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___________________
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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
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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
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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
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(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
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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
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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
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be.
Adjustment Events
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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
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(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
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Miscellaneous
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Transfer : Neither party may transfer the Transaction, in whole
or in part, without the prior written consent of the
non-transferring party.
Account Details
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Payments and deliveries to Party A: Previously provided
Payments and deliveries to Party B: Previously provided
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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.