1
CONTRACT B EXHIBIT 10.74
CONFIRMATION
Date: September 11, 1997
To: IDEC Pharmaceuticals Corporation ("Party B")
Attention: Phillip Schneider
From: Swiss Bank Corporation, London Branch ("Party A")
Re: Equity Option Confirmation
Reference Number 1262213
- --------------------------------------------------------------------------------
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.
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 August 26, 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 : *_________*
Buyer : Party A
Seller : Party B
Option Style : European Option
- ----------
*________*Indicates that material has been omitted and confidential treatment
has been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
2
Option Type : Call
Shares : Common Stock of IDEC Pharmaceuticals
Corporation (Symbol: IDPH)
Number of Options : 900,000
Contract Multiplier : 1.00
Strike Price : USD 46.40
Total Premium : *__________*.
Expiration Date : *__________*, 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 and the
Pacific Stock 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, on:
(i) the Exchange in the Shares; or (ii) the
Pacific Stock Exchange in
- ----------
*________* Indicates that material has been omitted and confidential treatment
has been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
2
3
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 (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
for purposes of
giving notice : Telephone: 619-458-8813
Fax: 619-458-8439
Attention: Phil Schneider
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 20 Exchange Business Days before
the Expiration Date (the date of such
notice, the "Election Date").
Notwithstanding the foregoing, if on the
Initial 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 I 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:
3
4
(a) within three Exchange Business Days
after the Election 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 Election Date.
(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
(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.
4
5
Reference Price : (a) If the Valuation Period contains
*______* Normal Trading Days, the Reference
Price shall be the arithmetic average of the
Share Prices on those *_____* Normal Trading
Days.
(b) If the Valuation Period does not contain
*_____* Normal Trading Days, the parties
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 *______* Share Prices, and in such
case the Reference Price shall be the
arithmetic average of those *______* Share
Prices. If the parties are unable to reach
agreement on the foregoing determination,
then the parties will negotiate in good
faith to agree on an independent third party
that will make such determination, and, if
they cannot agree within three Exchange
Business Days each of Party A and Party B
will promptly choose an independent third
party and instruct the parties so chosen to
agree on another independent third party
that will make such determination. The
determination of an independent third party
will be binding absent manifest error. The
costs of such independent third party will
be borne equally by Party A and Party B.
Share Price : The closing price of the Shares as reported
on the Exchange.
Valuation Period : The period from and including the *______*
Exchange Business Day immediately preceding
the Expiration Date (the "Initial Date") to
and including the *______* Exchange
Business Day immediately following 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 *___* Normal Trading Days,
but in no event shall the last day of the
Valuation Period be later than the *____*
Exchange Business Day following 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) within three Exchange Business Days
after the Election 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 ten
Exchange Business Days after the Settlement
Date, Party A resells all or any
- ----------
*________* Indicates that material has been omitted and confidential treatment
has been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
5
6
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 of Expiration
Date : At any time prior to fifteen days prior to
the date that otherwise would have been the
Expiration Date, Party B may notify Party A
that it would like to delay the Expiration
Date to a date (the "Termination Date") not
less than ten Exchange Business Days after
the date of such notice and not more than 90
days after the original 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") by the Buyer of the
Transaction to compensate the Seller of the
Transaction for such delay. 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 Buyer on
the third Currency Business Day after the
Agreement Date. If Party B does not agree to
the
6
7
Settlement Amount, the Expiration Date shall
not be delayed.
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 determination
of the Calculation Agent, 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:
SP[0] (CP[0] - DA)
------------------
SP[1] = CP[0]
SP[0]
-----
CM[1] = SP[1]
Where:
7
8
(i) SP[1] = Strike Price after the Dividend Event
(ii) CM[1] = Contract Multiplier after the Dividend
Event
(iii) SP[0] = Strike Price on the Exchange Business
Day immediately preceding the
Ex-Dividend Date with respect to the
Dividend Event
(iv) CP[0] = 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:
(CP[0] x N[0])-C
--------------
SP[1] = SP[0] x [CP[0] x (N[0]-N[1])]
SP[0]
-----
CM1 = SP[1]
Where:
(i) SP[1] = Strike Price after the Adjustment
Event
(ii) CM[1] = Contract Multiplier after the
Adjustment Event
(iii) SP[0] = Strike Price on the Completion Date
(as hereinafter defined)
(iv) CP[0] = The closing price of the Shares, as
reported on the Exchange, on the
Completion Date
(v) N[0] = 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 offer or
pursuant to the Adjustment Event
(vii) N[1] = Total number of shares of common
stock of the Issuer purchased by
the offeror pursuant to the
Adjustment Event
8
9
(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
9
10
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: By:
-------------------------------- -------------------------------------
Name: Name:
Title: Title:
Confirmed as of the ___ day
of ____________, 199__
IDEC PHARMACEUTICALS CORPORATION
By:
--------------------------------
Name:
Title:
10