
issuances of securities of the subsidiaries, possibly in combination with
securities of Interneuron, in public offerings or private placements),
collaborations or business combinations. If such efforts are not successful,
certain activities at these subsidiaries may be reduced.
Although Interneuron may acquire additional equity in subsidiaries through
participation in financings, purchases from third parties, including open market
purchases and conversion of intercompany debt, equity financings by a subsidiary
will likely reduce Interneuron's percentage ownership of that subsidiary and
funds held by the subsidiaries will generally not be available to Interneuron.
The Company's goal is for its subsidiaries to establish independent operations
and financing through corporate alliances, third-party financings, mergers or
other business combinations, with Interneuron generally retaining an ongoing
equity interest. The nature of any such transaction is expected to vary
depending on the business and capital needs of each subsidiary and the state of
development of their respective technologies or products.
Subsidiaries:
Interneuron is currently funding operations of Progenitor, Transcell and
InterNutria. Expenses of the Subsidiaries, including those required under
collaboration agreements, constitute a significant part of the Company's overall
expenses. The Subsidiaries' portion of consolidated research and development and
selling, general and administrative expenses in the six month period ended March
31, 1997 was approximately 39%.
Intercardia
Pursuant to the Astra Merck Collaboration, Intercardia has agreed to pay
Astra Merck $10,000,000 in December 1997 and up to $11,000,000 for one-third of
product launch costs for bucindolol incurred beginning when Intercardia files an
NDA with the FDA for the twice-daily formulation of bucindolol and continuing
through the first 12 months subsequent to the first commercial sale of the
formulation. In the event Intercardia elects not to make these payments, the
royalties payable by Astra Merck to Intercardia would be substantially reduced.
There can be no assurance of the success of the Beta-blocker Evaluation of
Survival Trial (the "BEST Study") or that bucindolol will be successfully
commercialized. A substantial portion of the bucindolol development costs are
being assumed and paid by the National Institutes of Health, the Department of
Veterans Affairs, Astra Merck and Knoll.
Pursuant to the Knoll Collaboration (see Note D of Notes to Unaudited
Consolidated Financial Statements), Intercardia is responsible for approximately
40% of the development and marketing costs of bucindolol in the Territory, which
includes all countries other than the United States and Japan, subject to
certain maximum dollar limitations. The Company's portion of development and
-18-
clinical trial costs for the Territory is estimated to be up to $10,000,000.
Intercardia is also responsible for approximately 40% of the once-daily
development costs which relate to development solely for the Territory and
approximately 67% of once-daily development costs which have a worldwide
benefit.
In February 1997, an FDA advisory committee recommended that the FDA
approve the use of carvedilol, a competitive drug being developed by SmithKline
Beecham for the treatment of congestive heart failure. The Company is unable to
predict the final labeling for this product or the impact of this product on
bucindolol, if it is approved by the FDA.
Progenitor
In December 1996, Progenitor entered into an agreement with Amgen, granting
Amgen certain exclusive rights for the development and commercialization of
products using Progenitor's leptin receptor technology. Amgen paid Progenitor a
$500,000 initial license fee in January 1997, which was reflected in contract
and license fee revenue in the six month period ended March 31, 1997. Progenitor
may also receive from Amgen certain development and regulatory milestone
payments and potential royalties on sales. Amgen also agreed to purchase
Progenitor Common Stock in the event of a Progenitor initial public offering.
In February 1997, Progenitor announced an agreement to acquire Mercator,
Inc. ("Mercator") a privately-held genomics company, subject to certain
conditions, including completion of an initial public offering by Progenitor for
approximately $22,000,000 payable in Progenitor common stock, plus the
assumption of Mercator liabilities. Progenitor also agreed to provide Mercator
with an interim operating line of credit through July 1997 of up to $6,600,000,
funding for which will be provided by Interneuron. At March 31, 1997, advances
under this line of credit totaled approximately $1,300,000 and are reflected in
prepaids and other current assets.
In March 1997, Progenitor filed registration statements with the Securities
and Exchange Commission relating to a proposed initial public offering of
2,750,000 shares of Progenitor common stock (plus up to an additional 412,500
shares to cover over-allotments) and the proposed acquisition by Progenitor of
Mercator. Based on the proposed terms of the offering and the acquisition,
assuming completion of the offering and the Mercator acquisition on the filed
terms, Interneuron will own approximately 43% of Progenitor's outstanding common
stock, without giving effect to any exercise of the over-allotment option or any
options or warrants, and subject to change based upon the timing of the
offering, the offering price, the number of Progenitor shares issued in
connection with the Mercator acquisition and the amount of Progenitor's
indebtedness to Interneuron. In connection with the acquisition, Progenitor will
incur non-recurring charges to operations currently estimated to aggregate
approximately $30,000,000, a portion of which are noncash charges related to the
purchase of in-process research and development, subject to increase based upon
several factors including the timing of the transactions and unanticipated
costs. Due to market conditions and other factors, there is no assurance that
Progenitor's initial public offering or acquisition of Mercator will be
completed, in which case Progenitor will incur charges to operations for amounts
expended in connection with the two proposed transactions, including funds
advanced under the line of credit. Interneuron will record a portion of these
charges based on its ownership interest in Progenitor.
If Progenitor does not complete its initial public offering and acquisition
of Mercator, the $1,300,000 advanced to Mercator under the line of credit and
the approximately $1,700,000 of expenditures relating to the initial public
offering at March 31, 1997, plus additional amounts advanced and expended
subsequent to March 31, 1997, will result in charges to operations.
-19-
Transcell
Transcell has committed to spend approximately $800,000 in fiscal 1997 to
build-out certain newly-leased facilities. At March 31, 1997, the Company had
outstanding a Standby Letter of Credit for $800,000 to secure these build-out
costs. This Standby Letter of Credit is collateralized by a certificate of
deposit and expires the sooner of September 15, 1997 or receipt by the
subsidiary's landlord of payment of the build-out costs.
InterNutria
InterNutria is assessing data from a clinical evaluation of PMS Escape.
Depending upon the results of this assessment, the test launch of PMS Escape and
the availability or allocation of sufficient funds, the Company will determine
whether to commence a commercial launch of PMS Escape, conduct additional
clinical trials or evaluations, or discontinue clinical or marketing efforts.
-20-
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on March 5, 1997. At
the meeting (i) all ten director nominees were elected; (ii) the proposed
amendment to the Amended and Restated Certificate of Incorporation of the
Company increasing from 60,000,000 to 80,000,000 the number of authorized shares
of Common Stock was approved and ratified; (iii) the amendment to the Company's
1994 Long-Term Incentive Plan, as amended, increasing from 3,000,000 to
6,000,000 the number of shares of Common Stock reserved for issuance was
approved and ratified; and (iv) the appointment of Coopers & Lybrand L.L.P. as
the independent auditors was ratified.
(i) The following Directors were elected for a one-year term by the votes
indicated:
Lindsay A. Rosenwald, M.D., 38,644,309 for, 312,239 against; Glenn L. Cooper,
M.D., 38,646,840 for, 309,708 against; Harry J. Gray, 38,642,945 for, 313,603
against; Alexander M. Haig, Jr., 38,640,145 for, 316,403 against; Peter Barton
Hutt, 38,005,120 for, 951,428 against; Malcolm Morville, Ph.D., 38,647,040 for,
309,508 against; Robert K. Mueller, 38,642,840 for, 313,708 against; Lee
J.Schroeder, 38,643,940 for, 312,608 against; David B. Sharrock, 38,646,540 for,
310,008 against; Richard Wurtman, M.D., 38,647,040 for, 309,508 against.
(ii) The amendment to the Amended and Restated Certificate of Incorporation of
the Company increasing from 60,000,000 to 80,000,000 the number of authorized
shares of Common Stock was approved and ratified by a vote of 38,106,270 for,
1,185,306 against, and 124,915 abstain.
(iii) The amendment to the Company's 1994 Long-Term Incentive Plan, as amended,
increasing from 3,000,000 to 6,000,000 the number of shares reserved for
issuance, was approved and ratified by a vote of 25,466,836 for, 5,310,408
against, and 151,590 abstain.
(iv) The appointment of Coopers & Lybrand L.L.P. was ratified by a vote of
39,474,226 for, 35,332 against, and 69,211 abstain.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
--------
<S> <C>
3.5 - Restated Certificate of Incorporation of Registrant, as amended
10.65(a) - 1994 Long-Term Incentive Plan, as amended (1)
10.89 - Form of ISDA Master Agreement by and between the Registrant and Swiss
Bank Corporation, London Branch, together with Schedules thereto
10.90(a) - Form of Confirmation for Contract A entered into pursuant to ISDA Master
Agreement by and between the Registrant and Swiss Bank Corporation,
London Branch together with appendix thereto.
10.90(b) - Form of Confirmation for Contract B entered into pursuant to ISDA Master
Agreement by and between the Registrant and Swiss Bank Corporation,
London Branch together with appendix thereto.
10.91 - Form of Agreement regarding Registration Rights and Related Obligations to
-21-
be entered into by and between Registrant and Swiss Bank
Corporation, London Branch
27 - Financial Data Schedule
</TABLE>
- ----------------
(1) amends and supersedes Exhibit 10.65
(b) Reports on Form 8-K
The Company filed Reports on Form 8-K reporting information under "Item 5"
on January 7, 1997, February 18, 1997, March 14, 1997 and May 6, 1997.
-22-
SIGNATURES
Pursuant to the requirements 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.
INTERNEURON PHARMACEUTICALS, INC.
Date: May 14, 1997 By: /s/ Glenn L. Cooper, M.D.,
--------------------------------
Glenn L. Cooper, M.D., President
and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1997 By: /s/ Thomas F. Farb
---------------------------------
Thomas F. Farb,
Executive Vice President, Finance
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: May 14, 1997 By: /s/ Dale Ritter
---------------------------------
Dale Ritter
Vice President, Corporate Controller
(Principal Accounting Officer)
-23-
EXHIBIT 3.5
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
INTERNEURON PHARMACEUTICALS, INC.
Pursuant to Section 242 of the General Corporation Law of the State of Delaware
--------------------------------
It is hereby certified that:
FIRST: The name of the Corporation is Interneuron Pharmaceuticals, Inc.
SECOND: The Corporation hereby amends its Amended and Restated Certificate of
Incorporation as follows:
Paragraph (A)(1) of Article FOURTH of the Amended and Restated
Certificate of Incorporation relating to the authorized capital stock
of the Corporation, is hereby deleted in its entirety and amended to
read as follows:
The aggregate number of shares which the Corporation shall have
authority to issue is eighty-five million (85,000,000), of which five
million (5,000,000) shares of the par value of $.001 per share shall
be designated "Preferred Stock" and eighty million (80,000,000)
shares of the par value of $.001 shall be designated "Common Stock".
THIRD: This Certificate of Amendment has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being the President of the
Corporation, hereunto signs his name and affirms that the statements made herein
are true under the penalties of perjury, this 5th day of March, 1997.
/s/ Glenn L. Cooper
-------------------------
Glenn L. Cooper, M.D.
President
CERTIFICATE OF DESIGNATION ESTABLISHING
SERIES C PREFERRED STOCK
OF
INTERNEURON PHARMACEUTICALS, INC.
INTERNEURON PHARMACEUTICALS, INC., a corporation organized and
existing under the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation, as amended, of said corporation,
and pursuant to the provisions of Section 151 of the General Corporation Law of
the State of Delaware, said Board of Directors, by unanimous written consent
dated May 27, 1993, adopted a resolution providing for the number, designation,
powers and preferences, and the qualifications, limitations and restrictions
thereof, of a series of Preferred Stock, which resolution is as follows:
"RESOLVED, that pursuant to the authority vested in the Board
of Directors in accordance with the provisions of its
Certificate of Incorporation, as amended, a series of
Preferred Stock of this corporation (hereinafter, the
"Company") be and it hereby is created. The number,
designation, powers and preferences, and the rights,
qualifications, limitations and restrictions of the shares of
such series of Preferred Stock are as follows:
Series C Preferred Stock.
-------------------------
1. Designation. The number of shares to constitute such series
of Preferred Stock shall be 5,000 and the designation of such series shall be
Series C Preferred Stock (hereinafter called the "Series C Stock").
2. Voting Rights. On all matters submitted to a vote of
stockholders generally, other than the election of Directors, each share of
Series C Stock will be entitled to a number of votes equal to the number of
shares of Common Stock into which such share of Series C Stock is then
convertible, and rounding the result to the nearest whole number. Except as
otherwise required by law or by any provision hereof, the Common Stock and the
Series C Stock will vote together as a single class on all matters on which
stockholders shall be entitled to vote.
-2-
3. Conversion.
(a) Conversion Ratio. Each outstanding share of Series C Stock
will be convertible at any time at the option of the holder into a number of
shares of Common Stock computed by dividing $100.00 by the Conversion Price then
in effect.
(b) Conversion Price; Adjustment. The initial Conversion Price
will be $13.0125. Each time after the effective date hereof, the Company issues
or agrees to issue any additional shares of Common Stock for a consideration
which is less than two-thirds of the then Conversion Price per share (such
consideration being hereinafter collectively referred to as the "Issue Price"),
the then Conversion Price shall be reduced to 150% of the Issue Price.
(c) Excluded Issuances. The reduction in the Conversion Price
required by paragraph 3 (b) shall not be made in the event (i) the Company
issues shares of Common Stock or options, warrants or other rights to purchase
Common Stock to any of its officers, directors, employees, consultants or
scientific advisers; (ii) of any issuance of up to 10,000 shares (as adjusted
from time to time pursuant to the provisions of paragraph 3(e) below) of Common
Stock or Options or warrants to purchase up to said number of shares of Common
Stock to any person at any one time, provided that no more than an aggregate of
100,000 shares (as adjusted from time to time pursuant to the provisions of
paragraph 3(e) below) and options or warrants to purchase said number of shares
may be issued pursuant to this clause (ii); or (iii) of any issuance of Common
Stock, Options or Convertible Securities (as defined in paragraph 3(d)(i)
hereof) in respect of an obligation incurred by the Company prior to the
effective date hereof.
(d) Effect on Conversion Price of Certain Events. For purposes
of determining the Issue Price and the Conversion Price under paragraph 3(b)
above, the following will apply:
(i) Issuance of Rights or Options. Each time after the
effective date hereof, the Company in any manner (other than an excluded
issuance under paragraph 3(c)) grants any rights or options to subscribe for or
to purchase Common stock or any stock or other securities convertible into or
exchangeable for Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or securities being herein
called "Convertible Securities") and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than both (x) 150% of the average of the
last sale prices for the Common Stock for the ten trading days preceding the
date on which the Company issues or agrees to issue such Options or Convertible
Securities and (y) the then Conversion Price, then the Conversion Price shall be
reduced to the greater of (x) 100% of the price per share for which Common Stock
is issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities and (y) 56.67% of the initial Conversion Price as
adjusted from time to time pursuant to the provisions of paragraph 3(e) below.
For purposes of this paragraph , the "price per share for
-3-
which Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities" will be determined by
dividing (A) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Option or upon the conversion or exchange
of all such Convertible issuable upon the exercise of such Options, plus the
minimum aggregate amount of additional consideration payable to the Company upon
exercise of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options. Except as otherwise provided in paragraph 3(d)(iii) below, no
adjustment of the Conversion Price will be made when Convertible Securities are
actually issued upon the exercise of such Options or when Common Stock is
actually issued upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
(ii) Issuance of Convertible Securities. Each time after
the effective date hereof, the Company in any manner (other than an excluded
issuance under paragraph 3(c) issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon such conversion or
exchange is less than both (x) 150% of the average of the last sale prices for
the Common Stock for the ten trading days preceding the date on which the
Company issues or agrees to issue such Options or Convertible Securities and (y)
the then Conversion Price, then the Conversion Price shall be reduced to the
greater of (x) 100% of the price per share for which Common Stock is issuable
upon such conversion or exchange and (y) 56.67% of the initial Conversion Price
as adjusted from time to time pursuant to the provisions of paragraph 3(e)
below. For the purposes of this paragraph, the "price per share for which Common
Stock is issuable upon such conversion or exchange" will be determined by
dividing (A) the total amount received or receivable by the Company as
consideration for the issuance or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (B) the total maximum number
of shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. Except as otherwise provided in paragraph 3(d)(iii)
below, no adjustment of the Conversion Price will be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion Price had been
or are to be made pursuant to other provisions of this paragraph 3, no further
adjustment of the Conversion Price will be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Option, the additional consideration, if any,
payable upon the conversion or exchange of Convertible Securities, or the rate
at which any Convertible Securities are convertible into or exchangeable for
Common Stock, change at any time (other than under or by reason of provisions
designed to protect against dilution of the type set forth in this paragraph 3
or any other mandatory anti-dilution provisions contained in such Options or
Convertible
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Securities) the Conversion Price in effect at the time of such change will be
readjusted to the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion rates, as
the case may be, at the time initially granted, issued or sold; provided, that
such adjustment of the Conversion Price then in effect would be reduced. If the
purchase price provided for in any Option, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities, or the
rate at which any Convertible Securities are convertible into or exchangeable
for Common Stock, is reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution of the type set forth
herein or any other mandatory anti-dilution provision contained in such Options
or Convertible Securities, then in the case of the delivery of Common Stock upon
the exercise of any such Option or upon the conversion or exchange of any such
Convertible Security, the Conversion Price then in effect hereunder will
forthwith be adjusted to such respective amount as would have been obtained had
such Option or Convertible Security never been issued as to such Common Stock
and had adjustments been made to the Conversion Price upon the issuance of the
shares of Common Stock delivered, but only if as a result of such adjustment,
the Conversion Price then in effect hereunder would be reduced.
(iv) Calculation of Consideration Received. In case any
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for consideration, part or all of which is cash, the
amount of cash consideration received therefor will be deemed to be the gross
amount received by the Company therefor. In case any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for a consideration, part or all of which is other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of securities
publicly traded, in which case the amount of consideration received by the
Company will be the market price thereof as of the date of receipt. In case any
Common Stock, Options or Convertible Securities are issued in connection with
any merger in which the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving corporation as is attributable
to such Common Stock, Options or Convertible Securities, as the case may be.
(v) Integration of Transactions. In case any Option or
Convertible Security is issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Option or Convertible
Security by the parties thereto, the Option or Convertible Security will be
deemed to have been issued without consideration.
(e) Subdivision or Combination of Common Stock. If the
Company at any time subdivides (by any stock split, stock dividend or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced, and if the Company at any time
-5-
combines (by reverse stock split or otherwise) its outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price will be
proportionately increased.
(f) Reorganization, Reclassification, Merger, Consolidation,
or Sale. If any capital reorganization, reclassification, consolidation or
merger or any sale of all or substantially all of the Company's assets
(collectively any "Major Change") is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, other securities or assets with respect to or in exchange
for Common Stock, then, as a condition to such Major Change, lawful and adequate
provision will be made, whereby each of the holders of Series C Stock will
thereafter have the right to acquire and receive, in lieu of the shares of
Common Stock immediately theretofore acquirable and receivable upon the
conversion of such holder's Series C Stock, such shares of stock, other
securities or assets as may be issuable or payable with respect to or in
exchange for the number of shares of Common stock immediately theretofore
acquirable and receivable upon conversion of such holder's Series C Stock had
such Major Change not taken place. In any such case, appropriate provision will
be made with respect to such holder's rights and interests to the end that the
provisions of this paragraph 3 and paragraph 4 below will thereafter be
applicable in relation to any shares of stock, securities or assets thereafter
deliverable upon the conversion of Series C Stock including, in the case of any
such consolidation, merger or sale in which the successor corporation or
purchasing corporation is other than the Company, an immediate adjustment of the
Conversion Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale and a corresponding immediate adjustment in
the number of shares of Common Stock acquirable and receivable upon conversion
of Series C Stock, if the value so reflected is less than the Conversion Price
in effect immediately prior to such consolidation, merger or sale. The Company
will not effect any such consolidation, merger or sale unless, prior to the
consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, assumes, by written instrument, the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
(g) Certain Events. If any event occurs of the type
contemplated by the provisions of this paragraph 3, but not expressly provided
for by such provisions, then the Board of Directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights of the holders of
Series C Stock.
(h) No Circumvention. The Company will not issue any
additional shares of Series C Stock or, in circumvention of the provisions of
this paragraph 3, issue any shares of preferred stock which, notwithstanding
such designation, primarily possess the attributes customarily associated with
common stock, and do not possess special voting rights, scheduled or optional
redemption features (with redemption prices specified as to amount and limited
to such amount), special liquidation rights fixed and limited as to amount, and
dividends fixed in amount and limited to the amount so fixed, other than
pursuant to an obligation to issue preferred stock existing prior to the
effective date hereof.
-6-
(i) Notices.
(i) As soon as practicable after any adjustment of the
Conversion Price, the Company will send written notice thereof to all holders of
Series C Stock.
(ii) The Company will give to the holders of Series C
Stock at least 20 days' prior written notice of the date on which any Major
Change, dissolution or liquidation will take place.
(j) Mechanics of Conversion. So long as any shares of Series
C Stock remain outstanding, at the election of the respective holders thereof,
any and all shares of the Series C Stock may be converted at any time on and
subsequent to the second anniversary of initial issuance and from time to time
into the number of fully paid and non-assessable shares of Common Stock of the
Company calculated as set forth herein. In order to exercise the conversion
privilege, the holder of Series C Stock shall surrender the certificates for the
Series C Stock to be converted at the offices of the Company in the Commonwealth
of Massachusetts, together with written notice to the Company that the holder
elects to convert such Series C Stock or a portion thereof. Such notice shall
also state the name or names (with address) in which the certificates for shares
of Common Stock issuable on such conversion shall be issued. Series C Stock
surrendered for conversion shall be accompanied by proper assignments thereof to
the company or in blank for transfer and the signature of the holder shall be
guaranteed by a firm having membership on the New York Stock Exchange or by a
commercial bank or trust company located in or having a correspondent in the
City of New York, and such conversion shall be deemed effective upon the date of
delivery of such certificates in accordance with the provisions of this
subdivision (j).
(k) Fractional Shares; Dividends on Conversion. No
fractional shares of Common Stock will be issuable upon conversion of Series C
Stock. The Company in lieu thereof, will make a payment in cash in lieu of any
fractional share of Common Stock to which the converting holder would be
entitled if such fractional share was issuable, based upon the market price of a
share of Common Stock as of the Conversion Date. Upon such conversion, the
Company will pay all accrued but unpaid dividends with respect to each share
converted which have not been paid theretofore.
4. Dividends.
(a) The annual dividend rate at which the holders of
shares shall be entitled to receive dividends is $1.00 per share per annum. The
holders of the shares shall be entitled to receive, out of funds legally
available therefor under Section 170 (or its successor) of the Delaware
Corporation Law, mandatory preferential dividends at such annual rate payable
annually on the first day of April in each year. Such dividends shall be accrued
on a daily basis and shall be cumulative.
-7-
(b) The Board of Directors shall pay dividends, in cash
or, at the election of the Board of Directors, in shares of Common Stock,
including dividends accrued under paragraph (a) but unpaid on any share of
Series C Stock as of the date on which such share is converted into Common
Stock. If paid in Common Stock, the dividend shall be paid by delivering shares
of Common Stock to, and registered on the books of the Company in the name of,
the registered holder of the share of Series C Stock on the record date or the
date of conversion, as the case may be. The number of such shares of Common
Stock so deliverable shall be that number of whole shares which, when multiplied
by the "per-share value" determined below, shall equal the total amount of the
dividend then due. "Per-share value" shall be equal to the average of the last
sale prices of Common Stock on the National Association of Securities Dealers
Automated Quotation System for the ten days immediately preceding such dividend
payment date or, if during which the Common Stock is then listed on any national
securities exchange, the average of the closing prices on the primary exchange
during such ten days. No fractional shares will be issued in payment of any
dividend contemplated by this paragraph 4(b). In lieu thereof, there shall be
paid, simultaneously with the distribution of the whole shares of Common Stock,
cash in the amount of the "per share value" of any fractional share.
(c) If the Company declares a distribution upon the
Common Stock, other than a distribution payable entirely in Common Stock,
payable otherwise than out of earnings or earned surplus determined in
accordance with generally accepted accounting principles, consistently applied
(a "Liquidating Dividend"), then the Company will pay to each holder of Series C
Stock at the time of payment of a Liquidating Dividend an amount equal to the
aggregate value of all Liquidating Dividends which would have been paid on the
Common Stock issuable upon conversion of such holder's Series C Stock, had such
Common Stock been converted immediately prior to the date on which a record was
taken for such Liquidating Dividend, or, if no record was taken, the date as of
which the record holders of Common Stock entitled to such dividends were
determined. For purposes of this paragraph 4, a dividend other than in cash,
notes, debentures or capital stock will not be considered payable out of
earnings or earned surplus, regardless of whether or not earnings or earned
surplus are charged an amount equal to the fair value of such dividend. No
distribution in respect of Series C Stock contemplated by this paragraph 4(c)
shall be deemed to reduce the amount of dividends then cumulated but unpaid
under paragraph 4(a).
(d) Except as contemplated by paragraph 4(c), no
dividend or distribution will be declared or paid on the Common Stock when any
dividends contemplated by paragraph 4(a) are cumulated but unpaid.
5. Preference on Liquidation. The preference per share which the
holders of Series C Preferred Stock shall be entitled to receive over the
holders of each share of Common Stock and each share of Preferred Stock (other
than the shares of any other series of Preferred Stock initially issued in its
entirety to American Cyanamid Company, which series shall rank pari passu with
Series C Stock), in case of the liquidation, distribution or sale of all or
substantially all of the Company's assets, dissolution or winding up of the
Company,
-8-
whether voluntary or involuntary, shall be $100.00 per share plus, in any such
case, an amount equal to any and all dividends cumulated but unpaid.
6. Protective Provisions. Until the date American Cyanamid Company or
its affiliates ceases to be the registered holder of all of the issued and
outstanding Preferred Stock of at least one series, the Company will not,
without the approval by the vote or written consent of at least a majority of
the outstanding shares of all series of Preferred Stock initially issued in its
entirety to American Cyanamid Company, voting as a single class:
(a) authorize or issue shares of any class of stock having any
preference or priority, or ranking, unless issued to American Cyanamid Company
or its designee or to Elan Pharmaceuticals, plc pursuant to an Option Agreement
dated as of April 22, 1991 as in effect on June 3, 1993, pari passu, as to
dividends or assets superior to any such series;
(b) reclassify any shares of any class of stock into shares
having any preference or priority as to dividends or assets superior to any such
series;
(c) make any amendment to its Certificate of Incorporation or
by-laws adversely affecting the rights of holders of any such series;
(d) merge or consolidate with any entity (other than a
wholly-owned subsidiary of the Company), or sell, lease, mortgage or otherwise
dispose of all of its assets, or liquidate, dissolve, recapitalize or
reorganize;
(e) repurchase or redeem any shares of its Common Stock;
(f) pay dividends or make any other distribution on any shares
of Common Stock, other than a distribution payable entirely in Common Stock,
unless, simultaneous with such payment or distribution, the Company pays or
distributes to each holder of Series C Stock at the time of such payment or
distribution, a payment or distribution equal in amount and paid in the same
form as the payment or distribution such holder would have received had such
holder converted its shares of Series C Stock into Common Stock immediately
prior to the record date for the payment or distribution to holders of Common
Stock. Any payment or distribution pursuant to this paragraph shall be in
addition to and shall not be deemed to reduce the amount of dividends then
cumulated but unpaid under paragraph 4(a); or
(g) guarantee any indebtedness of any third party except a
subsidiary for borrowed money.
7. Amendment. No amendment of any term of the Series C Stock
may be made without the affirmative vote of holders of at least 2/3 of the
outstanding shares of Series C Stock.
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This Certificate has been executed on this 3rd day of June 1993.
INTERNEURON PHARMACEUTICALS, INC.
By /s/ Glenn L. Cooper
--------------------------
President
Attest:
/s/ Jill Cohen
- --------------------
Secretary
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RESTATED CERTIFICATE OF INCORPORATION
OF
INTERNEURON PHARMACEUTICALS, INC.
INTERNEURON PHARMACEUTICALS, INC. (the "Corporation"), a
Corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Interneuron Pharmaceuticals, Inc.. The
Corporation was originally incorporated under the name Interneuron Merger
Corporation and the original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on February 21, 1990.
2. This Restated Certificate of Incorporation restates and integrates and does
not further amend the provisions of the Certificate of Incorporation of the
Corporation. This Restated Certificate of Incorporation was adopted pursuant to
Section 245 of the General Corporation Law of the State of Delaware.
3. Pursuant to Section 245 of the General Corporation Law of the State of
Delaware, the text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated to read in its entirety as follows:
FIRST: The name of the Corporation is Interneuron Pharmaceuticals, Inc.
SECOND: The Corporation is formed to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law
of the State of Delaware.
THIRD: The registered office of the Corporation is to be located at 32
Loockerman Square, Suite L-100, in the City of Dover, in the County
of Kent, in the State of Delaware. The name of its registered agent
at that address is The Prentice-Hall Corporation System, Inc.
FOURTH: (A) (1) The aggregate number of shares which the Corporation shall
have authority to issue is fifty-five million (55,000,000), of which
five million (5,000,000) shares of the par value of $.001 per share
shall be designated "Preferred Stock" and fifty million (50,000,000)
shares of the par value of $.001 per share shall be designated
"Common Stock."
-11-
(2) Authority is hereby expressly granted to the
Board of Directors from time to time to issue the Preferred
Stock as Preferred Stock of any series and, in connection with
the creation of each such series, to fix by the resolution or
resolutions providing for the issue of shares thereof, the
number of shares of such series and the designations, powers,
preferences, rights, qualifications, limitations and
restrictions of such series, to the full extent now or
hereafter permitted by the laws of the State of Delaware.
(B) Series B Preferred Stock.
(1) Designation. The number of shares to constitute
such series of Preferred Stock shall be 239,425 and the
designation of such series shall be Series B Preferred Stock
(hereinafter called the "Series B Stock").
(2) Voting Rights. On all matters submitted to a vote
of stockholders generally, other than the election of
Directors, each share of Series B Stock will be entitled to a
number of votes equal to the number of shares of Common Stock
into which such share of Series B Stock is then convertible,
and rounding the result to the nearest whole number. Except as
otherwise required by law or by any provision hereof, the
Common Stock and the Series B Stock will vote together as a
single class on all matters on which stockholders shall be
entitled to vote.
(3) Conversion.
(a) Conversion Ratio. Each outstanding share
of Series B Stock will be convertible at any time at the
option of the holder into a number of shares of Common Stock
computed by dividing $12.53 by the Conversion Price then in
effect.
(b) Conversion Price; Adjustment. The
initial Conversion Price will be $12.53. Each time after the
effective date hereof, the Company issues or agrees to issue
any additional shares of Common Stock for a consideration per
share which is less than two-thirds of the then Conversion
Price (such consideration being hereinafter collectively
referred to as the "Issue Price"), the then Conversion Price
shall be reduced to 150% of the Issue Price.
(c) Excluded Issuances. The reduction in the
Conversion Price required by paragraph 3(b) shall not be made
in the event (i) the Company issues shares of Common Stock or
options, warrants or other rights to purchase Common Stock to
any of its officers, directors, employees, consultants or
scientific advisers; (ii) of any issuance of up to 10,000
shares (as adjusted from time to time pursuant to the
provisions of paragraph 3(e) below) of Common Stock or options
or warrants to purchase up to said number of
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shares of Common Stock to any person at any one time, provided
that no more than an aggregate of 100,000 shares (as adjusted
from time to time pursuant to the provisions of paragraph 3(e)
below) and options or warrants to purchase said number of
shares may be issued pursuant to this clause (ii); or (iii) of
any issuance of Common Stock, Options or Convertible
Securities (as defined in paragraph 3(d)(i) hereof) in respect
of an obligation incurred by the Company prior to the
effective date hereof.
(d) Effect on Conversion Price of Certain Events.
For purposes of determining the Issue Price and the Conversion
Price under paragraph 3(b) above, the following will apply:
(i) Issuance of Rights or Options. Each time
after the effective date hereof, the Company, in any manner,
(other than an excluded issuance under paragraph 3(c)) grants
any rights or options to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or
exchangeable for Common Stock (such rights or options being
herein called "Options" and such convertible or exchangeable
stock or securities being herein called "Convertible
Securities") and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities is less than both
(x) 150% of the average of the last sale prices for the Common
Stock for the ten trading days preceding the date on which the
Company issues or agrees to issue such Options or Convertible
Securities and (y) the then Conversion Price, then the
Conversion Price shall be reduced to the greater of (x) 100%
of the price per share for which Common Stock is issuable upon
the exercise of such Options or upon conversion or exchange of
such Convertible Securities and (y) 56.67% of the initial
Conversion Price as adjusted from time to time pursuant to the
provisions of paragraph 3(e) below. For purposes of this
paragraph, the "price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities" will be determined
by dividing (A) the total amount, if any, received or
receivable by the Company as consideration for the granting of
such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such
Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Company upon
the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such
Options. Except as otherwise provided in paragraph 3(d)(iii)
below, no adjustment of the Conversion Price will be made when
Convertible Securities are actually issued upon the exercise
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of such Options or when Common Stock is actually issued upon
the exercise of such Options or the conversion or exchange of
such Convertible Securities.
(ii) Issuance of Convertible Securities.
Each time after the effective date hereof, the Company, in any
manner (other than an excluded issuance under paragraph 3(c)),
issues or sells any Convertible Securities and the price per
share for which Common Stock is issuable upon such conversion
or exchange is less than both (x) 150% of the average of the
last sale prices for the Common Stock for the ten trading days
preceding the date on which the Company issues or agrees to
issue such Options or Convertible Securities and (y) the then
Conversion Price, then the Conversion Price shall be reduced
to the greater of (x) 100% of the price per share for which
Common Stock is issuable upon such conversion or exchange and
(y) 56.67% of the initial Conversion Price as adjusted from
time to time pursuant to the provisions of paragraph 3(e)
below. For the purposes of this paragraph, the "price per
share for which Common Stock is issuable upon such conversion
or exchange" will be determined by dividing (A) the total
amount received or receivable by the Company as consideration
for the issuance or sale of such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such
Convertible Securities. Except as otherwise provided in
paragraph 3(d)(iii) below, no adjustment of the Conversion
Price will be made when Common Stock is actually issued upon
the conversion or exchange of such Convertible Securities, and
if any such issue or sale of such Convertible Securities is
made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other
provisions of this paragraph 3, no further adjustment of the
Conversion Price will be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion
Rate. If the purchase price provided for in any Option, the
additional consideration, if any, payable upon the conversion
or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or
exchangeable for Common Stock change at any time (other than
under or by reason of provisions designed to protect against
dilution of the type set forth in this paragraph 3, or any
other mandatory anti-dilution provision otherwise contained in
such Options or Convertible Securities), the Conversion Price
in effect at the time of such change will be readjusted to the
Conversion Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional
consideration or changed conversion rates, as the case may be,
at the time initially granted, issued or sold; provided, that
such adjustment of the Conversion Price then in effect would
be reduced. If the purchase price provided for in any Option,
the
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additional consideration, if any, payable upon the conversion
or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or
exchangeable for Common Stock, is reduced at any time, under
or by reason of, provisions with respect thereto designed to
protect against dilution of the type set forth herein or any
other mandatory anti-dilution provision contained in such
Options or Convertible Securities, then in the case of the
delivery of Common Stock upon the exercise of any such Option
or upon the Conversion or exchange of any such Convertible
Security, the Conversion Price then in effect hereunder will
forthwith be adjusted to such respective amount as would have
been obtained had such Option or Convertible Security never
been issued as to such Common Stock and had adjustments been
made to the Conversion Price upon the issuance of the shares
of Common Stock delivered, but only if as a result of such
adjustment, the Conversion Price then in effect hereunder
would be reduced.
(iv) Calculation of Consideration Received.
In case any Common Stock, Options or Convertible Securities
are issued or sold or deemed to have been issued or sold for
consideration, part or all of which is cash, the amount of
cash consideration received therefor will be deemed to be the
gross amount received by the Company therefor. In case any
Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for a
consideration, part or all of which is other than cash, the
amount of the consideration, other than cash, received by the
Company will be the fair value of such consideration, except
where such consideration consists of securities publicly
traded, in which case the amount of consideration received by
the Company, will be the market price thereof as of the date
of receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any merger in which
the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(v) Integration of Transactions. In case any
Option or Convertible Security is issued in connection with
the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific
consideration is allocated to such Option or Convertible
Security by the parties thereto, the Option or Convertible
Security will be deemed to have been issued without
consideration.
(e) Subdivision or Combination of Common Stock. If
the Company at any time subdivides (by any stock split, stock
dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in
effect immediately prior to such subdivision
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will be proportionately reduced, and if the Company at any
time combines (by reverse stock split or otherwise) its
outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price will be proportionately
increased.
(f) Reorganization, Reclassification,
Merger, Consolidation or Sale. If any capital reorganization,
reclassification, consolidation or merger or any sale of all
or substantially all of the Company's assets (collectively any
"Major Change") is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, other securities or assets with
respect to or in exchange for Common Stock, then, as a
condition to such Major Change, lawful and adequate provision
will be made whereby each of the holders of Series B Stock
will thereafter have the right to acquire and receive in lieu
of the shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's
Series B Stock, such shares of stock, other securities or
assets as may be issuable or payable with respect to or in
exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon conversion of such
holder's Series B Stock had such Major Change not taken place.
In any such case, appropriate provision will be made with
respect to such holder's rights and interests to the end that
the provisions of this paragraph 3 and paragraph 4 below will
thereafter be applicable in relation to any shares of stock,
securities or assets thereafter deliverable upon the
conversion of Series B Stock including, in the case of any
such consolidation, merger or sale in which the successor
corporation or purchasing corporation is other than the
Company, an immediate adjustment of the Conversion Price to
the value for the Common Stock reflected by the terms of such
consolidation, merger or sale and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable
and receivable upon conversion of Series B Stock, if the value
so reflected is less than the Conversion Price in effect
immediately prior to such consolidation, merger or sale. The
Company will not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing such
assets, assumes by written instrument the obligation to
deliver to each such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
(g) Certain Events. If any event occurs of
the type contemplated by the provisions of this paragraph 3,
but not expressly provided for by such provisions, then the
Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of
Series B Stock.
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(h) No Circumvention. The Company will not
issue any additional shares of Series B Stock or, in
circumvention of the provisions of this paragraph 3, issue any
shares of preferred stock which, notwithstanding such
designation, primarily possess the attributes customarily
associated with common stock, and do not possess special
voting rights, scheduled or optional redemption features (with
redemption prices specified as to amount and limited to such
amount), special liquidation rights fixed and limited as to
amount, and dividends fixed in amount and limited to the
amount so fixed; other than pursuant to an obligation to issue
preferred stock existing prior to the effective date hereof.
(i) Notices.
(i) As soon as practicable after any
adjustment of the Conversion Price, the Company will send
written notice thereof to all holders of Series B Stock.
(ii) The Company will give to the
holders of Series B Stock at least 20 days' prior written
notice of the date on which any Major Change, dissolution or
liquidation will take place.
(j) Mechanics of Conversion. So long as any
shares of Series B Stock remain outstanding, at the election
of the respective holders thereof, any and all shares of the
Series B Stock may be converted at any time on and subsequent
to the second anniversary of the initial issuance and from
time to time into the number of fully paid and non-assessable
shares of Common Stock of the Company calculated as set forth
herein. In order to exercise the conversion privilege, the
holder of Series B Stock shall surrender the certificates for
the Series B Stock to be converted at the offices of the
Company in the Commonwealth of Massachusetts, together with
written notice to the Company that the holder elects to
convert such Series B Stock or a portion thereof. Such notice
shall also state the name or names (with address) in which the
certificates for shares of Common Stock issuable on such
conversion shall be issued. Series B Stock surrendered for
conversion shall be accompanied by proper assignments thereof
to the Company or in blank for transfer and the signature of
the holder shall be guaranteed by a firm having membership on
the New York Stock Exchange or by a commercial bank or trust
company located in or having a correspondent in the City of
New York, and such conversion shall be deemed effective upon
the date of delivery of such certificates in accordance with
the provisions of this subdivision (j).
(k) Fractional Shares; Dividends on
Conversion. No fractional shares of Common Stock will be
issuable upon conversion of Series B Stock. The Company in
lieu thereof, will make a payment in cash in lieu of
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any fractional share of Common Stock to which the converting
holder would be entitled if such fractional share was
issuable, based upon the market price of a share of Common
Stock as of the Conversion Date. Upon such conversion, the
Company will pay all then accrued, but unpaid, dividends with
respect to each share converted which have not been paid
theretofore.
(4) Dividends.
(a) The annual dividend rate at which the
holders of shares shall be entitled to received dividends is
$.1253 per share per annum. The holders of the shares shall be
entitled to receive, out of funds legally available therefor
under Section 170 (or its successor) of the Delaware
Corporation Law, mandatory preferential dividends at such
annual rate payable annually on the first day of April in each
year. Such dividends shall accrue on a daily basis and shall
be cumulative.
(b) The Board of Directors shall pay
dividends in cash or, at the Board of Directors' election, in
shares of Common Stock, including dividends accrued under
paragraph (a) but unpaid on any share of Series B Stock as of
the date on which such share is converted into Common Stock.
If paid in Common Stock, the dividend shall be paid by
delivering shares of Common Stock to, and registered on the
books of the Company in the name of, the registered holder of
the share of Series B Stock on the record date or the date of
conversion, as the case may be. The number of such shares of
Common Stock so deliverable shall be that number of whole
shares which, when multiplied by the "per-share value"
determined below, shall equal the total amount of the dividend
then due. "Per-share value" shall be equal to the average of
the last sale prices of the Common Stock on the National
Association of Securities Dealers Automated Quotation System
for the ten days immediately preceding such dividend payment
date, or if the Common Stock is then listed on any national
securities exchange, the average of the closing prices on such
stock exchange during such ten days. No fractional shares will
be issued in payment of any dividend contemplated by this
paragraph (b). In lieu thereof there shall be paid
simultaneously with the distribution of the whole shares of
Common Stock, cash in the amount of the "per share value" of
any fractional share.
(c) If the Company declares a distribution
upon the Common Stock, other than a distribution paid entirely
in Common Stock, payable otherwise than out of earnings or
earned surplus determined in accordance with generally
accepted accounting principles, consistently applied (a
"Liquidating Dividend"), then the Company will pay to each
holder of Series B Stock, at the time of payment of a
Liquidating Dividend, an amount equal to the aggregate value
of all Liquidating Dividends which would have been paid on the
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Common Stock issuable upon conversion of such holder's Series
B Stock had such Common Stock been converted immediately prior
to the date on which a record was taken for such Liquidating
Dividend, or, if no record was taken, the date as of which the
record holders of Common Stock entitled to such dividends were
determined. For purposes of this paragraph 4, a dividend,
other than in cash, notes, debentures or capital stock, will
not be considered payable out of earnings or earned surplus
regardless of whether or not earnings or earned surplus are
charged an amount equal to the fair value of such dividend. No
distribution in respect of Series B Stock contemplated by this
paragraph 4(c) shall be deemed to reduce the amount of
dividends then cumulated but unpaid under paragraph 4(a).
(d) Except as contemplated by paragraph
4(c), no dividend or distribution will be declared or paid on
the Common Stock when any dividends contemplated by paragraph
4(a) are cumulated but unpaid.
(5) Preference on Liquidation. The preference per
share which the holders of Series B Preferred Stock shall be
entitled to receive over the holders of each share of Common
Stock, and each share of Preferred Stock (other than the
shares of any other series of Preferred Stock initially issued
in its entirety to American Cyanamid Company, which series
shall rank pari passu with Series B Stock), in the case of the
liquidation, distribution or sale of all or substantially all
of the Company's assets, dissolution or winding up of the
Company, whether voluntary or involuntary, shall be $12.53 per
share, plus in any such case, an amount equal to any and all
dividends cumulated but unpaid.
(6) Protective Provisions. Until the date American
Cyanamid Company ceases to be the registered holder of all of
the issued and outstanding Preferred Stock of at least one
series, the Company will not, without the approval by the vote
or written consent of at least a majority of the outstanding
shares of all series of Preferred Stock initially issued in
its entirety to American Cyanamid Company, voting as a single
class:
(a) authorize or issue shares of any class
of stock having any preference or priority, or, unless issued
to American Cyanamid Company or its designee, ranking pari
passu, as to dividends or assets superior to any such series;
(b) reclassify any shares of any class of
stock into shares having any preference or priority as to
dividends or assets, superior to any such series;
(c) make any amendment to its Certificate of
Incorporation or by-laws adversely affecting the rights of
holders of any such series;
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(d) merge or consolidate with any entity
(other than a wholly-owned subsidiary of the Company), or
sell, lease, mortgage or otherwise dispose of all or
substantially all of its assets, or liquidate, dissolve,
recapitalize or reorganize;
(e) repurchase or redeem any shares of its
Common Stock;
(f) pay dividends or make any other
distribution on any shares of Common Stock, other than a
distribution payable entirely in shares of Common Stock,
unless, simultaneous with such payment or distribution, the
Company pays or distributes to each holder of Series B Stock,
at the time of such payment or distribution, a payment or
distribution equal in amount and paid in the same form as the
payment or distribution such holder would have received had
such holder converted its shares of Series B Stock into Common
Stock immediately prior to the record date for the payment or
distribution to holders of Common Stock. Any payment or
distribution pursuant to this paragraph shall be in addition
to and shall not be deemed to reduce the amount of dividends
then cumulated but unpaid under paragraph 4(a); or
(g) guarantee any indebtedness of any third
party, except a subsidiary for borrowed money.
(7) Amendment. No amendment of any term of the Series
B Stock may be made without the affirmative vote of holders of
at least 2/3 of the outstanding shares of Series B Stock.
FIFTH The Stockholders, or the Board of Directors of the Corporation
without the assent or vote of the stockholders, shall have the
power to adopt, alter, amend or repeal the By-Laws of the
Corporation.
SIXTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages, for
breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or commissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
SEVENTH: The Corporation shall indemnify any person to the full extent
permitted by the Business Corporation Law of the State of
Delaware, as the same now exists or may hereafter be amended.
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IN WITNESS WHEREOF, this Restated Certificate has been
subscribed to this 11th day of February, 1993 by the undersigned, who affirms
that the statements made herein are true under the penalty of perjury.
INTERNEURON PHARMACEUTICALS, INC.
By: /s/ Lindsay Rosenwald
--------------------------
Lindsay Rosenwald, M.D.
Chairman of the Board
ATTEST:
By: /s/ Jill Cohen
------------------------
Jill Cohen, Secretary
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EXHIBIT 10.65a
INTERNEURON PHARMACEUTICALS, INC.
1994 LONG-TERM INCENTIVE PLAN, AS AMENDED
1. Purpose.
The purpose of this plan (the "Plan") is to secure for
INTERNEURON PHARMACEUTICALS, INC. (the "Company") and its stockholders the
benefits arising from capital stock ownership by employees, officers and
directors of, and consultants or advisors to, the Company who are expected to
contribute to the Company's future growth and success. Except where the context
otherwise requires, the term "Company" shall include all present and future
subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code"). Those provisions of the Plan which make express reference to Section
422 shall apply only to Incentive Stock Options (as that term is defined in the
Plan).
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the Company (or a
committee designated by the Board of Directors, the "Committee") and may be
either incentive stock options ("Incentive Stock Options") meeting the
requirements of Section 422 of the Code or non-statutory options which are not
intended to meet the requirements of Section 422 of the Code.
(b) Administration. The Plan will be administered by the Board
of Directors or the Committee, whose construction and interpretation of the
terms and provisions of the Plan shall be final and conclusive. The delegation
of powers to the Committee shall be consistent with applicable laws or
regulations (including, without limitation, applicable state law and Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), or any successor rule). The Board of Directors or the Committee
may in its sole discretion grant options to purchase shares of the Company's
Common Stock, $.001 par value per share ("Common Stock") and issue shares upon
exercise of such options as provided in the Plan. The Board of Directors or the
Committee shall have authority, subject to the express provisions of the Plan,
to construe the respective option agreements and the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, to determine the terms
and provisions of the respective option agreements, which need not be identical,
and to make all other determinations in the judgment of the Board of Directors
or the Committee necessary or desirable for the administration of the Plan. The
Board of Directors or the Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
in the manner and to the extent it shall deem expedient to carry the Plan into
effect and it shall be the sole and final judge of such expediency. No director
or person acting pursuant to authority delegated by the Board of Directors or
the Committee shall be liable for any action or determination under the Plan
made in good faith. Subject to adjustment as
provided in Section 15 below, the aggregate number of shares of Common Stock
that may be subject to Options granted to any person in a calendar year shall
not exceed 25% of the maximum number of shares which may be issued and sold
under the Plan, as set forth in Section 4 hereof, as such section may be amended
from time to time.
(c) Applicability of Rule 16b-3. Those provisions of the Plan
which make express reference to Rule 16b-3 shall apply to the Company only at
such time as the Company's Common Stock is registered under the Exchange Act,
subject to the last sentence of Section 3(b), and then only to such persons as
are required to file reports under Section 16(a) of the Exchange Act (a
"Reporting Person").
3. Eligibility.
(a) General. Options may be granted to persons who are, at the
time of grant, employees, officers or directors of, or consultants or advisors
to, the Company or any subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Code ("Participants") provided, that Incentive Stock Options
may only be granted to individuals who are employees of the Company (within the
meaning of Section 3401(c) of the Code). A person who has been granted an option
may, if he or she is otherwise eligible, be granted additional options if the
Board of Directors or the Committee shall so determine.
(b) Grant of Options to Reporting Persons. The selection of a
director or an officer who is a Reporting Person (as the terms "director" and
"officer" are defined for purposes of Rule 16b-3) as a recipient of an option,
the timing of the option grant, the exercise price of the option and the number
of shares subject to the option shall be determined either (i) by the Board of
Directors, (ii) by a committee consisting of two or more directors having full
authority to act in the matter or (iii) pursuant to provisions for automatic
grants set forth in Section 3(c) below.
(c) Directors' Options. Directors of the Company who are not
employees and who are not stockholders of the Company beneficially owning in
excess of 5% of the outstanding Common Stock of the Company ("Eligible
Directors") will receive an option ("Director Option") to purchase 20,000 shares
of Common Stock on the date that such person is first elected or appointed a
director ("Initial Director Option"). Commencing on the day immediately
following the date of the annual meeting of stockholders for the Company's
fiscal year ending September 30, 1996, each Eligible Director will receive an
automatic grant ("Automatic Grant") of a Director Option to purchase 5,000
shares of Common Stock, other than Eligible Directors who received an Initial
Director Option since the most recent Automatic Grant, on the day immediately
following the date of each annual meeting of stockholders, as long as such
director is a member of the Board of Directors. The exercise price for each
share subject to a Director Option shall be equal to the fair market value of
the Common Stock on the date of grant. Director Options shall become exercisable
in four equal annual installments commencing one year from the date the option
is granted and will expire the earlier of 10 years after the date of grant or 90
days after the termination of the director's service on the Board.
2
4. Stock Subject to Plan.
The stock subject to options granted under the Plan shall be
shares of authorized but unissued or reacquired Common Stock. Subject to
adjustment as provided in Section 15 below, the maximum number of shares of
Common Stock of the Company which may be issued and sold under the Plan is
6,000,000 shares. If an option granted under the Plan shall expire, terminate or
is cancelled for any reason without having been exercised in full, the
unpurchased shares subject to such option shall again be available for
subsequent option grants under the Plan.
5. Forms of Option Agreements.
As a condition to the grant of an option under the Plan, each
recipient of an option shall execute an option agreement in such form not
inconsistent with the Plan as may be approved by the Board of Directors or the
Committee. Such option agreements may differ among recipients.
6. Purchase Price.
(a) General. The purchase price per share of stock deliverable
upon the exercise of an option shall be determined by the Board of Directors or
the Committee at the time of grant of such option; provided, however, that in
the case of an Incentive Stock Option, the exercise price shall not be less than
100% of the Fair Market Value (as hereinafter defined) of such stock, at the
time of grant of such option, or less than 110% of such Fair Market Value in the
case of options described in Section 11(b). "Fair Market Value" of a share of
Common Stock of the Company as of a specified date for the purposes of the Plan
shall mean the closing price of a share of the Common Stock on the principal
securities exchange (including the Nasdaq National Market) on which such shares
are traded on the day immediately preceding the date as of which Fair Market
Value is being determined, or on the next preceding date on which such shares
are traded if no shares were traded on such immediately preceding day, or if the
shares are not traded on a securities exchange, Fair Market Value shall be
deemed to be the average of the high bid and low asked prices of the shares in
the over-the-counter market on the day immediately preceding the date as of
which Fair Market Value is being determined or on the next preceding date on
which such high bid and low asked prices were recorded. If the shares are not
publicly traded, Fair Market Value of a share of Common Stock (including, in the
case of any repurchase of shares, any distributions with respect thereto which
would be repurchased with the shares) shall be determined in good faith by the
Board of Directors or the Committee. In no case shall Fair Market Value be
determined with regard to restrictions other than restrictions which, by their
terms, will never lapse.
(b) Payment of Purchase Price. Options granted under the Plan
may provide for the payment of the exercise price by delivery of cash or a check
to the order of the Company in an amount equal to the exercise price of such
options, or by any other means which the Board of Directors or the Committee
determines are consistent with the purpose of the Plan and with
3
applicable laws and regulations (including, without limitation, the provisions
of Rule 16b-3 and Regulation T promulgated by the Federal Reserve Board).
7. Option Period.
Subject to earlier termination as provided in the Plan, each
option and all rights thereunder shall expire on such date as determined by the
Board of Directors or the Committee and set forth in the applicable option
agreement, provided, that such date shall not be later than (10) ten years after
the date on which the option is granted.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either
in full or in installments at such time or times and during such period as shall
be set forth in the option agreement evidencing such option, subject to the
provisions of the Plan. Subject to the requirements in the immediately preceding
sentence, if an option is not at the time of grant immediately exercisable, the
Board of Directors or the Committee may (i) in the agreement evidencing such
option, provide for the acceleration of the exercise date or dates of the
subject option upon the occurrence of specified events, and/or (ii) at any time
prior to the complete termination of an option, accelerate the exercise date or
dates of such option.
9. Transferability of Options.
No incentive stock option granted under this Plan shall be
assignable or otherwise transferable by the optionee except by will or by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. The Board of Directors or the Committee
may, in its discretion, authorize all or a portion of any non-statutory options
to be granted to an optionee to be on terms which permit transfer by such
optionee to (i) the spouse, children or grandchildren of the optionee
("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit
of such Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, provided that (w) the options must be held
by the optionee for a period of at least one month prior to transfer, (x) there
may be no consideration for any such transfer, (y) the stock option agreement
pursuant to which such options are granted must be approved by the Board of
Directors or the Committee, and must expressly provide for transferability in a
manner consistent with this Section, and (z) subsequent transfers of transferred
options shall be prohibited except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. Following transfer, any such options shall continue to be subject to
the same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of the Plan the term "optionee" shall be deemed to
refer to the transferee. The events of termination of employment of Section 10
hereof shall continue to be applied with respect to the original optionee. An
option may be exercised during the lifetime of the optionee only by the original
optionee. In the event an optionee dies
4
during his employment by the Company or any of its subsidiaries, or during the
three-month period following the date of termination of such employment, his
option shall thereafter be exercisable, during the period specified in the
option agreement, by his executors or administrators to the full extent to which
such option was exercisable by the optionee at the time of his death during the
periods set forth in Section 10 or 11(d).
10. Effect of Termination of Employment or Other Relationship.
Except as provided in Section 11(d) with respect to Incentive
Stock Options and except as otherwise determined by the Committee at the date of
grant of an Option, and subject to the provisions of the Plan, an optionee may
exercise an option at any time within six (6) months following the termination
of the optionee's employment or other relationship with the Company or within
one (1) year if such termination was due to the death or disability of the
optionee but, except in the case of the optionee's death, in no event later than
the expiration date of the Option. If the termination of the optionee's
employment is for cause or is otherwise attributable to a breach by the optionee
of an employment or confidentiality or non-disclosure agreement, the option
shall expire immediately upon such termination. The Board of Directors shall
have the power to determine what constitutes a termination for cause or a breach
of an employment or confidentiality or non-disclosure agreement, whether an
optionee has been terminated for cause or has breached such an agreement, and
the date upon which such termination for cause or breach occurs. Any such
determinations shall be final and conclusive and binding upon the optionee.
11. Incentive Stock Options.
Options granted under the Plan which are intended to be
Incentive Stock Options shall be subject to the following additional terms and
conditions:
(a) Express Designation. All Incentive Stock Options granted
under the Plan shall, at the time of grant, be specifically designated as such
in the option agreement covering such Incentive Stock Options.
(b) 10% Stockholder. If any employee to whom an Incentive
Stock Option is to be granted under the Plan is, at the time of the grant of
such option, the owner of stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company (after taking into account
the attribution of stock ownership rules of Section 424(d) of the Code), then
the following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(i) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than
110% of the Fair Market Value of one share of Common Stock at
the time of grant; and
5
(ii) The option exercise period shall not exceed five
years from the date of grant.
(c) Dollar Limitation. For so long as the Code shall so
provide, options granted to any employee under the Plan (and any other incentive
stock option plans of the Company) which are intended to constitute Incentive
Stock Options shall not constitute Incentive Stock Options to the extent that
such options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate Fair Market Value, as
of the respective date or dates of grant, of more than $100,000.
(d) Termination of Employment, Death or Disability. No
Incentive Stock Option may be exercised unless, at the time of such exercise,
the optionee is, and has been continuously since the date of grant of his or her
option, employed by the Company, except that:
(i) an Incentive Stock Option may be exercised within
the period of three months after the date the optionee ceases
to be an employee of the Company (or within such lesser period
as may be specified in the applicable option agreement),
provided, that the agreement with respect to such option may
designate a longer exercise period and that the exercise after
such three-month period shall be treated as the exercise of a
non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the
Company, or within three months after the optionee ceases to
be such an employee, the Incentive Stock Option may be
exercised by the person to whom it is transferred by will or
the laws of descent and distribution within the period of one
year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the
meaning of Section 22(e)(3) of the Code or any successor
provisions thereto) while in the employ of the Company, the
Incentive Stock Option may be exercised within the period of
one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser
period as may be specified in the applicable option
agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors or
the Committee may, in its sole discretion, include additional provisions in
option agreements covering options
6
granted under the Plan, including without limitation restrictions on transfer,
repurchase rights, rights of first refusal, commitments to pay cash bonuses, to
make, arrange for or guaranty loans or to transfer other property to optionees
upon exercise of options, or such other provisions as shall be determined by the
Board of Directors or the Committee; provided, that such additional provisions
shall not be inconsistent with any other term or condition of the Plan and such
additional provisions shall not cause any Incentive Stock Option granted under
the Plan to fail to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code.
(b) Acceleration, Extension, Etc. The Board of Directors or
the Committee may, in its sole discretion, (i) accelerate the date or dates on
which all or any particular option or options granted under the Plan may be
exercised or (ii) extend the dates during which all, or any particular, option
or options granted under the Plan may be exercised; provided, however, that no
such extension shall be permitted if it would cause the Plan to fail to comply
with Section 422 of the Code or with Rule 16b-3 (if applicable).
13. General Restrictions.
(a) Investment Representations. The Company may require any
optionee, as a condition of exercising such option, to give written assurances
in substance and form satisfactory to the Company to the effect that such person
is acquiring the Common Stock subject to the option or award, for his or her own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock, including any "lock-up"
or other restriction on transferability.
(b) Compliance With Securities Law. Each Option shall be
subject to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such option or award upon any securities exchange or automated quotation
system or under any state or federal law, or the consent or approval of any
governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary as a
condition of, or in connection with the issuance of shares thereunder, such
option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval, or satisfaction of such
condition shall have been effected or obtained on conditions acceptable to the
Board of Directors. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration or qualification, or to
satisfy such condition.
14. Rights as a Stockholder.
The holder of an option shall have no rights as a stockholder
with respect to any shares covered by the option (including, without limitation,
any rights to receive dividends or non-cash distributions with respect to such
shares) until the date of issue of a stock certificate to
7
him or her for such shares. No adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock certificate is
issued.
15. Adjustment Provisions for Recapitalizations, Reorganizations
and Related Transactions.
(a) Recapitalizations and Related Transactions. If, through or
as a result of any recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar transaction, (i) the outstanding
shares of Common Stock are increased, decreased or exchanged for a different
number or kind of shares or other securities of the Company, or (ii) additional
shares or new or different shares or other non-cash assets are distributed with
respect to such shares of Common Stock or other securities, an appropriate and
proportionate adjustment shall be made in (x) the maximum number and kind of
shares reserved for issuance under or otherwise referred to in the Plan, (y) the
number and kind of shares or other securities subject to any then outstanding
options under the Plan, and (z) the price for each share subject to any then
outstanding options under the Plan, without changing the aggregate purchase
price as to which such options remain exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment (i) would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3 or (ii) would be considered as the adoption of a new
plan requiring stockholder approval.
(b) Reorganization, Merger and Related Transactions. All
outstanding Options under the Plan shall become fully exercisable for a period
of sixty (60) days following the occurrence of any Trigger Event, whether or not
such Options are then exercisable under the provisions of the applicable
agreements relating thereto. For purposes of the Plan, a "Trigger Event" is any
one of the following events:
(i) the date on which shares of Common Stock are
first purchased pursuant to a tender offer or exchange offer (other
than such an offer by the Company, any Subsidiary, any employee benefit
plan of the Company or of any Subsidiary or any entity holding shares
or other securities of the Company for or pursuant to the terms of such
plan), whether or not such offer is approved or opposed by the Company
and regardless of the number of shares purchased pursuant to such
offer;
(ii) the date the Company acquires knowledge that any
person or group deemed a person under Section 13(d)-3 of the Exchange
Act (other than the Company, any Subsidiary, any employee benefit plan
of the Company or of any Subsidiary or any entity holding shares of
Common Stock or other securities of the Company for or pursuant to the
terms of any such plan or any individual or entity or group or
affiliate thereof which acquired its beneficial ownership interest
prior to the date the Plan was adopted by the Board), in a transaction
or series of transactions, has become the beneficial owner, directly or
indirectly (with beneficial ownership determined as provided in Rule
13d-3, or any successor rule, under the Exchange Act), of securities of
the Company entitling the person or group to 30% or more of all votes
8
(without consideration of the rights of any class or stock to elect
directors by a separate class vote) to which all shareholders of the
Company would be entitled in the election of the Board of Directors
were an election held on such date;
(iii) the date, during any period of two consecutive
years, when individuals who at the beginning of such period constitute
the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election, or the
nomination for election by the stockholders of the Company, of each new
director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such
period; and
(iv) the date of approval by the stockholders of the
Company of an agreement (a "reorganization agreement") providing for:
(A) The merger or consolidation of the
Company with another corporation where the stockholders of the
Company, immediately prior to the merger or consolidation, do
not beneficially own, immediately after the merger or
consolidation, shares of the corporation issuing cash or
securities in the merger or consolidation entitling such
stockholders to 65% or more of all votes (without
consideration of the rights of any class of stock to elect
directors by a separate class vote) to which all shareholders
of such corporation would be entitled in the election of
directors or where the members of the Board of Directors of
the Company, immediately prior to the merger or consolidation,
do not, immediately after the merger or consolidation,
constitute a majority of the Board of Directors of the
corporation issuing cash or securities in the merger or
consolidation; or
(B) The sale or other disposition of all or
substantially all the assets of the Company.
(c) Board Authority to Make Adjustments. Any adjustments under
this Section 15 will be made by the Board of Directors, whose determination as
to what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc.
(a) General. In the event of a consolidation or merger or sale
of all or substantially all of the assets of the Company in which outstanding
shares of Common Stock are exchanged for securities, cash or other property of
any other corporation or business entity or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options: (i) in
the event of a merger under the terms of which holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the merger (the
9
"Merger Price"), make or provide for a cash payment to the optionees equal to
the difference between (A) the Merger Price times the number of shares of Common
Stock subject to such outstanding options (to the extent then exercisable at
prices not in excess of the Merger Price) and (B) the aggregate exercise price
of all such outstanding options in exchange for the termination of such options,
and (ii) in the event the provisions of Section 15 are not applicable, provide
that all or any outstanding options shall become exercisable in full immediately
prior to such event and upon written notice to the optionees, provide that all
unexercised options will terminate immediately prior to the consummation of such
transaction unless exercised by the optionee within a specified period following
the date of such notice.
(b) Substitute Options. The Company may grant options under
the Plan in substitution for options held by employees of another corporation
who become employees of the Company, or a subsidiary of the Company, as the
result of a merger or consolidation of the employing corporation with the
Company or a subsidiary of the Company, or as a result of the acquisition by the
Company, or one of its subsidiaries, of property or stock of the employing
corporation. The Company may direct that substitute options be granted on such
terms and conditions as the Board of Directors considers appropriate in the
circumstances.
17. No Special Employment Rights.
Nothing contained in the Plan or in any option shall confer
upon any optionee any right with respect to the continuation of his or her
employment by the Company or interfere in any way with the right of the Company
at any time to terminate such employment or to increase or decrease the
compensation of the optionee.
18. Other Employee Benefits.
Except as to plans which by their terms include such amounts
as compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
(a) The Board of Directors may at any time, and from time to
time, modify or amend the Plan in any respect; provided, however, that if at any
time the approval of the stockholders of the Company is required under Section
422 of the Code or any successor provision with respect to Incentive Stock
Options, or under Rule 16b-3, the Board of Directors may not effect such
modification or amendment without such approval; and provided, further, that the
provisions of Section 3(c) hereof shall not be amended more than once every six
months,
10
other than to comport with changes in the Code, the Employer Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
(b) The modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected, the
Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.
20. Withholding.
(a) The Company shall have the right to deduct from payments
of any kind otherwise due to the optionee any federal, state or local taxes of
any kind required by law to be withheld with respect to any shares issued upon
exercise of options under the Plan. Subject to the prior approval of the
Company, which may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an option or (ii) by delivering to the Company
shares of Common Stock already owned by the optionee. The shares so delivered or
withheld shall have a Fair Market Value equal to such withholding obligation as
of the date that the amount of tax to be withheld is to be determined. An
optionee who has made an election pursuant to this Section 20(a) may only
satisfy his or her withholding obligation with shares of Common Stock which are
not subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.
(b) The acceptance of shares of Common Stock upon exercise of
an Incentive Stock Option shall constitute an agreement by the optionee (i) to
notify the Company if any or all of such shares are disposed of by the optionee
within two years from the date the option was granted or within one year from
the date the shares were issued to the optionee pursuant to the exercise of the
option, and (ii) if required by law, to remit to the Company, at the time of and
in the case of any such disposition, an amount sufficient to satisfy the
Company's federal, state and local withholding tax obligations with respect to
such disposition, whether or not, as to both (i) and (ii), the optionee is in
the employ of the Company at the time of such disposition.
(c) Notwithstanding the foregoing, in the case of a Reporting
Person whose options have been granted in accordance with the provisions of
Section 3(b) herein, no election to use shares for the payment of withholding
taxes shall be effective unless made in compliance with any applicable
requirements of Rule 16b-3.
11
21. Cancellation and New Grant of Options, Etc.
The Board of Directors shall have the authority to effect, at
any time and from time to time, with the consent of the affected optionees, (i)
the cancellation of any or all outstanding options under the Plan and the grant
in substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when
adopted by the Board of Directors, but no Incentive Stock Option granted under
the Plan shall become exercisable unless and until the Plan shall have been
approved by the Company's stockholders. If such stockholder approval is not
obtained within twelve months after the date of the Board's adoption of the
Plan, no options previously granted under the Plan shall be deemed to be
Incentive Stock Options and no Incentive Stock Options shall be granted
thereafter. Amendments to the Plan not requiring stockholder approval shall
become effective when adopted by the Board of Directors; amendments requiring
stockholder approval (as provided in Section 21) shall become effective when
adopted by the Board of Directors, but no Incentive Stock Option granted after
the date of such amendment shall become exercisable (to the extent that such
amendment to the Plan was required to enable the Company to grant such Incentive
Stock Option to a particular optionee) unless and until such amendment shall
have been approved by the Company's stockholders. If such stockholder approval
is not obtained within twelve months of the Board's adoption of such amendment,
any Incentive Stock Options granted on or after the date of such amendment shall
terminate to the extent that such amendment to the Plan was required to enable
the Company to grant such option to a particular optionee. Subject to this
limitation, options may be granted under the Plan at any time after the
effective date and before the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with
Section 16, the Plan shall terminate upon the earlier of (i) the close of
business on the day next preceding the tenth anniversary of the date of its
adoption by the Board of Directors, or (ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant to the
exercise or cancellation of options granted under the Plan. If the date of
termination is determined under (i) above, then options outstanding on such date
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
23. Provision for Foreign Participants.
The Board of Directors may, without amending the Plan, modify
awards or options granted to participants who are foreign nationals or employed
outside the United States to recognize differences in laws, rules, regulations
or customs of such foreign jurisdictions with respect to tax, securities,
currency, employee benefit or other matters.
12
24. Governing Law.
The provisions of this Plan shall be governed and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws.
Adopted by the Board of Directors on September 23, 1994;
amended by the Board of Directors December 18, 1996.
13
EXHIBIT 10.89
(MULTICURRENCY--CROSS BORDER)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of May 5, 1997
Swiss Bank Corporation, London Branch ("Party A") and Interneuron
Pharmaceuticals, Inc. ("Party B") have entered and/or anticipate entering into
one or more transactions (each a "Transaction") that are or will be governed by
this Master Agreement, which includes the schedule (the "Schedule"), and the
documents and other confirming evidence (each a "Confirmation") exchanged
between the parties confirming those Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of
this Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments in
the required currency. Where settlement is by delivery (that is,
other than by payment), such delivery will be made for receipt on the
due date in the manner customary for the relevant obligation unless
otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject
to (1) the condition precedent that no Event of Default or Potential
Event of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination
Date in respect of the relevant Transaction has occurred or been
effectively designated and (3) each other applicable condition
precedent specified in this Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
2
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as
modified by the practice of any relevant governmental revenue
authority, then in effect. If a party is so required to deduct or
withhold, then that party ("X") will:--
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount
required to be deducted or withheld (including the full
amount required to be deducted or withheld from any
additional amount paid by X to Y under this Section 2(d))
promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice
that such amount has been assessed against Y;
3
(3) promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably
acceptable to Y, evidencing such payment to such
authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise entitled
under this Agreement, such additional amount as is
necessary to ensure that the net amount actually received
by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y
would have received had no such deduction or withholding
been required. However, X will not be required to pay any
additional amount to Y to the extent that it would not be
required to be paid but for:--
(A) the failure by Y to comply with or perform
any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and
true unless such failure would not have
occurred but for (I) any action taken by a
taxing authority, or brought in a court of
competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless
of whether such action is taken or brought with
respect to a party to this Agreement) or (II) a
Change in Tax Law.
(ii) LIABILITY. If:--
(1) X is required by any applicable law, as modified by
the practice of any relevant governmental revenue
authority, to make any deduction or withholding in respect
of which X would not be required to pay an additional
amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the
amount of such liability (including any related liability for
interest, but including any related liability
4
for penalties only if Y has failed to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws
of the jurisdiction of its organisation or incorporation, and if
relevant under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it
has under any Credit Support Document to which it is a party and has
taken all necessary action to authorize such execution, delivery and
performance;
5
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment
of any court or other agency of government applicable to it or any of
its assets or any contractual restriction binding on or affecting it
or any of its assets;
(iv) CONSENTS. All governmental and other consents that are required
to have been obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party have been obtained and
are in full force and effect and all conditions of any such consents
have been complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles
of general application (regardless of whether enforcement is sought
in a proceeding in equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
6
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any form or
document that may be required or reasonably requested in writing in
order to allow such other party or its Credit Support Provider to
make a payment under this Agreement or any applicable Credit Support
Document without any deduction or withholding for or on account of
any Tax or with such deduction or withholding at a reduced rate (so
long as the completion, execution or submission of such form or
document would not materially prejudice the legal or commercial
position of the party in receipt of such demand), with any such form
or document to be accurate and completed in a manner reasonably
satisfactory to such other party and to be executed and to be
delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document
7
to which it is a party and will use all reasonable efforts to obtain any that
may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organised, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section
2(a)(i) or 2(e) required to be made by it if such failure is not
remedied on or before the third Local Business Day after notice of
such failure is given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d) to be complied
with or performed by the party in accordance
8
with this Agreement if such failure is not remedied on or before the
thirtieth day after notice of such failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of
such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit Support Document if such
failure is continuing after any applicable grace period
has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of
this Agreement (in either case other than in accordance
with its terms) prior to the satisfaction of all
obligations of such party under each Transaction to which
such Credit Support Document relates without the written
consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been
made or repeated by the party or any Credit Support Provider of such
party in this Agreement or any Credit Support Document proves to have
been incorrect or misleading in any material respect when made or
repeated or deemed to have been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit
Support Provider of such party or any applicable Specified Entity of
such party (1) defaults under a Specified Transaction and, after
giving effect to any applicable notice requirement or grace period,
there occurs a liquidation of, an acceleration of obligations under,
or any early termination of, that Specified Transaction, (2)
defaults, after giving effect to any applicable notice requirement or
grace period, in making any payment or delivery due on the last
payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues
for at least
9
three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates
or rejects, in whole or in part, a Specified Transaction (or such
action is taken by any person or entity appointed or empowered to
operate it or act on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule
as applying to the party, the occurrence or existence of (1) a
default, event of default or other similar condition or event
(however described) in respect of such party, any Credit Support
Provider of such party or any applicable Specified Entity of such
party under one or more agreements or instruments relating to
Specified Indebtedness of any of them (individually or collectively)
in an aggregate amount of not less than the applicable Threshold
Amount (as specified in the Schedule) which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of
being declared, due and payable under such agreements or instruments,
before it would otherwise have been due and payable or (2) a default
by such party, such Credit Support Provider or such Specified Entity
(individually or collectively) in making one or more payments on the
due date thereof in an aggregate amount of not less than the
applicable Threshold Amount under such agreements or instruments
(after giving effect to any applicable notice requirement or grace
period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such
party or any applicable Specified Entity of such party:- -
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is
unable to pay its debts or fails or admits in writing its
inability generally to pay its debts as they become due;
(3) makes a general assignment, arrangement or composition
with or for the benefit of its creditors; (4) institutes
or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or other similar
law affecting creditors' rights, or a petition is
presented for its winding-up or liquidation, and, in the
case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the
entry of an order for relief or the making of an order for
its winding-up or liquidation or (B) is not dismissed,
discharged, stayed or restrained in each case within 30
days of the institution or presentation thereof; (5) has a
resolution passed for its winding-up, official
10
management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or
becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or
substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other
legal process levied, enforced or sued on or against all
or substantially all its assets and such secured party
maintains possession, or any such process is not
dismissed, discharged, stayed or restrained, in each case
within 30 days thereafter; (8) causes or is subject to any
event with respect to it which, under the applicable laws
of any jurisdiction, has an analogous effect to any of the
events specified in clauses (1) to (7) (inclusive); or (9)
takes any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the
foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges
with or into, or transfers all or substantially all its assets to,
another entity and, at the time of such consolidation, amalgamation,
merger or transfer:--
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit
Support Provider under this Agreement or any Credit
Support Document to which it or its predecessor was a
party by operation of law or pursuant to an agreement
reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to
extend (without the consent of the other party) to the
performance by such resulting, surviving or transferee
entity of its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv)
11
below or an Additional Termination Event if the event is specified pursuant to
(v) below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation
by any court, tribunal or regulatory authority with competent
jurisdiction of any applicable law after such date, it becomes
unlawful (other than as a result of a breach by the party of Section
4(b)) for such party (which will be the Affected Party):--
(1) to perform any absolute or contingent obligation to
make a payment or delivery or to receive a payment or
delivery in respect of such Transaction or to comply with
any other material provision of this Agreement relating to
such Transaction; or
(2) to perform, or for any Credit Support Provider of such
party to perform, any contingent or other obligation which
the party (or such Credit Support Provider) has under any
Credit Support Document relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to this Agreement)
or (y) a Change in Tax Law, the party (which will be the Affected
Party) will, or there is a substantial likelihood that it will, on
the next succeeding Scheduled Payment Date (1) be required to pay to
the other party an additional amount in respect of an Indemnifiable
Tax under Section 2(d)(i)(4) (except in respect of interest under
Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which
an amount is required to be deducted or withheld for or on account of
a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) and no additional amount is required to be paid in respect of
such Tax under Section 2(d)(i)(4) (other than by reason of Section
2(d)(i)(4)(A) or
(B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has
been deducted or withheld for or on account of any Indemnifiable Tax
in respect of which the other party is not
12
required to pay an additional amount (other than by reason of Section
2(d)(i)(4)(A) or (B)), in either case as a result of a party
consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity
(which will be the Affected Party) where such action does not
constitute an event described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity
of X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party);
or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying,
the occurrence of such event (and, in such event, the Affected Party
or Affected Parties shall be as specified for such Additional
Termination Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the
13
time immediately preceding the institution of the relevant proceeding or the
presentation of the relevant petition upon the occurrence with respect to such
party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent
analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party,
specifying the nature of that Termination Event and each Affected
Transaction and will also give such other information about that
Termination Event as the other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
Party is the Affected Party, the Affected Party will, as a condition
to its right to designate an Early Termination Date under Section
6(b)(iv), use all reasonable efforts (which will not require such
party to incur a loss, excluding immaterial, incidental expenses) to
transfer within 20 days after it gives notice under Section 6(b)(i)
all its rights and obligations under this Agreement in respect of the
Affected Transactions to another of its Offices or Affiliates so that
such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will
give notice to the other party to that effect within such 20 day
period, whereupon the other party may effect such a transfer within
30 days after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent of the
other party, which consent will not be withheld if such other party's
policies in effect at such time would permit it to enter into
transactions with the transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party
will use all reasonable efforts to reach agreement within 30 days
after notice thereof is given under Section 6(b)(i) on action to
avoid that Termination Event.
14
(iv) RIGHT TO TERMINATE. If:--
(1) a transfer under Section 6(b)(ii) or an agreement
under Section 6(b)(iii), as the case may be, has not been
effected with respect to all Affected Transactions within
30 days after an Affected Party gives notice under Section
6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event
Upon Merger or an Additional Termination Event occurs, or
a Tax Event Upon Merger occurs and the Burdened Party is
not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a
Tax Event or an Additional Termination Event if there is more than
one Affected Party, or the party which is not the Affected Party in
the case of a Credit Event Upon Merger or an Additional Termination
Event if there is only one Affected Party may, by not more than 20
days notice to the other party and provided that the relevant
Termination Event is then continuing, designate a day not earlier
than the day such notice is effective as an Early Termination Date in
respect of all Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the
date so designated, whether or nor the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
15
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and
will provide to the other party a statement (1) showing, in
reasonable detail, such calculations (including all relevant
quotations and specifying any amount payable under Section 6(e)) and
(2) giving details of the relevant account to which any amount
payable to it is to be paid. In the absence of written confirmation
from the source of a quotation obtained in determining a Market
Quotation, the records of the party obtaining such quotation will be
conclusive evidence of the existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of
any Early Termination Date under Section 6(e) will be payable on the
date that notice of the amount payable is effective (in the case of
an Early Termination Date which is designated or occurs as a result
of an Event of Default) and on the day which is two Local Business
Days after the day on which notice of the amount payable is effective
(in the case of an Early Termination Date which is designated as a
result of a Termination Event). Such amount will be paid together
with (to the extent permitted under applicable law) interest thereon
(before as well as after judgment) in the Termination Currency, from
(and including) the relevant Early Termination Date to (but
excluding) the date such amount is paid, at the Applicable Rate. Such
interest will be calculated on the basis of daily compounding and the
actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:--
16
(1) First Method and Market Quotation. If the First Method
and Market Quotation apply, the Defaulting Party will pay
to the Non-defaulting Party the excess, if a positive
number, of (A) the sum of the Settlement Amount
(determined by the Non-defaulting Party) in respect of the
Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting
Party.
(2) First Method and Loss. If the First Method and Loss
apply, the Defaulting Party will pay to the Non-
defaulting Party, if a positive number, the Non-defaulting
Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second
Method and Market Quotation apply, an amount will be
payable equal to (A) the sum of the Settlement Amount
(determined by the Non-defaulting Party) in respect of the
Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party less (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting
Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss
apply, an amount will be payable equal to the
Non-defaulting Party's Loss in respect of this Agreement.
If that amount is a positive number, the Defaulting Party
will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event: --
(1) One Affected Party. If there is one Affected Party,
the amount payable will be determined in accordance with
Section 6(e)(i)(3), if Market Quotation applies, or
Section 6(e)(i)(4), if Loss applies, except that, in
either case, references to the Defaulting Party and to the
Non-
17
defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the
Transactions are being terminated, Loss shall be calculated in
respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party
will determine a Settlement Amount in respect
of the Terminated Transactions, and an amount
will be payable equal to (I) the sum of (a)
one-half of the difference between the
Settlement Amount of the party with the higher
Settlement Amount ("X") and the Settlement
Amount of the party with the lower Settlement
Amount ("Y") and (b) the Termination Currency
Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent
of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine
its Loss in respect of this Agreement (or, if
fewer than all the Transactions are being
terminated, in respect of all Terminated
Transactions) and an amount will be payable
equal to one-half of the difference between the
Loss of the party with the higher Loss ("X")
and the Loss of the party with the lower Loss
("Y").
If the amount payable is a positive number, Y will pay it
to X; if it is negative number, X will pay the absolute
value of that amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies
in respect of a party, the amount determined under this Section 6(e)
will be subject to such adjustments as are appropriate and permitted
by law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Sections 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for
the loss of bargain and the loss of protection against future risks
and except as otherwise provided in this
18
Agreement neither party will be entitled to recover any additional
damages as a consequence of such losses.
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
19
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations form the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
20
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts
(including by facsimile transmission), each of which will be deemed
an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall be entered into as soon as
practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of
telexes or by an exchange of electronic messages on an electronic
messaging system, which in each case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective means that
any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
21
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payment or deliveries for the purpose of a Transaction without the prior written
consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
22
(i) if in writing and delivered in person or by courier, on the date
it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the recipient
in legible form (it being agreed that the burden of proving receipt
will be on the sender and will not be met by a transmission report
generated by the sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested), on the date that mail
is delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex, or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION.
(a) GOVERNING LAW.This Agreement will be governed by and construed in accordance
with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court
23
located in the Borough of Manhattan in New York City, if this
Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives any
claim that such Proceedings have been brought in an inconvenient
forum and further waives the right to object, with respect to other
Proceedings, that such court does not have any jurisdiction over such
party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent to the other
party. The parties irrevocably consent to service of process given in the manner
provided for notices in Section 12. Nothing in this Agreement will affect the
right of either party to serve process in any other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachments of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
24
14. DEFINITIONS
As used in this Agreement.
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means: --
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-defaulting Rate; and
(d) in all other cases, the Terminating Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
25
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
26
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations
27
from Reference Market-makers. Each quotation will be for an amount, if any, that
would be paid to such party (expressed as a negative number) or by such party
(expressed as a positive number) in consideration of an agreement between such
party (taking into account any existing Credit Support Document with respect to
the obligations of such party) and the quoting Reference Market-maker to enter
into a transaction (the "Replacement Transaction") that would have the effect of
preserving for such party the economic equivalent of any payment or delivery
(whether the underlying obligation was absolute or contingent and assuming the
satisfaction of each applicable condition precedent) by the parties under
Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated
Transactions that would, but for the occurrence of the relevant Early
Termination Date, have been required after that date. For this purpose, Unpaid
Amounts in respect of the Terminated Transaction or group of Terminated
Transactions are to be excluded but, without limitation, any payment or delivery
that would, but for the relevant Early Termination Date, have been required
(assuming satisfaction of each applicable condition precedent) after that Early
Termination Date is to be included. The Replacement Transaction would be subject
to such documentation as such party and the Reference Market-maker may, in good
faith, agree. The party making the determination (or its agent) will request
each Reference Market-maker to provide its quotation to the extent reasonably
practicable as of the same day and time (without regard to different time zones)
on or as soon as reasonably practicable after the relevant Early Termination
Date. The day and time as of which those quotations are to be obtained will be
selected in good faith by the party obliged to make a determination under
Section 6(e), and, if each party is so obliged, after consultation with the
other. If more than three quotations are provided, the Market Quotation will be
the arithmetic mean of the quotations, without regard to the quotations having
the highest and lowest values. If exactly three such quotations are provided,
the Market Quotation will be the quotation remaining after disregarding the
highest and lowest quotations. For this purpose, if more than one quotation has
the same highest value or lowest value, then one of such quotations shall be
disregarded. If fewer than three quotations are provided, it will be deemed that
the Market Quotation in respect of such Terminated Transaction or group of
Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
28
"OFFICE" means a branch or office of a party, which may be such party's head or
home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
29
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
30
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid
31
or performed to (but excluding) such Early Termination Date, at the Applicable
Rate. Such amounts of interest will be calculated on the basis of daily
compounding and the actual number of days elapsed. The fair market value of any
obligation referred to in clause (b) above shall be reasonably determined by the
party obliged to make the determination under Section 6(e) or, if each party is
so obliged, it shall be the average of the Termination Currency Equivalents of
the fair market values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
SWISS BANK CORPORATION, LONDON BRANCH INTERNEURON PHARMACEUTICALS, INC.
By: /s/ Thomas Eggenschwiler By: Thomas F. Farb
------------------------------ ----------------------------
Name: Thomas Eggenschwiler Name: Thomas F. Farb
Title: Attorney-in-Fact Title: Executive Vice President -
Finance
Date: 5 - May 1997 Date: May 5, 1997
By: /s/ Alfred C. Kellogg
-------------------------------
Name: Alfred C. Kellogg
Title: Attorney-in-Fact
Date: May 5, 1997
32
SCHEDULE
TO THE MASTER AGREEMENT
DATED AS OF MAY 5, 1997
BETWEEN
SWISS BANK CORPORATION, AND INTERNEURON
LONDON BRANCH PHARMACEUTICALS, INC., a
corporation organized under the
laws of the State of Delaware
("Party A") ("Party B")
PART 1
TERMINATION PROVISIONS
In this Agreement:
(a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:
Section 5(a)(v), NONE
Section 5(a)(vi), NONE
Section 5(a)(vii), NONE
Section 5(b)(iv), NONE
and in relation to Party B for the purpose of:
Section 5(a)(v), NONE
Section 5(a)(vi), NONE
Section 5(a)(vii), NONE
Section 5(b)(iv), NONE
(b) The definition of "SPECIFIED TRANSACTION" shall have the meaning
specified in Section 14 of the Agreement.
(c) The "CROSS DEFAULT" provisions of Section 5 (a)(vi) will apply to both
parties, as amended by deleting the phrase "or becoming capable at such time of
being declared," and shall exclude any default that results solely from wire
transfer difficulties or an error or omission of an administrative or
operational nature (so long as sufficient funds are available to the relevant
party on the relevant date), but only if payment is made within three Business
Days after such transfer difficulties have been corrected or the error or
omission has been discovered.
If such provisions apply:
1
"SPECIFIED INDEBTEDNESS" means any obligation (whether present or
future, contingent or otherwise, as principal or surety or otherwise) in respect
of borrowed money or any Derivative Transaction other than any Specified
Transaction.
"THRESHOLD AMOUNT" means
(i) with respect to Party A, 2% of "Total Capital and Reserves" of
Swiss Bank Corporation as shown on the most recent annual
audited financial statements of Swiss Bank Corporation and
(ii) with respect to Party B, U.S. Dollars 10mm.
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5 (b)(iv) will not
apply to either Party A or Party B.
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6 (a) will not
apply to Party A or Party B.
(f) "PAYMENTS ON EARLY TERMINATION". For the purpose of Section 6 (e) of
this Agreement:
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) "TERMINATION CURRENCY" means United States Dollars.
(h) "ADDITIONAL TERMINATION EVENT" will not apply.
PART 2
TAX REPRESENTATIONS
(a) Payer Representation. For the purpose of Section 3(e) of this
Agreement, Party A will make the following representation and Party B will make
the following representation:-
It is not required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, of any
Relevant Jurisdiction to make any deduction or withholding for or on
account of any Tax from any payment (other than interest under Section
2(e), 6 (d) (ii) or 6 (e) of this Agreement) to be made by it to the
other party under this Agreement. In making this representation, it may
rely on (i) the accuracy of any representations made by the other party
pursuant to Section 3 (f) of this Agreement, (ii) the satisfaction of
the agreement contained in Section 4 (a)(iii) of this Agreement and the
accuracy and effectiveness of any document provided by the other party
pursuant to Section 4 (a)(i) or 4 (a)(iii) of this Agreement and (iii)
the satisfaction of the agreement of the other party contained in
Section 4 (d) of this Agreement, provided that it shall not be a breach
of this representation where reliance is placed on clause (ii) and the
other party does not deliver a form or document under Section 4
(a)(iii) by reason of material prejudice to its legal or commercial
position.
(b) Payee Representations. For the purpose of Section 3 (f) of this
Agreement, Party A makes the following representation:
2
Each payment received or to be received by it in connection with this
Agreement will be effectively connected with its conduct of a trade or
business in the United States of America.
PART 3
AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Sections 4(a) (i) and (ii) of this Agreement, each
party agrees to deliver the following documents, as applicable:
(a) Tax forms, documents or certificates to be delivered are:
PARTY REQUIRED TO
DELIVER DOCUMENT FORM/DOCUMENT/CERTIFICATE DATE BY WHICH TO BE DELIVERED
Party A Department of the Treasury On or before execution of this
Internal Revenue Service Agreement and on an annual
Form 4224 basis thereafter
Party B Department of the Treasury On or before execution of this
Internal Revenue Service Agreement
Form W-9
(b) Other documents to be delivered are:
PARTY REQUIRED COVERED BY
TO DELIVER DATE BY WHICH TO SECTION 3(D)
DOCUMENT FORM/DOCUMENT/CERTIFICATE BE DELIVERED REPRESENTATION
Party A and Signature authentication On or before YES
Party B satisfactory to the execution of
other party hereto this Agreement
Party B Copy (certified by an On or before YES
officer) of the board execution of
resolution (or equivalent this Agreement
authorizing documentation)
permitting the entering
into of this Agreement
and Transactions hereunder
PART 4
MISCELLANEOUS
(a) ADDRESSES FOR NOTICES. For the purposes of Section 12(a) of this Agreement:
(i) All notices or communications to Party A shall be sent to the
address, telex number, or facsimile number reflected below:
Address: Swiss Bank Corporation, London Branch
1 High Timber Street
London EC4V 3SB
Attention: Swaps Group
Telex: 887434 Answerback: SBCO G
Facsimile: 44-71-711-2364
3
(ii) All notices or communications to Party B shall be sent to the
address, telex number, or facsimile number reflected below:
Address: Interneuron Pharmaceuticals, Inc.
99 Hayden Avenue
Lexington, MA 02173
Attention: Thomas Farb, Executive Vice President, Finance
Facsimile: 617-674-2448 Telephone No: 617-861-8444
(b) PROCESS AGENT. For the purpose of Section 13 (c) of this Agreement:
Party A appoints as its Process Agent:
Swiss Bank Corporation, New York Branch
222 Broadway, New York, NY 10038
Attention: Legal Affairs
Party B appoints as its Process Agent: NOT APPLICABLE
(c) OFFICES. The provisions of Section 10(a) will apply to Party A and Party B,
it being the understanding of the parties that while obligations entered into by
an Office of a party pursuant to this Agreement constitute obligations of the
company (and not merely of such Office), each party will, in respect of any
Transaction and in the ordinary course of business, send payments and notices to
and receive payments and notices from the Office of the other party specified in
the Confirmation of such Transaction rather than any other office of such party.
A party (the "owed party") may seek payment from the head office of the other
party (the "owing party") with respect to this Agreement in the event that an
amount payable to the owed party by the owing party pursuant to this Agreement
(including any amount payable as a result of the occurrence or designation of an
Early Termination Date) has not been paid in full when due.
(d) MULTIBRANCH PARTY. For the purpose of Section 10 (c) of this Agreement
neither Party A nor Party B is a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:
NONE
(g) CREDIT SUPPORT PROVIDER. Credit Support Provider means:
NOT APPLICABLE
(h) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CHOICE
OF LAW DOCTRINE).
(i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2 (c) of this Agreement
will apply.
(j) "AFFILIATE" will have the meaning specified in Section 14 of this
Agreement.
4
PART 5
OTHER PROVISIONS
(a) SET-OFF. Without affecting the provisions of the Agreement requiring the
calculation of certain net payment amounts, all payments under this Agreement
will be made without set-off or counterclaim; provided, however, that upon the
designation of any Early Termination Date, in addition to and not in limitation
of any other right or remedy (including any right to set off, counterclaim, or
otherwise withhold payment or any recourse to any Credit Support Document) under
applicable law the Non-defaulting Party or Non-affected Party (in either case,
"X") may without prior notice to any person set off any sum or obligation
(whether or not arising under this Agreement and whether matured or unmatured,
whether or not contingent and irrespective of the currency, place of payment or
booking office of the sum or obligation) owed by the Defaulting Party or
Affected Party (in either case, "Y") to X or any Affiliate of X against any sum
or obligation (whether or not arising under this Agreement, whether matured or
unmatured, whether or not contingent and irrespective of the currency, place of
payment or booking office of the sum or obligation) owed by X or any Affiliate
of X to Y and, for this purpose, may convert one currency into another at a
market rate determined by X. If any sum or obligation is unascertained, X may in
good faith estimate that sum or obligation and set-off in respect of that
estimate, subject to X or Y, as the case may be, accounting to the other party
when such sum or obligation is ascertained.
(b) REPRESENTATIONS AND WARRANTIES. Section 3(a) is amended by adding the
following paragraphs (vi) and (vii):
"(vi) NO AGENCY. It is entering into this Agreement and each
Transaction as principal (and not as agent or in any other capacity,
fiduciary or otherwise).
(vii) ELIGIBLE SWAP PARTICIPANT. It is an "eligible swap participant"
as that term is defined by the United States Commodity Futures Trading
Commission in 17 C.F.R. ss. 35.1(b)(2) and it has entered into this
Agreement and it is entering into each Transaction in connection with
its line of business (including financial intermediation services) or
the financing of its business; and the material terms of this Agreement
and such Transaction have been individually tailored and negotiated."
(c) RELATIONSHIP BETWEEN PARTIES. Each party will be deemed to represent to the
other party on the date on which it enters into a Transaction that (absent a
written agreement between the parties that expressly imposes affirmative
obligations to the contrary for that Transaction):
(i) NON-RELIANCE. It is acting for its own account, and it has made its
own independent decisions to enter into that Transaction and as to
whether that Transaction is appropriate or proper for it based upon its
own judgment and upon advice from such advisers as it has deemed
necessary. It is not relying on any communication (written or oral) of
the other party as investment advice or as a recommendation to enter
into that Transaction; it being understood that information and
explanations related to the terms and conditions of a Transaction shall
not be considered investment advice or a recommendation to enter into
that Transaction. No communication (written or oral) received from the
other party shall be deemed to be an assurance or guarantee as to the
expected results of that Transaction.
(ii) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the
merits of and understanding (on its own behalf or through independent
professional advice), and understands and accepts the terms, conditions
and risks of that Transaction. It is also capable of assuming, and
assumes, the risks of that Transaction.
(iii) STATUS OF PARTIES. The other party is not acting as a fiduciary
for or an adviser to it in respect of that Transaction.
5
(d) TRANSFER. Section 7 is amended by the deletion of "and" at the end of
paragraph (a), the deletion of the full stop at the end of paragraph (b) and the
insertion of a semi-colon followed by "and" in its place, and the insertion of a
new paragraph after paragraph (b) at the end thereof "(c) Party A may transfer
its rights and obligations under this Agreement in whole (but not in part) to
any branch of Swiss Bank Corporation provided that as a result of such transfer:
(i) it does not become unlawful for either party to perform any
obligation under this Agreement;
(ii) neither party is required to pay to the other party an
additional amount under Section 2(d)(i)(4) or to receive a
payment from which an amount is required to be deducted or
withheld for or on account of a Tax and no additional amount
is required to be paid in respect of such Tax under Section
2(d)(i)(4); and
(iii) no Event of Default occurs in respect of either party."
(e) WAIVER OF JURY TRIAL. Each party hereby irrevocably waives any and all
right to trial by jury in any suit, action or proceeding arising out of or
relating to this Agreement or any Transaction and acknowledges that this waiver
is a material inducement to the other party's entering into this Agreement.
(f) CONSENT TO RECORDING. The parties agree that each may electronically record
all telephonic conversations between them and that any such recordings may be
submitted in evidence to any court or in any Proceedings for the purpose of
establishing any matters pertinent to any Transaction.
(g) SEVERANCE. In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, such
provisions shall be severed from this Agreement to the extent of such
invalidity, illegality or unenforceability, unless such severance shall
substantially impair the benefits of the remaining portions of this Agreement.
The Agreement after such severance shall remain the valid, binding and
enforceable obligation of the parties hereto.
(h) NETTING PROVISIONS. If an Early Termination Date occurs, amounts determined
in respect of all Terminated Transactions shall be aggregated with and netted
against one another in performing the calculations contemplated by Section 6(e).
If the calculation of the amount payable pursuant to Section 6(e) in respect of
an Early Termination Date would involve the aggregation or netting of amounts
determined in respect of Transactions of different types, and under applicable
law amounts determined in respect of one or more types of Transactions hereunder
may not be aggregated with or netted against amounts determined in respect of
one or more other types of Transactions in performing such calculation, then,
notwithstanding the foregoing or any other provision of this Agreement,
aggregation and netting will be performed within and between types of
Transactions to the fullest extent permitted by law in performing such
calculation, and the set-off provisions of this Agreement and applicable law
shall be applied to the resulting amount or amounts.
(i) DEFINITIONS. The following definition shall appear in Section 14 after the
definition of "Defaulting Party":
"Derivative Transaction" means:
(a) any transaction (including an agreement with respect thereto)
which is a rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, repurchase
transaction, reverse repurchase transaction, precious metals
transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate
swap
6
transaction, currency option or any other similar transaction
(including any option with respect to any of these
transactions); and
(b) any combination of these transactions."
(j) ONE-WAY TRANSACTION. Party B agrees that in the event the parties enter
into a Transaction, other than a call option transaction written by either Party
A or Party B where the property underlying the transaction is the common stock
of Party B, then Party B will enter into a new Master Agreement with Party A or
will amend this Agreement, in either case in a form satisfactory to Party A and
Party B.
PART 6
ADDITIONAL TERMS FOR EQUITY AND EQUITY INDEX TRANSACTIONS
Notwithstanding anything to the contrary in this Agreement, the following
provisions will apply for the purposes of any Transaction which is an option on
a single security, a basket of securities or an index, including any Transaction
which contemplates by its terms the physical delivery of shares, participation
certificates or other equity securities ("Shares"):
(a) DIVIDENDS AND EXPENSES. The following provision shall be included as
Section 2(f):
"(f) DIVIDENDS AND EXPENSES ON DELIVERY: All dividends on the Shares to
be delivered shall be payable to and all costs and expenses incurred in
connection with the delivery of Shares (including, without prejudice to Section
2(d), any Tax or Stamp Tax and any interest or penalties payable in connection
therewith) shall be payable by the party who would customarily receive such
dividend or bear such costs or expenses under a contract for the purchase of the
Shares by the deliveree through the clearance system specified in the relevant
Confirmation."
(b) REPRESENTATIONS. Each party acknowledges that (i) certain Transactions may
be securities that have not been registered under the Securities Act of 1933 of
the United States of America, as amended (the "1933 Act"), or under the laws of
any state, (ii) no federal or state agency has passed upon such Transactions or
made any finding or determination as to the fairness of such Transactions and
(iii) such Transactions are intended to be exempt from registration under the
1933 Act. In addition to the representations made pursuant to Section 3 of this
Agreement,each party represents to the other party with respect to any such
Transaction that (i) it is an "accredited investor," as such term is defined in
Regulation D promulgated under the 1933 Act, (ii) it has had access to such
information regarding such Transaction and the other party as it requested,
(iii) it has knowledge and experience in financial and business matters and is
capable of evaluating the merits and risks of such Transaction and is able to
bear the economic risk of its investment, including without limitation the risk
of complete loss on the investment, (iv) it acquired its interest in such
Transaction for its own account for investment and not with a view to, or in
connection with, any distribution of such interests, (v) it will not sell,
transfer, assign or otherwise dispose such Transaction or interests herein and
therein in violation of the 1933 Act and the rules and regulations promulgated
thereunder, and (vi) with respect to any Transaction which contemplates by its
terms the physical delivery of Shares, at the time of the delivery of any such
Shares to the other party, it possesses full legal and beneficial title thereto
and it is delivering the same free and clear of any lien, claim, encumbrance or
security interest of any kind whatsoever created by the deliveror.
7
Exhibit 10.90(a)
CONTRACT A-1
CONFIRMATION
Date: May 12, 1997
To: Interneuron Pharmaceuticals, Inc. ("Party B")
Attention: Thomas F. Farb
From: Swiss Bank Corporation, London Branch ("Party A")
Re: Equity Option Confirmation
Reference Number ____________
- -----------------------------------------------------------------------
The purpose of this communication is to confirm the terms and conditions of the
transaction (the "Transaction") entered into between us on the Trade Date
specified below. This Confirmation constitutes a "Confirmation" as referred to
in the 1992 ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc. (formerly
known as the International Swap Dealers Association, Inc.) ("ISDA")) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement dated as of May 5, 1997, as amended and supplemented from time to time
(the "Agreement"), between you and Swiss Bank Corporation. All provisions
contained in the Agreement govern this Confirmation except as expressly modified
below.
The terms of the Transaction to which this Confirmation relates are as follows:
Trade Date : May 9, 1997
Buyer : Party B
Seller : Party A
Option Style : European Option
Option Type : Capped Call
Shares : Common Stock of Interneuron Pharmaceuticals,
Inc. (Symbol: IPIC)
Number of Options : 310,000
Contract Multiplier : 1.00
Strike Price : USD 17.75
Cap Price : USD 26.00
Total Premium : Call options written by Party B on shares of
Party B's Common Stock.
Premium
Payment Date : May 9, 1997
Expiration Date : September 24, 1997, or, if that date is not
an Exchange Business Day, the following day
that is an Exchange Business Day.
Currency
Business Day : Any day on which commercial banks are open for
business (including dealings in foreign
exchange and foreign currency deposits) in
the cities from which and in which a payment
is to be made.
Exchange
Business Day : A day that is ( or but for the occurrence of a
Market Disruption Event, would have been) a
trading day on the Exchange (other than a
day on which trading on any such exchange is
scheduled to close prior to its regular
weekday closing time, first announced on the
day of such closing).
Normal
Trading Day : An Exchange Business Day on which no Market
Disruption Event has occurred or is
continuing.
Market
Disruption Event : The occurrence or existence on any Exchange
Business Day during the one-half hour period
that ends at the close of business of any
suspension of or limitation imposed on
trading (by reason of movements in price
exceeding levels permitted by the relevant
exchange or otherwise), provided that any
such event is material in the reasonable
determination of the Calculation Agent, and
agreed to by Party B, on: (i) the Exchange
in the Shares; or (ii) the Pacific Stock
Exchange in options contracts on the Shares.
Exchange : Nasdaq National Market
Clearance System
Business Day : Any day on which the Clearance System is
open for the acceptance and execution of
settlement instructions.
Clearance System : Depository Trust Company, or any successor
to or transferee of such clearance system.
Calculation Agent : Party A, whose calculations shall be binding
absent manifest error.
Procedure for Exercise
- ----------------------
Exercise Date : The Expiration Date.
Expiration Time : 5:00 p.m. local time in New York City
Automatic Exercise : The Transaction will be deemed to be
automatically exercised if it is
In-the-Money on the Expiration Date, unless
(i) the Buyer has notified the Seller or its
agent (by telephone or in writing) prior to
5:00 p.m. local time in New York City on the
Expiration Date that it does not wish to
exercise the Transaction (or wishes to delay
the Expiration Date, as set forth below); or
(ii) the Closing Value cannot be determined
on the Expiration Date. If the Transaction
is to be cash settled, "In-the-Money" means
that the Cash Settlement Amount is greater
than zero. If the Transaction is to be
physically settled, "In-the-Money" means
that the Closing Value is greater than the
Strike Price. "Closing Value" means the
closing price of the Shares, as reported on
the Exchange, on the Expiration Date.
Telephone
and facsimile number
of Seller's Agent
2
for purposes of
giving notice : Telephone: (312) 554-5249
Fax: (312) 554-6271
Attention: David P. Stowell
Settlement Terms
- ----------------
Settlement : The Transaction will be cash settled;
provided, however, that Party B may elect to
physically settle the Transaction by giving
notice to Party A no later than ten Exchange
Business Days before the Expiration Date.
Physical Settlement : If the Transaction is to be physically
settled, on the Settlement Date, the Seller
shall deliver to the Buyer the number of
Shares equal to the Contract Multiplier
multiplied by the number of Options
exercised against payment by the Buyer to
the Seller of an amount equal to the product
of (a) the Strike Price, adjusted as
hereinafter provided, multiplied by (b) the
Contract Multiplier multiplied by (c) the
number of Options exercised. If the Closing
Value exceeds the Cap Price, the Strike
Price shall be increased by the amount by
which the Closing Value exceeds the Cap
Price; if the Closing Value is equal to or
less than the Cap Price, no adjustment will
be made to the Strike Price. Such payment
and such delivery will be made through the
Clearance System at the accounts specified
below, on a delivery versus payment basis.
Cash Settlement : If the Transaction is to be cash settled, on
the Settlement Date, Party A shall pay to
Party B the Cash Settlement Amount, if any.
The "Cash Settlement Amount" shall be the
greater of (a) zero and (b) an amount
calculated by the Calculation Agent equal to
(i) the Contract Multiplier multiplied by
(ii) the number of Options exercised
multiplied by (iii) the Price Differential.
"Price Differential" means (x) if the
Reference Price exceeds the Cap Price, the
result of subtracting the Strike Price from
the Cap Price, and (y) if the Reference
Price is equal to or less than the Cap
Price, the result of subtracting the Strike
Price from the Reference Price.
Reference Price : (a) If the Valuation Period contains five
Normal Trading Days, the Reference Price
shall be the arithmetic average of the Share
Prices on those five Normal Trading Days.
(b) If the Valuation Period does not contain
five Normal Trading Days, Party A and Party
B, shall jointly determine the Share Price
for the Valuation Date and as many Exchange
Business Days immediately preceding the
Valuation Date as shall be necessary, when
such Share Prices are taken together with
the Share Prices on all Normal Trading Days
occurring within the Valuation Period, to
provide five Share Prices, and in such case
the Reference Price shall be the arithmetic
average of those five Share Prices.
Share Price : The volume weighted average price of the
Shares as reported on Bloomberg for the
period from 9:30 a.m. to 4:30 p.m. local
time in New York City on the given day.
Valuation Period : The period from and including the fourth
Exchange Business Day immediately preceding
the Expiration Date (the "Initial Date") to
and including the Expiration Date, provided
that if any Exchange Business Day in the
Valuation Period as so determined, shall not
be a Normal Trading Day, the Valuation
Period shall be extended so that the
3
Valuation Period includes five Normal
Trading Days , but in no event shall the
last day of the Valuation Period be later
than the fifth Exchange Business Day after
the Expiration Date, and in no event shall
the Valuation Period include any day before
the Initial Date.
Valuation Date : The last day of the Valuation Period.
Settlement Date : If the Transaction is to be cash settled,
the Settlement Date shall be three Currency
Business Days after the Valuation Date. If
the Transaction is to be physically settled,
the Settlement Date shall be three Clearance
System Business Days after the Exercise
Date.
Change in Expiration Date
- -------------------------
Delay or Acceleration
of Expiration Date : At any time prior to the day that otherwise
would have been the Initial Date, Party B
may notify Party A that it would like to
delay or accelerate the Expiration Date, as
of a date (the "Termination Date") not less
than ten Exchange Business Days after the
date such notice, and, in the case of a
delay, not more than 180 days after the
Expiration Date. Promptly after receipt of
such notice, Party A shall notify Party B of
the additional amount, if any, required to
be paid (the "Settlement Amount") (i) in the
case of a delay of the Expiration Date, by
the Buyer of the Transaction to compensate
the Seller of the Transaction for such
delay, or (ii) in the case of an
acceleration of the Expiration Date, by the
Seller of the Transaction to compensate the
Buyer of the Transaction for such
acceleration. The Settlement Amount shall be
reasonably determined by SBC based upon
SBC's then current methodology for pricing
options. Within five Exchange Business Days
after receipt of notice of the Settlement
Amount from Party A, Party B shall notify
Party A whether it agrees to the Settlement
Amount (the date of such notice, the
"Agreement Date"). If Party B agrees to the
Settlement Amount (i) the Termination Date
shall be deemed to be the Expiration Date
for all purposes of this Confirmation; and
(ii) the Settlement Amount, which shall be
in addition to any payment or delivery, if
any, otherwise required to be made under the
terms of the Transaction, shall be paid by
the appropriate party on the third Currency
Business Day after the Agreement Date. If
Party B does not agree to the Settlement
Amount, the Expiration Date shall not be
delayed or accelerated, as the case may be.
Adjustment Events
- -----------------
Adjustments : During the life of the Transaction, if any
adjustment is made by The Options Clearing
Corporation or its successors ("OCC") in the
terms of outstanding OCC-issued options
("OCC Options") on the Shares which are the
subject of the Transactions, an equivalent
adjustment shall be made in the terms of the
Transaction. Except as provided in the
following paragraph and in the "Additional
Adjustment Provisions" below, no adjustment
shall be made in the terms of the
Transaction for any event that does not
result in an adjustment to the terms of
outstanding OCC Options on the Shares.
Without limiting the generality of the
foregoing, NO ADJUSTMENT SHALL BE MADE IN
THE TERMS OF THE TRANSACTIONS FOR ORDINARY
CASH DIVIDENDS ON THE SHARES EXCEPT AS
PROVIDED IN THE "ADDITIONAL ADJUSTMENT
PROVISIONS" BELOW.
4
If at any time during the life of the
Transaction there shall be no outstanding
OCC Options on the Shares, and an event
shall occur for which an adjustment might
otherwise be made under the By-Laws, Rules,
and stated policies of the OCC applicable to
the adjustment of OCC Options (the "OCC
Adjustment Rules"), the parties shall use
their best efforts, applying the principles
set forth in the OCC Adjustment Rules, to
jointly determine whether to adjust the
terms of the Transaction and the nature of
any such adjustment.
Additional
Adjustments : Notwithstanding the foregoing, if upon the
occurrence of the following events during
the life of the Transaction no adjustment is
required to be made to the terms of the
Transaction in accordance with the foregoing
provisions or if an adjustment has been made
but such adjustment is, in the reasonable
determination of the Calculation Agent, in
consultation with Party B, insufficient to
preserve the economic benefit of the
Transaction for the parties, the following
additional adjustments shall be made to the
terms of the Transaction:
(a) If (i) an ordinary cash dividend is
declared or paid on the Shares or (ii) a
special cash dividend is declared or paid on
the Shares and in either case the
Ex-Dividend Date with respect to such
dividend occurs during the period from, and
including, the Effective Date to, but
excluding, the Expiration Date (each, a
"Dividend Event"), the Strike Price and the
Contract Multiplier shall each be adjusted
for each Dividend Event in accordance with
the following formulas:
SP0 (CP0 - DA)
SP1 = ------------------
CP0
SP0
CM1 = --------------
SP1
Where:
(i) SP1 = Strike Price after the
Dividend Event
(ii) CM1 = Contract Multiplier after the
Dividend Event
(iii) SP0 = Strike Price on the Exchange
Business Day immediately
preceding the Ex-Dividend Date
with respect to the Dividend
Event
(iv) CP0 = The closing price of the
Shares, as reported on the
Exchange, on the Exchange
Business Day immediately
preceding the Ex-Dividend Date
with respect to the Dividend
Event
(vi) DA = The amount of the ordinary
cash dividend or the special
cash dividend, as the case may
be
(b) If there occurs a tender offer, by the
issuer of the Shares (the "Issuer") or a
third party, for the Shares, and the date of
the expiration of such offer (the
"Termination Date") occurs during the period
from, and including, the Effective Date to,
but excluding, the Expiration Date (an
5
"Adjustment Event"), the Strike Price and
the Contract Multiplier shall each be
adjusted for each Adjustment Event in
accordance with the following formulas:
(CP0 x N0) - C
--------------------
SP1 = SP0 x [ CP0 x (N0 - N1) ]
SP0
CM1 = -----
SP1
Where:
(i) SP1 = Strike Price after the
Adjustment Event
(ii) CM1 = Contract Multiplier after the
Adjustment Event
(iii) SP0 = Strike Price on the Completion
Date (as hereinafter defined)
(iv) CP0 = The closing price of the
Shares, as reported on the
Exchange, on the Completion
Date
(v) N0 = Total number of shares of
common stock of the Issuer
outstanding on the Completion
Date
(vi) C = Price paid by the offeror per
share of common stock of the
Issuer multiplied by the total
number of shares purchased by
the offeror pursuant to the
Adjustment Event
(vii) N1 = Total number of shares of
common stock of the Issuer
purchased by the offeror
pursuant to the Adjustment
Event
(viii) "Completion Date" means the
Termination Date; provided, however,
that if the period following the
Termination Date within which
delivery of tendered shares may be
guaranteed is less than the customary
settlement period for a sale of the
Shares executed through the Clearance
System, the Completion Date shall be
the date which precedes the
Termination Date by the number of
Exchange Business Days equal to such
difference
Miscellaneous
Transfer : Neither party may transfer the Transaction,
in whole or in part, without the prior
written consent of the non-transferring
party.
Account Details
- ---------------
Payments and deliveries to Party A: Previously provided
Payments and deliveries to Party B: Previously provided
6
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates your agreement
to those terms.
Yours sincerely,
SWISS BANK CORPORATION, LONDON BRANCH
By: /s/ Stewart Macbeth By: /s/ Karen Hayes
---------------------------- ------------------------
Name: Stewart Macbeth Name: Karen Hayes
Title: Director Fx & Derivatives Title: Associate Director
SCBW London
Confirmed as of the 12th day
of May, 1997
INTERNEURON PHARMACEUTICALS, INC.
By: /s/ Thomas F. Farb
Name: Thomas F. Farb
Title: Executive Vice President - Finance
7
Appendix to Exhibit 10.90(a)*
The Registrant and Swiss Bank Corporation, London Branch, entered into four
transactions evidenced by four confirmations, relating to an aggregate of
1,240,000 options, each of which is substantially identical to the form of
confirmation filed as Exhibit 10.90(a), except that the Cap Price and the
Expiration Dates of the four confirmations are as follows:
Expiration Date Cap Price
Contract A-1 September 24, 1997 $26.00
Contract A-2 March 9, 1998 $34.00
Contract A-3 May 21, 1998 $38.00
Contract A-4 August 24, 1998 $40.00
* Pursuant to Instruction 2 to Item 601 of Regulation S-K.
CONTRACT B-1
CONFIRMATION
Date: May 12, 1997
To: Interneuron Pharmaceuticals, Inc. ("Party B")
Attention: Thomas F. Farb
From: Swiss Bank Corporation, London Branch ("Party A")
Re: Equity Option Confirmation
Reference Number___________________
- --------------------------------------------------------------------------------
The purpose of this communication is to confirm the terms and conditions of the
transaction (the "Transaction") entered into between us on the Trade Date
specified below. This Confirmation constitutes a "Confirmation" as referred to
in the 1992 ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc. (formerly
known as the International Swap Dealers Association, Inc.) ("ISDA")) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement dated as of May 5, 1997, as amended and supplemented from time to time
(the "Agreement"), between you and Swiss Bank Corporation. All provisions
contained in the Agreement govern this Confirmation except as expressly modified
below.
The terms of the Transaction to which this Confirmation relates are as follows:
Trade Date : May 9, 1997
Buyer : Party A
Seller : Party B
Option Style : European Option
Option Type : Call
Shares : Common Stock of Interneuron Pharmaceuticals, Inc.
(Symbol: IPIC)
Number of Options : 1,000,000
Contract Multiplier : 1.00
Strike Price : USD 40.30
Total Premium : Call options written by Party A on shares of Party
B's Common Stock.
Premium
Payment Date : May 9, 1997
Expiration Date : May 21, 1999, or, if that date is not an Exchange
Business Day, the following day that is an Exchange
Business Day; provided, however, that if Party B
elects to cash settle the Transaction as hereinafter
provided, the Expiration Date shall be extended to
the 35th Exchange Business Day after such date.
Currency
Business Day : Any day on which commercial banks are open for
business (including dealings in foreign exchange and
foreign currency deposits) in the cities from which
and in which a payment is to be made.
Exchange
Business Day : A day that is (or but for the occurrence of a Market
Disruption Event, would have been) a trading day on
the Exchange (other than a day on which trading on
any such exchange is scheduled to close prior to its
regular weekday closing time, first announced on the
day of such closing).
Normal
Trading Day : An Exchange Business Day on which no Market
Disruption Event has occurred or is continuing.
Market
Disruption Event : The occurrence or existence on any Exchange Business
Day during the one-half hour period that ends at the
close of business of any suspension of or limitation
imposed on trading (by reason of movements in price
exceeding levels permitted by the relevant exchange
or otherwise), provided that any such event is
material in the reasonable determination of the
Calculation Agent, and agreed to by Party B, on: (i)
the Exchange in the Shares; or (ii) the Pacific Stock
Exchange in options contracts on the Shares.
Exchange : Nasdaq National Market
Clearance System
Business Day : Any day on which the Clearance System is open for the
acceptance and execution of settlement instructions.
Clearance System : Depository Trust Company, or any successor to or
transferee of such clearance system.
Calculation Agent : Party A, whose calculations shall be binding absent
manifest error.
Procedure for Exercise
- ----------------------
Exercise Date : The Expiration Date.
Expiration Time : 5:00 p.m. local time in New York City
Automatic Exercise : The Transaction will be deemed
to be automatically exercised if it is In-the-Money
on the Expiration Date, unless (i) the Buyer has
notified the Seller (by telephone or in writing)
prior to 5:00 p.m. local time in New York City on the
Expiration Date that it does not wish to exercise the
Transaction (or wishes to delay the Expiration Date,
as set forth below); or (ii) the Closing Value cannot
be determined on the Expiration Date. If the
Transaction is to be cash settled or net share
settled, "In-the-Money" means that the Cash
Settlement Amount is greater than zero. If the
Transaction is to be physically settled,
"In-the-Money" means that the Closing Value is
greater than the Strike Price. "Closing Value" means
the closing price of the Shares, as reported on the
Exchange, on the Expiration Date.
Seller's telephone
or facsimile number
2
for purposes of
giving notice : Telephone: (617) 861-8444 ext. 607
Fax: (617) 674-2448
Attention: Thomas F. Farb
Settlement Terms
- ----------------
Settlement : The Transaction will be physically settled; provided,
however, that Party B may elect to cash settle or net
share settle the Transaction by giving notice to
Party A no later than 30 Exchange Business Days
before the Expiration Date. Notwithstanding the
foregoing, if on or prior to the fifth Exchange
Business Day prior to the Expiration Date, the
registration statement referred to in Section 4.1 of
the Agreement Regarding Registration Rights and
Related Obligations (the "Registration Agreement")
attached hereto as Exhibit B has not become
effective, the Transaction will be cash settled and
the parties shall have no further obligations under
the Registration Agreement.
Physical Settlement : If the Transaction is to be physically settled:
(a) at such time as Party B requests but in no event
later than 20 Exchange Business Days before the
Expiration Date, Party A and Party B will enter into
the Registration Agreement attached hereto as Exhibit
I; and
(b) on the Settlement Date, the Seller shall deliver
to the Buyer the number of Shares equal to the
Contract Multiplier multiplied by the number of
Options exercised against payment by the Buyer to the
Seller of an amount equal to the product of (A) the
Strike Price multiplied by (B) the Contract
Multiplier multiplied by (C) the number of Options
exercised. Such payment and such delivery will be
made through the Clearance System at the accounts
specified below, on a delivery versus payment basis.
Cash Settlement : If the Transaction is to be cash settled:
(a) within one Currency Business Day after written notice
by Party A, Party B will pay to Party A the
Prepayment Amount. The "Prepayment Amount" shall be
an amount calculated by the Calculation Agent equal
to (i) the Contract Multiplier multiplied by (ii) the
number of Options to be exercised multiplied by (iii)
the result of subtracting the Strike Price from the
closing price of the Shares, as reported on the
Exchange, on the date of such notice by Party A.
(b) on the Settlement Date, the following payment shall be made:
(i) if a Prepayment Amount has been paid by
Party B, then (A) if the Final Payment Amount
is a positive number, Party B shall pay to
Party A an amount equal to the Final Payment
Amount and (B) if the Final Payment Amount is a
negative number, Party A shall pay to Party B
an amount equal to the absolute value of the
Final Payment Amount. The "Final Payment
Amount" shall be an amount, which may be less
than zero, calculated by the Calculation Agent
equal to (A) the Cash Settlement Amount minus
(B) the Prepayment Amount minus
3
(C) the Interest Amount. The "Cash Settlement
Amount" shall be the greater of (A) zero and
(B) an amount calculated by the Calculation
Agent equal to (1) the Contract Multiplier
multiplied by (2) the number of Options
exercised multiplied by (3) the result of
subtracting the Strike Price from the Reference
Price. The "Interest Amount" shall be an amount
calculated by the Calculation Agent equal to
the aggregate sum of the amounts of interest
calculated for each day in the period from (and
including) the date the Prepayment Amount is
received by Party A to (but excluding) the
Settlement Date, determined as follows: (A) the
Prepayment Amount multiplied by (B) the
overnight Federal Funds Rate for such day as
reported in Federal Reserve Publication
H.15-519 divided by (C) 360.
(ii) if a Prepayment Amount has not been paid
by Party B, Party B shall pay to Party A the
Cash Settlement Amount, if any.
Reference Price : (a) If the Valuation Period contains 35 Normal
Trading Days, the Reference Price shall be the
arithmetic average of the Share Prices on those 35
Normal Trading Days.
(b) If the Valuation Period does not contain 35 Normal Trading Days,
Party A and Party B, shall jointly determine the
Share Price for the Valuation Date and as many
Exchange Business Days immediately preceding the
Valuation Date as shall be necessary, when such Share
Prices are taken together with the Share Prices on
all Normal Trading Days occurring within the
Valuation Period, to provide 35 Share Prices, and in
such case the Reference Price shall be the arithmetic
average of those 35 Share Prices.
Share Price : The volume weighted average price of the Shares as
reported on Bloomberg for the period from 9:30 a.m.
to 4:30 p.m. local time in New York City on the given
day.
Valuation Period : The period from and including the 34th Exchange
Business Day immediately preceding the Expiration
Date (the "Initial Date") to and including the
Expiration Date, provided that if any Exchange
Business Day in the Valuation Period as so
determined, shall not be a Normal Trading Day, the
Valuation Period shall be extended so that the
Valuation Period includes 35 Normal Trading Days, but
in no event shall the last day of the Valuation
Period be later than the 35th Exchange Business Day
after the Expiration Date, and in no event shall the
Valuation Period include any day before the Initial
Date.
Valuation Date : The last day of the Valuation Period.
Net Share
Settlement : If a Transaction is to be net share settled,
(a) no later than 20 Exchange Business Days before
the Expiration Date, Party A and Party B will enter
into the Registration Agreement attached hereto as
Exhibit I; and
(b) on the Settlement Date, Party B shall deliver to Party A the
number of whole Shares (the "Settlement Shares")
equal to (i) the Cash Settlement Amount divided by
(ii) the Closing Value, plus cash in lieu of any
fractional Shares. If within
4
ten Exchange Business Days after the Settlement Date,
Party A resells all or any portion of the Settlement
Shares and the net proceeds received by the Party A
upon resale of such Shares exceed the Cash Settlement
Amount (or if less than all of the Settlement Shares
are resold, the applicable pro rata portion of the
Cash Settlement Amount), Party A shall promptly
refund in cash such difference to Party B. In the
event that such net proceeds are less than the Cash
Settlement Amount (or if less than all of the
Settlement Shares are resold, the applicable pro rata
portion of the Cash Settlement Amount), Party B shall
pay in cash or additional Shares such difference (the
"Make-whole Amount") to Party A promptly after
receipt of notice thereof. In the event that Party B
elects to pay the Make-whole Amount in additional
Shares, Party B shall deliver to Party A the number
of whole Shares (the "Make-whole Shares") equal to
(i) the Make-whole Amount divided by (ii) the closing
price of the Shares as reported on the Exchange on
the Exchange Business Day prior to delivery of such
Shares. If within ten Exchange Business Days after
the delivery of the Make-whole Shares to Party A,
Party A resells all or any portion of such Shares and
the net proceeds received by Party A exceed or are
less than the Make-whole Amount (or if less than all
of the Make-whole Shares are resold, the applicable
pro rata portion of the Make-whole Amount), the
provisions set forth above with respect to payment of
the Settlement Payment in Shares, including
Make-whole requirements, shall apply.
Settlement Date : If the Transaction is to be cash settled, the
Settlement Date shall be three Currency Business Days
after the Valuation Date. If the Transaction is to be
physically settled or net share settled, the
Settlement Date shall be three Clearance System
Business Days after the Exercise Date.
Change in Expiration Date
- -------------------------
Delay or Acceleration
of Expiration Date : At any time prior to the day that otherwise would
have been the Initial Date, Party B may notify Party
A that it would like to delay or accelerate the
Expiration Date, as of a date (the "Termination
Date") not less than ten Exchange Business Days after
the date such notice, and, in the case of a delay,
not more than 180 days after the Expiration Date.
Promptly after receipt of such notice, Party A shall
notify Party B of the additional amount, if any,
required to be paid (the "Settlement Amount") (i) in
the case of a delay of the Expiration Date, by the
Buyer of the Transaction to compensate the Seller of
the Transaction for such delay, or (ii) in the case
of an acceleration of the Expiration Date, by the
Seller of the Transaction to compensate the Buyer of
the Transaction for such acceleration. The Settlement
Amount shall be reasonably determined by Party A
based upon Party A's then current methodology for
pricing options. Within five Exchange Business Days
after receipt of notice of the Settlement Amount from
Party A, Party B shall notify Party A whether it
agrees to the Settlement Amount (the date of such
notice, the "Agreement Date"). If Party B agrees to
the Settlement Amount (i) the Termination Date shall
be deemed to be the Expiration Date for all purposes
of this Confirmation; and (ii) the Settlement Amount,
which shall be in addition to any payment or
delivery, if any, otherwise required to be made under
the terms of the Transaction, shall be paid by the
appropriate party on the third Currency Business Day
after the Agreement Date. If Party B does not agree
to the Settlement Amount, the Expiration Date shall
not be delayed or accelerated, as the case may
5
be.
Adjustment Events
- -----------------
Adjustments : During the life of the Transaction, if any adjustment
is made by The Options Clearing Corporation or its
successors ("OCC") in the terms of outstanding
OCC-issued options ("OCC Options") on the Shares
which are the subject of the Transactions, an
equivalent adjustment shall be made in the terms of
the Transaction. Except as provided in the following
paragraph and in the "Additional Adjustment
Provisions" below, no adjustment shall be made in the
terms of the Transaction for any event that does not
result in an adjustment to the terms of outstanding
OCC Options on the Shares. Without limiting the
generality of the foregoing, NO ADJUSTMENT SHALL BE
MADE IN THE TERMS OF THE TRANSACTIONS FOR ORDINARY
CASH DIVIDENDS ON THE SHARES EXCEPT AS PROVIDED IN
THE "ADDITIONAL ADJUSTMENT PROVISIONS" BELOW.
If at any time during the life of the Transaction
there shall be no outstanding OCC Options on the
Shares, and an event shall occur for which an
adjustment might otherwise be made under the By-Laws,
Rules, and stated policies of the OCC applicable to
the adjustment of OCC Options (the "OCC Adjustment
Rules"), the parties shall use their best efforts,
applying the principles set forth in the OCC
Adjustment Rules, to jointly determine whether to
adjust the terms of the Transaction and the nature of
any such adjustment.
Additional
Adjustments : Notwithstanding the foregoing, if upon the occurrence
of the following events during the life of the
Transaction no adjustment is required to be made to
the terms of the Transaction in accordance with the
foregoing provisions or if an adjustment has been
made but such adjustment is, in the reasonable
determination of the Calculation Agent, in
consultation with Party B, insufficient to preserve
the economic benefit of the Transaction for the
parties, the following additional adjustments shall
be made to the terms of the Transaction:
(a) If (i) an ordinary cash dividend is declared or
paid on the Shares or (ii) a special cash dividend is
declared or paid on the Shares and in either case the
Ex-Dividend Date with respect to such dividend occurs
during the period from, and including, the Effective
Date to, but excluding, the Expiration Date (each, a
"Dividend Event"), the Strike Price and the Contract
Multiplier shall each be adjusted for each Dividend
Event in accordance with the following formulas:
SP0 (CP0 - DA)
SP1 = ------------------
CP0
SP0
CM1 = ------------
SP1
Where:
(i) SP1 = Strike Price after the Dividend Event
(ii) CM1 = Contract Multiplier after the Dividend
Event
6
(iii) SP0 = Strike Price on the Exchange Business
Day immediately preceding the
Ex-Dividend Date with respect to the
Dividend Event
(iv) CP0 = The closing price of the Shares, as
reported on the Exchange, on the
Exchange Business Day immediately
preceding the Ex-Dividend Date with
respect to the Dividend Event
(vi) DA = The amount of the ordinary cash
dividend or the special cash dividend,
as the case may be
(b) If there occurs a tender offer, by the issuer of
the Shares (the "Issuer") or a third party, for the
Shares, and the date of the expiration of such offer
(the "Termination Date") occurs during the period
from, and including, the Effective Date to, but
excluding, the Expiration Date (an "Adjustment
Event"), the Strike Price and the Contract Multiplier
shall each be adjusted for each Adjustment Event in
accordance with the following formulas:
(CP0 x N0) - C
--------------------
SP1 = SP0 x [ CP0 x (N0 - N1) ]
SP0
CM1 = -----
SP1
Where:
(i) SP1 = Strike Price after the Adjustment Event
(ii) CM1 = Contract Multiplier after the Adjustment
Event
(iii) SP0 = Strike Price on the Completion Date (as
hereinafter defined)
(iv) CP0 = The closing price of the Shares, as
reported on the Exchange, on the
Completion Date
(v) N0 = Total number of shares of common stock
of the Issuer outstanding on the
Completion Date
(vi) C = Price paid by the offeror per share of
common stock of the Issuer multiplied by
the total number of shares purchased by
the offeror pursuant to the Adjustment
Event
(vii) N1 = Total number of shares of common stock
of the Issuer purchased by the offeror
pursuant to the Adjustment Event
(viii) "Completion Date" means the Termination Date;
provided, however, that if the period
following the Termination Date within which
delivery of tendered shares may be guaranteed
is less than the customary settlement period
for a sale of the Shares executed through the
Clearance System, the Completion Date shall
be the date which precedes the Termination
Date by the number of Exchange Business Days
equal to such difference
7
Miscellaneous
- -------------
Transfer : Neither party may transfer the Transaction, in whole
or in part, without the prior written consent of the
non-transferring party.
Account Details
- ---------------
Payments and deliveries to Party A: Previously provided
Payments and deliveries to Party B: Previously provided
8
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates your agreement
to those terms.
Yours sincerely,
SWISS BANK CORPORATION, LONDON BRANCH
By: /s/ Stewart Macbeth By: /s/ Karen Hayes
---------------------------- ------------------------
Name: Stewart Macbeth Name: Karen Hayes
Title: Director Fx & Derivatives Title: Associate Director
SCBW London
Confirmed as of the 12th day
of May, 1997
INTERNEURON PHARMACEUTICALS, INC.
By: /s/ Thomas F. Farb
Name: Thomas F. Farb
Title: Executive Vice President - Finance
9
Appendix to Exhibit 10.90(b)*
The Registrant and Swiss Bank Corporation, London Branch entered into two
confirmations, relating to an aggregate of 2,000,000 options each relating to
1,000,000 options and substantially identical to the form of confirmation filed
as Exhibit 10.90(b), except that the Expiration Dates are May 21, 1999 for
contract B-1 and May 24, 1999 for contract B-2.
* Pursuant to section 2 to Item 601 of regulation S-K.
EXHIBIT 10.91
AGREEMENT REGARDING
REGISTRATION RIGHTS AND RELATED OBLIGATIONS
This Agreement Regarding Registration Rights and Related Obligations
(this "Agreement") is entered into this _____ day of _____________, 199__,
between Interneuron Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and Swiss Bank Corporation, a Swiss banking corporation, acting by
and through its London Branch ("SBC").
WHEREAS, on _______________, 1997, the Company issued to SBC, and SBC
acquired from the Company, the Call Warrant, as defined in Section 1.1 hereof,
in consideration of a capped call option issued on that date by SBC to the
Company, as well as the other undertakings and obligations of the Company set
forth in the Call Warrant; and
WHEREAS, pursuant to the terms and conditions of the Call Warrant, on
____________, 199__ or such later date as is established pursuant to the Call
Warrant (the "Maturity Date"), SBC has the right to purchase from the Company,
and, upon exercise of that right by SBC, the Company has the obligation, at its
election, either (i) to sell to SBC, at the exercise price provided for in the
Call Warrant, the number of shares of the Company's common stock, par value
$.001 per share (the "Common Stock"), underlying the Call Warrant ("Physical
Settlement") or (ii) to pay to SBC an amount of cash calculated as provided in
the Call Warrant ("Cash Settlement"); and
WHEREAS, pursuant to the terms and conditions of the Call Warrant, in
the event the Company elects to discharge its obligations thereunder by Physical
Settlement, the Company and SBC shall enter into this Agreement; and
WHEREAS, the Company has elected to discharge its obligations under the
Call Warrant by Physical Settlement;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the Company and SBC hereby agree as follows:
ARTICLE I DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
1.1 Call Warrant. "Call Warrant" shall mean the warrant to purchase
Common Stock issued by the Company to SBC pursuant to the terms and conditions
of the Confirmation.
1.2 Commission. "Commission" shall mean the United States Securities
and Exchange Commission or any successor agency thereto.
1.3 Confirmation. "Confirmation" shall mean the confirmation setting
forth the terms of the Call Warrant, together with the Master Agreement
incorporated therein, dated as of _________________.
1.4 Exchange Act. "Exchange Act" shall mean the United States
Securities Exchange Act of 1934, as amended.
1.5 Local Business Day. "Local Business Day" shall mean a day on which
commercial banks are open for business (including dealings in foreign exchange
and foreign currency deposits) in New York, New York.
1.6 Preliminary Prospectus. "Preliminary Prospectus" shall mean any
preliminary prospectus, including all documents incorporated by reference
therein, included in the Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission under the
Securities Act; any reference to any amendment or supplement to the Preliminary
Prospectus shall be deemed to include any documents filed under the Exchange Act
after the date of such Preliminary Prospectus and incorporated by reference
therein; and any reference to the Preliminary Prospectus as amended or
supplemented shall be deemed to include the Preliminary Prospectus as amended or
supplemented by any such documents filed under the Exchange Act after the date
of such Preliminary Prospectus and incorporated by reference therein.
1.7 Prospectus. "Prospectus" shall mean any prospectus, including all
documents incorporated by reference therein, (i) included in the Registration
Statement as of the time that the Registration Statement is declared effective
or (ii) filed with the Commission in connection with the Registration Statement
pursuant to Rule 424(b) of the rules and regulations of the Commission under the
Securities Act; any reference to any amendment or supplement to the Prospectus
shall be deemed to include any documents filed under the Exchange Act after the
date of such Prospectus and incorporated by reference therein; and any reference
to the Prospectus as amended or supplemented shall be deemed to include the
Prospectus as amended or supplemented by any such documents filed under the
Exchange Act after the date of such Prospectus and incorporated by reference
therein.
1.8 Registration Statement. "Registration Statement" shall mean a
registration statement on Form S-3 (or any applicable successor form then in
effect; provided that if, at the time a registration statement is to be filed,
the Company is not eligible to use Form
2
S-3 or applicable successor form for a primary offering by or on behalf of the
Company, "Registration Statement" shall mean a registration statement on such
form as is then available to the Company), which is to be filed with the
Commission pursuant to Section 4.1 hereof, covering the resale of the Shares
from time to time, including all exhibits thereto and all documents incorporated
by reference in the Prospectus contained in such Registration Statement at the
time it is declared effective, each as amended at the time the Registration
Statement is declared effective.
1.9 Securities Act. "Securities Act" shall mean the United States
Securities Act of 1933, as amended.
1.10 Shares. "Shares" shall mean the shares of Common Stock issuable
upon exercise of the Call Warrant.
1.11 Termination Date. "Termination Date" shall mean the second
anniversary of the Maturity Date.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to SBC that the following are true
and correct as of the date hereof and as of the "Settlement Date" (as that term
is defined in the Confirmation):
2.1 Organization and Existence of the Company. The Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority (corporate and
other) to own its properties and conduct its business as described in the 1934
Act Reports, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which the ownership or leasing of properties, or the conduct of
its business requires such qualification, except to the extent the failure to be
so qualified would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation and is in good standing
under the laws of its jurisdiction of incorporation, except where the failure to
be so would not have a material adverse effect on the Company and the
subsidiaries taken as a whole.
2.2 Authorization of Transactions and Agreement. The execution,
delivery and performance of this Agreement have been duly authorized by the
board of directors of the Company. Assuming the due execution thereof by SBC,
this Agreement constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
3
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law). The Company has the corporate
power to execute and deliver this Agreement and to consummate the transactions
contemplated herein.
2.3 Capitalization. (a) As of __________, 199__, the authorized capital
stock of the Company consists of (i) ___________ shares of Common Stock and (ii)
_________ shares of preferred stock, par value $.001 per share (the "Preferred
Stock"). As of _______, 199__, ______________ shares of Common Stock (of which
__________ shares are treasury shares) and _________ shares of Preferred Stock
were issued and outstanding. In addition, as of __________, 199__, the following
shares of Common Stock were reserved for issuance upon [SPECIFY RESERVED
SHARES].
(b) The outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and non-assessable. The Company's
stockholders have no preemptive rights with respect to the Shares. All of the
issued shares of capital stock of each subsidiary of the Company that is a
"significant subsidiary" (as defined in Rule 12b-2 under the Exchange Act) have
been duly and validly authorized and issued, are fully paid and non-assessable,
and all such shares that are owned directly or indirectly by the Company are
owned free and clear of all liens, encumbrances, equities or claims, with such
exceptions as would not have a material adverse effect on the Company's
ownership interest in a significant subsidiary.
(c) The Shares have been duly authorized and, when issued and delivered
upon exercise of the Call Warrant in accordance with the terms and conditions
thereof, will be validly issued, fully paid and nonassessable.
2.4 SEC Filings and Financial Statements. (a) The Company has
heretofore delivered to SBC copies of the Company's (i) Annual Report on Form
10-K for the fiscal year ended [THEN MOST RECENTLY ENDED FISCAL YEAR], and (ii)
the proxy statement for its 199__ Annual Meeting of Stockholders, in each case,
substantially in the form filed by the Company with the Commission
(collectively, together with any other reports filed, as of the date of this
Agreement, by the Company under the Exchange Act and the rules and regulations
of the Commission since [TWO YEARS BEFORE DATE IN CLAUSE (I)] (the "1934 Act
Reports"). All of the 1934 Act Reports have complied in all material respects,
as of their respective filing dates, with all applicable requirements of the
Exchange Act and the related rules and regulations thereunder. As of their
respective filing dates, none of the 1934 Act Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Any amending,
correcting or superseding statement made in any subsequent 1934 Act Report shall
be effective for this purpose only with respect to the period after the filing
of such subsequent 1934 Act Report.
4
(b) The audited consolidated financial statements and unaudited interim
financial statements of the Company contained or incorporated by reference in
the Company's 1934 Act Reports have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis and, together with
the notes thereto, present fairly the consolidated financial position of the
Company and its subsidiaries at the dates shown and the consolidated results of
their operations, changes in stockholders' equity and cash flows for the periods
then ended.
2.5 No Material Adverse Change. Neither the Company nor any of its
significant subsidiaries has sustained since the date of the latest audited
financial statements included or incorporated by reference in the 1934 Act
Reports any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the 1934 Act Reports. Since the date of the
latest audited financial statements included or incorporated by reference in the
1934 Act Reports, and except as may be set forth or contemplated in the 1934 Act
Reports, there has not been (i) any material change in the capital stock of the
Company (other than a change solely attributable to, or resulting from, the
issuance of Common Stock pursuant to a director, officer or employee stock
option, benefit or compensation plan), (ii) any material increase in the
short-term or long-term consolidated debt of the Company and its consolidated
subsidiaries on a consolidated basis or (iii) any material adverse change, or
any development involving a prospective material adverse change, in the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole, that could
reasonably be expected to require disclosure in a primary public offering of
Common Stock by the Company under the Securities Act.
2.6 No Conflicts. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
sale/leaseback agreement, loan agreement, similar financing agreement or
instrument or other agreement or instrument to which the Company or any of its
significant subsidiaries is a party or by which the Company or any of its
significant subsidiaries is bound or to which any of the property or assets of
the Company or any of its significant subsidiaries is subject, except for such
conflicts, breaches or violations as would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole, or on the transactions
contemplated by this Agreement or the Confirmation; nor will such actions result
in any violation of the provisions of the Certificate of Incorporation or
by-laws of the Company or any statute applicable to the Company or any of its
significant subsidiaries or any order, judgment, decree, rule or
5
regulation applicable to the Company or any of its significant subsidiaries of
any court or governmental agency or body having jurisdiction over the Company or
any of its significant subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the consummation by
the Company of the transactions contemplated by this Agreement, except such as
may be required under the Securities Act prior to the resale of Shares and any
such consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
resale of Shares.
2.7 Litigation. Other than as set forth or contemplated in the 1934 Act
Reports, there are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and to the Company's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
2.8 Independence of Public Accountants. Coopers & Lybrand LLP, who have
audited certain financial statements of the Company and its consolidated
subsidiaries, are independent public accountants as required by the Securities
Act and the Exchange Act and the rules and regulations of the Commission
thereunder.
2.9 Not an Investment Company. The Company is not an "investment
company" as such term is defined under the Investment Company Act of 1940, as
amended.
2.10 No Registration Rights. Except as provided in Schedule 2.10
hereto, or in other agreements with SBC, no person has any right to request or
demand to have any shares of Common Stock or other securities of the Company
registered pursuant to the Registration Statement or another registration
statement pursuant to the Securities Act.
2.11 Registrant Requirements for Form S-3. The Company meets the
registrant requirements of General Instruction I.A. of Form S-3 under the
Securities Act, as in effect on the date of this Agreement.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SBC
SBC represents and warrants to the Company that the following are true
and correct as of the date hereof and as of the Settlement Date:
6
3.1 Organization and Existence of SBC. SBC is a banking corporation
organized under the laws of Switzerland, with power and authority (corporate and
other) to own its properties and conduct its business.
3.2 Authorization of Transactions and Agreement. The execution,
delivery and performance of this Agreement have been duly authorized by SBC.
Assuming the due execution thereof by the Company, this Agreement constitutes
the legal, valid and binding obligation of SBC, enforceable against SBC in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law). SBC has the corporate power to execute and deliver this Agreement and to
consummate the transactions contemplated herein.
3.3 No Conflicts. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any agreement or instrument to which SBC is a party
or by which SBC is bound or to which any of the property or assets of SBC is
subject, nor will such action result in any violation of the charter or by-laws
of SBC or any statute or any order, judgment, decree, rule or regulation of any
court or governmental agency or body having jurisdiction over SBC or any of its
properties, except for such conflicts, breaches or violations as would not have
a material adverse effect on the transactions contemplated by this Agreement or
the Confirmation; and no consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or body is
required for the consummation by SBC of the transactions contemplated by this
Agreement, except such as may be required under the Securities Act prior to the
resale of Shares and any such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky laws in
connection with the resale of Shares.
ARTICLE IV AGREEMENTS OF THE COMPANY
The Company agrees, with respect to the period beginning on the date
hereof through and including the earlier of the Termination Date or the date on
which the Company receives written notice from SBC that all of the Shares have
been resold (except that the provisions of Section 4.9 may continue by its terms
after such date), as follows:
4.1 Filing of Registration Statement. (a) The Company has filed or
shall expeditiously file with the Commission a registration statement, covering
the resale of the Shares from time to time by SBC and such affiliated entities
as SBC may designate on
7
securities exchanges or over-the-counter or in such other lawful manner as SBC
may specify, in a form previously reviewed by SBC.
(b) If such registration statement has not yet become effective, the
Company shall use its best efforts to cause such registration statement to
become effective no later than the Maturity Date. The Company shall (i) use its
best efforts to cause such registration statement to remain in effect until the
earlier of the Termination Date or the date on which the Company receives
written notice from SBC that all of the Shares have been resold, (ii) inform SBC
promptly upon notice from the Commission that the Registration Statement has
been declared effective, (iii) advise SBC promptly of any proposed amendment or
supplement to the Prospectus after the effective date thereof and furnish SBC
with a draft prior to the filing thereof, (iv) for so long as delivery of a
prospectus is required in connection with the offering or sale of any of the
Shares, (A) unless the Company is legally required to so amend or supplement the
Prospectus, make no further amendment or any supplement to the Prospectus (other
than any such amendment or supplement resulting from the filing of reports or
statements under the Exchange Act which are incorporated by reference in the
Prospectus) after the effective date thereof to which SBC reasonably objects
within two business days after receipt of a draft of the proposed amendment or
supplement and (B) file promptly all reports and any definitive proxy or
information statements required to be filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, (v) during such same period,
advise SBC, promptly after the Company receives notice thereof, (A) of the time
when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed with the Commission, (B) of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any prospectus
relating to the Shares, (C) of the suspension of the qualification of the Shares
for offering or sale in any jurisdiction, (D) of the initiation or threatening
of any proceeding for any such purpose, or (E) of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information, and (vi) in the event of the issuance
of any such stop order or of any such order preventing or suspending the use of
any prospectus relating to the Shares or suspending any such qualification, use
promptly its best efforts to obtain the withdrawal of such order. The Company
shall not include in the Registration Statement any securities other than the
Shares.
4.2 Qualification of the Shares under State Securities Laws. The
Company shall promptly take, from time to time, such action as SBC may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such of the United States as SBC may request and to comply
with such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the resale of the
Shares (but not to exceed the period specified in the first paragraph of this
Article IV); provided that, in connection therewith, the Company shall not be
required to
8
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction.
4.3 Preparation of Registration Statement; Reasonable Investigation.
The Company shall (a) give SBC, its designated affiliated entities, counsel and
accountants the opportunity to participate in the preparation of the
Registration Statement and, to the extent practicable, each amendment or
supplement thereto and document incorporated by reference therein which is filed
with the Commission after the filing of the Registration Statement, (b) give SBC
and its representatives such reasonable access to the books, records and
properties of the Company and its subsidiaries (to the extent customarily given
to those who are underwriters of the Company's securities) and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements and
will have such officers and accountants supply such information as shall be
reasonably requested by SBC or its representatives in connection with a
"reasonable investigation" within the meaning of Section 11(b) of the Securities
Act and (c) furnish SBC with copies of any press release or other public
announcement which it intends to issue, or any report or document which it
intends to file under the Exchange Act with the Commission or other regulatory
agency, insofar as such press release, public announcement, report or other
document regards this Agreement and the Call Warrant promptly (where
practicable, at least two business days prior to the proposed issuance or filing
thereof), and consider in good faith any comments received from SBC concerning
the timing and content of such press release, public announcement, report or
other document.
4.4 Compliance with Applicable Law and Commission Requirements. (a) The
Registration Statement and Prospectus and all amendments or supplements thereto
shall conform in all material respects to the requirements of the Securities Act
and the rules and regulations of the Commission thereunder and shall not, as of
the applicable effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date of the Prospectus and any amendment
or supplement thereto, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this covenant shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by SBC expressly for use in
the Prospectus or any amendment or supplement thereto.
(b) All of the documents incorporated by reference in the Registration
Statement and Prospectus, or any amendment or supplement thereto, whether
previously filed with the Commission or filed with the Commission following the
date hereof, at their respective times of filing, (i) shall have conformed or
shall conform, as applicable, in all material respects to the requirements of
the Securities Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and (ii) shall not have contained
9
or shall not contain, as applicable, an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to (A) any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by or on behalf of SBC expressly for use in the Prospectus or any
amendment or supplement thereto or (B) statements or omissions that have been
superseded or otherwise corrected by an amendment, supplement or other filing
under the Exchange Act but only with respect to the period after such
correction.
4.5 Furnishing of Prospectuses; Notice to SBC of Need for Amendment.
The Company shall furnish SBC with copies of the Prospectus, including any
amendments or supplements thereto, in such quantities as SBC may from time to
time reasonably request. If, while the Registration Statement is effective, the
delivery of a prospectus is required at any time during the period specified in
the first paragraph of this Article IV in connection with the offering and sale
of the Shares by SBC and if, at such time, any event shall have occurred as a
result of which the Prospectus, including the Prospectus as then amended or
supplemented, would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be necessary
during such same period to amend or supplement the Prospectus or to file under
the Exchange Act any document incorporated by reference in the Prospectus in
order to comply with the Securities Act or the Exchange Act, the Company shall
notify SBC in writing and, as promptly as reasonably possible, provided that
where such report is required under this Section 4.5 solely to comply with the
periodic reporting provisions under the Exchange Act, such report need not be
filed sooner than required by such provisions and no such written notice to SBC
shall be required, shall amend or supplement the Prospectus or file such
document so as to correct such statement or omission or effect such compliance
and shall prepare and furnish to SBC without charge as many copies as SBC may
from time to time reasonably request of any amended Prospectus or supplement to
the Prospectus.
4.6 Listing of the Shares. The Company shall use its best efforts to
have the Shares approved for quotation on the Nasdaq National Market or listed
on such other exchange as the Company Common Stock is listed as of the Maturity
Date.
4.7 Delivery of Opinion and Comfort Letter. On the effective date of
the Registration Statement, the Company shall cause to be furnished to SBC (i)
an opinion or opinions of counsel for the Company, addressed to SBC and dated as
of the effective date of the Registration Statement, in substantially the form
of Exhibit A hereto, and (ii) a letter signed by Coopers & Lybrand LLP,
addressed to SBC and dated as of the effective date of the Registration
Statement, in substantially the form set forth in Exhibit B hereto, provided SBC
provides Coopers & Lybrand LLP with an appropriate request.
10
4.8 Furnishing of Additional Information. Until the earlier of the
Termination Date or completion of resale of the Shares, the Company shall
furnish to SBC copies of all reports or other communications (financial or
other) generally furnished to stockholders and, as soon as they are available,
copies of any reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which the Shares or any class
of securities of the Company are listed (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders generally
or to the Commission).
4.9 Payment of Expenses. The Company shall pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Shares and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, the Prospectus and any amendments and supplements
thereto and the mailing and delivering of copies thereof, (ii) any fees incurred
in connection with any stock exchange listing or approval for quotation of the
Shares on the Nasdaq National Market, (iii) all expenses in connection with the
qualification of the Shares for offering and sale under Section 4.2 hereof, (iv)
the cost of preparing certificates for the Shares, (v) the cost and charges of
any transfer agent or registrar or dividend disbursing agent, and (vi) all other
costs incident to the performance of the Company's obligations under Article IV
hereof which are not otherwise specifically provided for in this Section. It is
understood, however, that except as provided in this Section 4.9, SBC will pay
all of its own costs and expenses, including the fees of its counsel and
brokerage fees and commissions and transfer taxes on resale of any of the Shares
by SBC.
ARTICLE V AGREEMENTS OF SBC
SBC agrees, with respect to the period beginning on the date hereof
through and including the Termination Date, as follows:
5.1 Information for Use in the Prospectus. As soon as practicable but
in no event later than the third business day following the receipt of a written
request from the Company, SBC shall furnish the Company with such information
regarding SBC and its proposed dispositions of Shares as the Company may from
time to time reasonably request for use in preparing the Registration Statement
and Prospectus, including any amendments or supplements thereto.
5.2 Suspension of Disposition of Shares. Upon receipt of written notice
from the Company pursuant to Section 4.5 that an event has occurred as a result
of which, or that the Company has discovered that, the Prospectus, including the
Prospectus as then amended or supplemented, includes an untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the
11
circumstances under which they were made, not misleading, SBC shall immediately
discontinue disposition of the Shares pursuant to the Registration Statement
until such time as SBC shall have received copies of an amended or supplemented
Prospectus or until it receives notice from the Company that dispositions of
Shares may be resumed without amendment or supplementation of the Prospectus.
5.3 Notice of Completion. SBC shall notify the Company within three
business days of completion of its disposition of the Shares.
5.4 Resales of Shares. SBC agrees that it will not offer, transfer,
sell, pledge, hypothecate or otherwise dispose of any of the Shares (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of any
Shares), except in compliance with the Securities Act and the rules and
regulations of the Commission thereunder, and in compliance with applicable
state securities or Blue Sky laws.
ARTICLE VI INDEMNIFICATION
The Company and SBC further agree as follows:
6.1 Indemnification with Respect to the Registration Statement. (a) The
Company will indemnify and hold harmless SBC against any losses, claims, damages
or liabilities, joint or several, to which SBC may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any preliminary prospectus supplement,
the Registration Statement, the Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and will reimburse SBC for any legal or other expenses
reasonably incurred by SBC in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, any supplement thereto, the Registration Statement, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by or on behalf of SBC expressly
for use therein.
(b) SBC will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages
12
or liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus and any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Prospectus, any preliminary prospectus supplement, the
Registration Statement, the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of SBC expressly for use therein and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation.
(d) If the indemnification provided for in this Section 6.1 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and SBC on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
13
fact relates to information supplied by the Company on the one hand or SBC on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
SBC agree that it would not be just and equitable if contribution pursuant to
this subsection (d) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section 6.1 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each "affiliate" (as defined under the
Securities Act) of SBC, to each director and each officer of SBC and of its
affiliates, to each person, if any, who controls SBC or any of its affiliates
within the meaning of the Securities Act; and the obligations of SBC under this
Section 6.1 shall be in addition to any liability which SBC may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company and to each person, if any, who controls the Company
within the meaning of the Securities Act.
ARTICLE VII GENERAL
7.1 Notices. (a) Any notice or other communication in respect of this
Agreement may be given in any manner set forth below to the address or number
specified in paragraph (b) of this Section 7.1 and will be deemed effective as
indicated: (i) if in writing and delivered in person or by courier, on the date
it is delivered; (ii) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the recipient in legible
form (it being agreed that the burden of proving receipt will be on the sender
and will not be met by a transmission report generated by the sender's facsimile
machine); or (iii) if sent by certified or registered mail or the equivalent
(return receipt requested), on the date that mail is delivered or its delivery
is attempted; unless that delivery (or attempted delivery) or that receipt, as
applicable, is not on a Local Business Day or occurs after the close of business
on a Local Business Day, in which case that notice or communication shall be
deemed given and effective on the first following day that is a Local Business
Day.
(b) Notices shall be given to the addresses or facsimile numbers
reflected below:
14
If to SBC, to: Swiss Bank Corporation, London Branch
c/o SBC Warburg Inc.
141 West Jackson Boulevard
Chicago, Illinois 60604
Attention: Legal Department
Facsimile: (312) 554-5734
Telephone: (312) 554-5376
If to the Company, to: Interneuron Pharmaceuticals, Inc.
99 Heyden Ave.
Lexington, MA 02173
Attention: Chief Financial Officer
Facsimile: 617-674-2448
Telephone: 617-861-8444
(c) Either party may by notice to the other change the address or
facsimile number at which notices or other communications are to be given to it.
7.2 Entire Agreement. This Agreement, together with the Confirmation,
constitute the entire agreement and understanding of the parties with respect to
their subject matter and supersede all oral communications and prior writings
with respect thereto.
7.3 Governing Law and Jurisdiction. (a) This Agreement shall be
governed by and construed in accordance with New York law (without reference to
choice of law doctrine).
(b) With respect to any suit, action or proceedings relating to this
Agreement ("Proceedings"), each party irrevocably (i) submits to the
non-exclusive jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in New York City, and
(ii) waives any objection which it may have at any time to the laying of venue
of any Proceedings brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient forum and further waives the
right to object, with respect to such Proceedings, that such court does not have
any jurisdiction over such party. Nothing in this Agreement precludes either
party from bringing Proceedings in any other jurisdiction, nor will the bringing
of Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SBC hereby appoints Swiss Bank Corporation, New York Branch, 222
Broadway, New York, New York 10038, Attention: Legal Affairs, to receive, for it
and on its behalf, service of process of any Proceedings. The parties
irrevocably consent to
15
service of process given in the manner provided for notices in Section 7.1.
Nothing in this Agreement will affect the right of either party to serve process
in any other manner permitted by law.
7.4 Amendments and Waivers. No amendment, modification or waiver in
respect of this Agreement shall be effective unless in writing and executed by
each of the parties. A failure or delay in exercising any right, power or
privilege in respect of this Agreement shall not be presumed to preclude any
subsequent or further exercise of that right, power or privilege or the exercise
of any other right, power or privilege.
7.5 Remedies Cumulative. The rights, powers, remedies and privileges
provided in this Agreement are cumulative and not exclusive of any rights,
powers, remedies and privileges provided by law.
7.6 Headings. The headings used in this Agreement are for convenience
of reference only and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
7.7 No Third-Party Beneficiaries. Except as expressly provided in
Section 6.1(e), nothing in this Agreement is intended or shall be construed to
confer upon any person other than the parties hereto any right, remedy or claim
under or by reason of this Agreement.
7.8 Survival. The representations, warranties, indemnities and
agreements contained in this Agreement shall remain in full force and effect,
regardless of any investigation by or on behalf of any party, and shall survive
delivery of the Shares to SBC and resale of the Shares by SBC or any affiliated
entity.
7.9 Counterparts. This Agreement may be executed in one or more
counterparts with the same effect as if the signatures to each counterpart were
upon the same instrument.
7.10 Assignability. This Agreement is not assignable by either party
without the prior written consent of the other; provided that the Company may
assign this Agreement to a successor in interest pursuant to a transfer of all
or substantially all of its assets or pursuant to a consolidation or merger.
16
IN WITNESS WHEREOF, Interneuron Pharmaceuticals, Inc. and Swiss Bank
Corporation, London Branch, have executed this Agreement as of the day and year
first written above.
INTERNEURON PHARMACEUTICALS, INC.
By: ___________________________
Title: ___________________________
SWISS BANK CORPORATION,
LONDON BRANCH
By: ___________________________
Title:___________________________
By: ___________________________
Title:___________________________
17
EXHIBIT A
Form of Opinion of Counsel
In Connection With Registration Statement
Counsel reasonably satisfactory to SBC shall have furnished to SBC his
or their written opinion, dated the effective date of the Registration
Statement, in form and substance reasonably satisfactory to SBC, to the effect
that:
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its business as
described in the prospectus; and each subsidiary of the Company that is a
"significant subsidiary" (as defined in Rule 12b-2 under the Exchange Act) has
been duly incorporated and is validly existing as a corporation and is in good
standing under the laws of its jurisdiction of incorporation, except where the
failure to be so would not have a material adverse effect on the Company and its
significant subsidiaries taken as a whole;
(ii) The Company has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each
jurisdiction other than the State of Delaware in which the ownership or leasing
of its properties, or the conduct of its business, requires such qualification,
except to the extent the failure to be so qualified in any jurisdiction would
not have a material adverse effect on the Company and its significant
subsidiaries taken as a whole (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel and in respect of
matters of fact upon certificates of officers of the Company, provided that such
counsel shall state that they believe that both SBC and they are justified in
relying upon such opinions and certificates);
(iii) The Company's authorized capital stock conforms as to legal
matters in all material respects to the description thereof set forth or
incorporated by reference in the Prospectus, and all of the issued shares of
capital stock of the Company (including the Shares delivered in exercise of the
Call Warrant and registered for resale pursuant to the Registration Statement)
have been duly and validly authorized and issued and are fully paid and
non-assessable; all of the issued shares of capital stock of the significant
subsidiaries held directly or indirectly by the Company have been duly and
validly authorized and issued, are fully paid and non-assessable; and the
Company's stockholders have no preemptive rights with respect to the Shares
delivered in exercise of the Call Warrant (such counsel being entitled to rely
in respect of the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that they believe that both
SBC and they are justified in relying upon such opinions and certificates);
(iv) To the best of such counsel's knowledge and other than as set
forth or incorporated by reference in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its significant
subsidiaries is a party or of which any property of the Company or any of its
significant subsidiaries is the subject which, if determined adversely to the
Company or any of its significant subsidiaries, would individually or in the
aggregate have a material adverse effect on the business operations,
consolidated financial position, shareholders' equity or results of operations
of the Company and its significant subsidiaries, taken as a whole; and, to such
counsel's knowledge, no such proceedings are threatened by governmental
authorities or threatened by others, provided that such counsel expresses no
opinion on any such matter relating to the U.S. Food and Drug Administration
("FDA");
(v) The documents incorporated by reference in the Prospectus (other
than the financial statements, related schedules and other financial information
therein, as to which such counsel need express no opinion), when they were filed
with the Commission complied as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder; and
(vi) The Registration Statement and the Prospectus (other than the
financial statements, related schedules and other financial information therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations thereunder; and such counsel do not know of any amendment to the
Registration Statement required to be filed or any contracts or other documents
of a character required to be filed as an exhibit to the Registration Statement
or required to be incorporated by reference into the Prospectus or required to
be described in the Registration Statement or the Prospectus which are not filed
or incorporated by reference or described as required.
In addition to the matters set forth above, the opinion shall also
contain a statement to the effect that while such counsel are not passing upon,
and do not assume responsibility for, the accuracy, completeness or fairness of
the Registration statement or the Prospectus, including the documents
incorporated by reference therein, based upon the procedures referred to in such
opinion nothing has come to the attention of such counsel which leads him or
them to believe (i) that the Registration Statement as of its effective date or
the Prospectus as of its date (other than the financial statements, related
schedules and other financial information therein as to which such counsel need
express no belief) contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading or (ii) that any of the documents incorporated by reference in
the Prospectus which were filed with the Commission prior to such effective time
(other than the financial statements, related schedules and other financial
information therein, as to which such counsel need express no belief), as of the
respective dates when they were filed with the Commission in each
2
case after excluding any statement in any such document which does not
constitute part of the Registration Statement or the Prospectus pursuant to Rule
412 of Regulation C under the Securities Act and after substituting therefor any
statement modifying or superseding such excluded statement, contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such documents were so filed, not misleading, provided
in each case that such counsel expresses no opinion as to FDA or patent matters.
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-END> Mar-31-1997
<CASH> 93,414,000
<SECURITIES> 29,471,000
<RECEIVABLES> 1,926,000
<ALLOWANCES> 0
<INVENTORY> 6,356,000
<CURRENT-ASSETS> 137,128,000
<PP&E> 5,391,000
<DEPRECIATION> (2,367,000)
<TOTAL-ASSETS> 177,792,000
<CURRENT-LIABILITIES> 25,142,000
<BONDS> 0
0
3,500,000
<COMMON> 41,000
<OTHER-SE> 128,880,000<F1>
<TOTAL-LIABILITY-AND-EQUITY> 177,792,000
<SALES> 14,173,000
<TOTAL-REVENUES> 37,466,000
<CGS> 12,302,000
<TOTAL-COSTS> 52,992,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,000
<INCOME-PRETAX> (10,781,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,781,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,781,000)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> 0
<FN>
<F1> Additional paid - in capital - $249,020,000
Accumulated Deficit - $ (117,559,000)
FAS 115 Securities Adjustment - $(218,000)
Treasury Stock - $(2,363,000)
</FN>
</TABLE>
