-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V8vI62xWCzGnz6SfgMz3kxW6igyh4Xdt0XCmSsio6kuKhsUOQu8ExL88NbY1kbJ0 dx/1q0EqInc1bOjGLoLcAQ== 0000950162-03-000875.txt : 20030604 0000950162-03-000875.hdr.sgml : 20030604 20030604161111 ACCESSION NUMBER: 0000950162-03-000875 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20030604 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ELAN CORP PLC CENTRAL INDEX KEY: 0000737572 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: LINCOLN HOUSE LINCOLN PLACE STREET 2: COUNTY WESTMEATH CITY: DUBLIN 2 IRELAND STATE: L2 BUSINESS PHONE: 3537094000 MAIL ADDRESS: STREET 1: LINCOLN HOUSE LINCOLN PLACE STREET 2: EIGHTY PINE STREET CITY: DUBLIN 2 IRELAND STATE: L2 ZIP: 00000 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CURIS INC CENTRAL INDEX KEY: 0001108205 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 043505116 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-59429 FILM NUMBER: 03732708 BUSINESS ADDRESS: STREET 1: 61 MOULTON ST CITY: CAMBRIDGE STATE: MA ZIP: 02138 BUSINESS PHONE: 6178760086 MAIL ADDRESS: STREET 1: 61 MOULTON ST CITY: CAMBRIDGE STATE: MA ZIP: 02138 SC 13D 1 elancuris13d060403.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________ SCHEDULE 13D Under the Securities Exchange Act of 1934 Curis, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.01 par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 231269101 - -------------------------------------------------------------------------------- (CUSIP Number) William F. Daniel Elan Corporation, plc Lincoln House Lincoln Plaza Dublin 2, Ireland (353) 1-709-4000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 16, 2003 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ]. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - -------------------------------------------------------------------------------- CUSIP No. 231269101 - -------------------------------------------------------------------------------- (1) NAME OF REPORTING PERSONS Elan Corporation, plc I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) N/A - -------------------------------------------------------------------------------- (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- (3) SEC USE ONLY - -------------------------------------------------------------------------------- (4) SOURCE OF FUNDS WC, OO - -------------------------------------------------------------------------------- (5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- (6) CITIZENSHIP OR PLACE OF ORGANIZATION Ireland - -------------------------------------------------------------------------------- Number of (7) SOLE VOTING POWER Shares 3,775,230 -------------------------------------------------------------- Beneficially (8) SHARED VOTING POWER Owned None -------------------------------------------------------------- by Each (9) SOLE DISPOSITIVE POWER Reporting 3,775,230 -------------------------------------------------------------- Person With (10) SHARED DISPOSITIVE POWER None - -------------------------------------------------------------------------------- (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,775,230 - -------------------------------------------------------------------------------- (12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.8% (based on 31,720,838 shares of Common Stock outstanding on April 21, 2003, as reported in the Issuer's annual report of Form 10-Q for the fiscal quarter ended March 31, 2003, plus 2,878,782 shares issued to Elan on May 16, 2003) - -------------------------------------------------------------------------------- (14) TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- Item 1. Security and Issuer. Common Stock, $0.01 par value, of Curis, Inc. (the "Issuer"), a Delaware corporation whose principal offices are located at 61 Mouton Street, Cambridge, Massachusetts, 02138. Item 2. Identity and Background. This Schedule 13D is filed by Elan Corporation, plc, an Irish public limited company. Elan Corporation, plc's principal place of business is Lincoln House, Lincoln Place Dublin 2, Ireland. Elan Corporation, plc is a worldwide pharmaceutical company. Schedule A to this Schedule 13D sets forth the (a) name, (b) residence or business address, (c) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted and (d) the citizenship or place of organization of each executive officer, director and controlling person of Elan. During the last five years, neither Elan nor any person identified on Schedule A to this Schedule 13D: (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction, as a result of which proceeding it was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, United States federal or state securities laws, or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration For the purposes of this Schedule 13D, Elan Corporation, plc and its subsidiaries are referred to as "Elan." Pursuant to a Securities Purchase Agreement dated July 18, 2001 (the "Purchase Agreement"), Elan International Services, Ltd., a Bermuda exempted limited liability company ("EIS") and wholly-owned subsidiary of Elan Corporation, plc, acquired (a) 546,448 shares of Common Stock, $0.01 par value, of the Issuer (the "Common Stock"), (b) 1,000 shares of Series A Convertible Exchangeable Preferred Stock, $0.01 par value, of the Issuer (the "Series A Preferred Stock") and (c) a warrant to purchase up to 50,000 shares of Common Stock (the "Warrant"). The aggregate purchase price, paid in cash, for the above-referenced securities was $16,015,000, $12,015,000 of which represented the purchase price for the Series A Preferred Stock and $4,000,000 which represented the purchase price for the shares of Common Stock and the Warrant. General corporate funds were used in acquiring the above-referenced securities. At the time of issuance, the Series A Preferred Stock accrued paid-in-kind dividends at an annual rate of 6.0%, compounded semi-annually, and was convertible at the option of the holder at any time after the third anniversary of its issuance and through July 18, 2007 into shares of Common Stock at a conversion price of $14.12, subject to customary antidilution adjustments. The Warrant was and is immediately exercisable for 50,000 shares of Common Stock, at an exercise price of $10.46 per share, subject to customary antidilution adjustments. -1- Also pursuant to the Purchase Agreement, Elan Pharma International Limited, an Irish private limited liability company ("EPIL") and wholly-owned subsidiary of Elan Corporation, plc, purchased a convertible promissory note (the "Note") from the Issuer under which EPIL made advances of $4,660,371 in the aggregate. At the time of issuance, the Note accrued interest at an annual rate of 8% from the issuance date through July 18, 2005, and thereafter at 6%, compounded semi-annually (with interest not paid in cash but capitalized and added to principal on each compounding date). The Note had a six-year term and principal (including capitalized interest) and accrued and unpaid interest was convertible, at the holder's option, commencing July 18, 2003, into shares of Common Stock at a conversion price of $8.63 per share. As of December 31, 2002, $4,864,372 of principal (including capitalized interest) and accrued and unpaid interest was outstanding. At the time of entering into the Purchase Agreement, the Issuer and Elan formed a joint venture company, Curis Newco, Ltd. (the "Joint Venture"). In certain circumstances, the Series A Preferred Stock was exchangeable into securities of the Joint Venture. On May 16, 2003, Elan Corporation, plc, EIS, EPIL and the Issuer executed a Termination Agreement (the "Termination Agreement"), pursuant to which, among other things (i) certain agreements between Elan and the Issuer relating to the Joint Venture were terminated, (ii) EIS surrendered to the Issuer for cancellation all 1,000 shares of the Series A Preferred Stock and waived its right to receive payment of all mandatory paid-in-kind dividends with respect to the Series A Preferred Stock not theretofore paid, in consideration for the issuance by the Issuer to EIS of an aggregate of 2,878,782 shares of Common Stock, (iii) agreements affecting the securities were amended to remove certain restrictions on transfer, (iv) the Issuer repaid $1,500,000 of the Note, consisting of principal (including capitalized interest) and accrued and unpaid interest, (v) EPIL forgave $400,000 of the Note, consisting of principal (including capitalized interest) and accrued and unpaid interest and (iv) the Issuer issued an Amended and Restated Promissory Note (the "Amended and Restated Note") to EPIL in an aggregate principal amount of $3,000,000 that supersedes and replaces the Note in its entirety. The Amended and Restated Note matures on July 18, 2007 and bears interest at an annual rate of 6.0%, compounded semi-annually on each July 18 and January 14, commencing July 18, 2003. Accrued interest is capitalized and added to the principal amount outstanding on each compounding date. The Amended and Restated Note is convertible at any time after July 18, 2003 and prior to its maturity into that number of shares of Common Stock that is equal to the total amount of the outstanding principal (including capitalized interest) plus accrued and unpaid interest on the date of conversion divided by $10.00, subject to customary anti-dilution adjustments. On July 18, 2003, the amended and Restated Note will be convertible into 303,107 shares of Common Stock, subject to customary antidilution adjustments. The maximum number of shares of Common Stock that could be issued upon conversion of the Amended and Restated Note, if the Amended and Restated Note is converted immediately prior to maturity, is 384,028, subject to customary antidilution adjustments. If the Amended and Restated Note is held to maturity, the principal amount (including capitalized interest) plus accrued and unpaid interest will be payable, at the option of the Issuer, in cash or by the issuance of shares of Common Stock at fair market value. Item 4. Purpose of the Transaction. Elan acquired the securities pursuant to the Purchase Agreement for the purpose of making an investment in the Company and in connection with the Termination Agreement. The Amended and Restated Note is convertible into common stock at the option of EPIL at a conversion price of $10.00 per share, subject to customary antidilution adjustments. The -2- number of shares of Common Stock into which the Amended and Restated Note may be converted is based upon the quotient obtained by dividing the outstanding principal (including capitalized interest) plus accrued and unpaid interest on the date of conversion by $10.00, subject to customary antidilution adjustments. The Warrant is exercisable for 50,000 shares of Common Stock at an exercise price of $10.46, subject to customary antidilution adjustments. The Issuer has granted to Elan certain registration rights for the shares of Common Stock held by Elan and for the shares of Common Stock issuable upon conversion of the Amended and Restated Promissory Note and upon exercise of the Warrant. Elan and the Issuer have agreed that for so long as EIS owns at least 5% of the shares of Common Stock and/or common stock equivalents of the Issuer, subject to the requirements of the General Corporation Law of the State of Delaware, EIS will have the right (which right is assignable by EIS and its assignees and transferees) to elect a representative to the vacancy on the Issuer's Board of Directors (the "Issuer Board"), which representative must be reasonably acceptable to the Issuer (such approval not to be unreasonably withheld or delayed), and, if no vacancy shall exist on the Issuer Board, upon the request of EIS, the Issuer Board will create a new directorship on the Issuer Board. Other than as set forth above, Elan has no present plans or intentions which would result in or relate to any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. The foregoing descriptions of the Purchase Agreement and the Termination Agreement do not purport to be complete and are qualified in their entirety by reference to the full text thereof. The Purchase Agreement and the Termination Agreement are incorporated by reference herein. Item 5. Interest in Securities of Issuer. (a) Elan is the beneficial owner of 3,775,230 shares of Common Stock (including 300,000 shares of Common Stock issuable upon conversion of the Convertible Note and 50,000 shares issuable upon exercise of the Warrant), representing 10.8% of the outstanding shares of Common Stock (based on 31,720,838 shares of Common Stock outstanding on April 21, 2003, as reported in the Issuer's annual report on Form 10-Q for the fiscal quarter ended March 31, 2003, plus 2,878,782 shares issued to Elan on May 16, 2003). (b) Elan has the sole voting and dispositive power over 3,775,230 shares of Common Stock (including 300,000 shares of Common Stock issuable upon conversion of the Convertible Note and 50,000 shares issuable upon exercise of the Warrant). (c) See Items 3 and 4. (d) N/A (e) N/A -3- Item 6. Contracts, Arrangements, Understanding or Relationships with Respect to Securities of the Issuer. Except as described in Items 3 and 4, there are no contracts, arrangements, understandings or relationships described in Item 6 of Schedule 13D. Item 7. Material to Be Filed as Exhibits. 1. Securities Purchase Agreement, dated July 18, 2001.(1) 2. Registration Rights Agreement, dated July 18, 2001.(2) 3. Warrant, dated July 18, 2001.(3) 4. Termination Agreement, dated May 16, 2003.(4) 5. Amended and Restated Promissory Note, dated May 16, 2003.(3) - ---------- 1 Filed as Exhibit 10.1 to the Issuer's Quarterly Report on Form 10-Q for the period ended June 30, 2001 (the "June 2001 10-Q") and incorporated by reference herein. 2 Filed as Exhibit 4.1 to the June 2001 10-Q and incorporated by reference herein. 3 Filed herewith. 4 Filed as Exhibit 10.1 to the Issuer's Current Report on Form 8-K filed June 3, 2003 and incorporated by reference herein. -4- SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: June 4, 2003 ELAN CORPORATION, PLC By: /s/ Liam Daniel ------------------------------ Name: Liam Daniel Title: Company Secretary SCHEDULE A The (a) name, (b) state or other place of its organization, (c) principal business, (d) address of its principal business and (e) address of its principal office of Elan is set forth below: (a) Elan Corporation, plc, (b) Ireland, (c) a worldwide biopharmaceutical company, (d) Lincoln House, Lincoln Place, Dublin 2, Ireland, and (e) Lincoln House, Lincoln Place, Dublin 2, Ireland. The (a) name, (b) business address, (c) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted and (d) citizenship of each executive officer and director (other than Messrs. Armen, Boushel, Crowley, Gillespie, Groom, McGowan, McIntyre, McLaughlin, Selkoe, Thornburgh and Tully and Ms. Gray) of Elan are set forth below: 1. (a) G. Kelly Martin, (b) 345 Park Avenue, New York, New York 10154 (c) President and Chief Executive Officer and (d) United States. 2. (a) Shane Cooke, (b) Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Executive Vice President and Chief Financial Officer, and (d) Ireland. 3. (a) William F. Daniel (b) Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Company Secretary, and (d) Ireland. 4. (a) Seamus Mulligan, (b) Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Executive Vice President, Business and Corporate Development, and (d) Ireland. 5. (a) Lars Ekman, (b) Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) President, Research and Development, and (d) Sweden. 6. (a) Tim Wright, (b) Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) President, Commercial Operations, and (d) United States. 7. (a) Paul Breen, (b) Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Executive Vice President Operations, and (d) Ireland. The (a) name, (b) business address, (c) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted and (d) citizenship of each director (other than Messrs. Martin and Daniel) of Elan are set forth below: 1. (a) Garo A. Armen, Ph.D., (b) 630 Fifth Avenue, Suite 2167, New York, New York 10111, (c) Chairman of the Board and Chief Executive Officer of Antigenics, Inc., and (d) United States. 2. (a) Brendan E. Boushel, (b) 9 Upper Mount Street, Dublin 2, Ireland, (c) Retired, and (d) Ireland. 3. (a) Laurence G. Crowley, (b) c/o Elan Corporation, plc, Lincoln House, Lincoln Place, Dublin A-1 2, Ireland, (c) Governor (Chairman) Bank of Ireland, and (d) Ireland. 4. (a) Alan R. Gillespie, Ph.D., (b) c/o Elan Corporation, plc, Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Chairman, Ulster Bank Limited, and (d) United Kingdom. 5. (a) John Groom, (b) c/o Elan Corporation, plc, Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Retired, and (d) United Kingdom. 6. (a) Ann Maynard Gray, (b) c/o Elan Corporation, plc, Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Retired, and (d) United States. 7. (a) Kieran McGowan, (b) c/o Elan Corporation, plc, Lincoln House, Lincoln Place Dublin 2, Ireland, (c) Retired, and (d) Ireland. 8. (a) Kevin McIntyre, M.D., (b) c/o Elan Corporation, plc, Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Associate Clinical Professor of Medicine at Harvard Medical School, and (d) United States. 9. (a) Kyran McLaughlin, (b) Davy House, 49 Dawson Street, Dublin 2, Ireland, (c) Head of Equities and Corporate Finance, Davy Stockbrokers, and (d) Ireland. 10. (a) Dennis J. Selkoe, M.D., (b) c/o Elan Corporation, plc, Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Professor of Neurology and Neuroscience at Harvard Medical School, and (d) United States. 11. (a) Richard L. Thornburgh, (b) c/o Elan Corporation, plc, Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Counsel to the law firm of Kirkpatrick & Lockhart LLP, and (d) United States. 12. (a) Daniel P. Tully, (b) c/o Elan Corporation, plc, Lincoln House, Lincoln Place, Dublin 2, Ireland, (c) Retired, and (d) United States. A-2 EXHIBIT INDEX 1. Securities Purchase Agreement, dated July 18, 2001.(1) 2. Registration Rights Agreement, dated July 18, 2001.(2) 3. Warrant, dated July 18, 2001.(3) 4. Termination Agreement, dated May 16, 2003.(4) 5. Amended and Restated Promissory Note, dated May 16, 2003.(3) - ---------- 1 Filed as Exhibit 10.1 to the Issuer's Quarterly Report on Form 10-Q for the period ended June 30, 2001 (the "June 2001 10-Q") and incorporated by reference herein. 2 Filed as Exhibit 4.1 to the June 2001 10-Q and incorporated by reference herein. 3 Filed herewith. 4 Filed as Exhibit 10.1 to the Issuer's Current Report on Form 8-K filed June 3, 2003 and incorporated by reference herein. EX-3 3 elan13dwarrant.txt WARRANT THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND NO INTEREST THEREIN MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) SUCH SECURITIES ARE TRANSFERRED PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT (OR ANY SUCCESSOR RULE) OR (3) CURIS, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO CURIS, INC. THAT NO VIOLATION OF THE ACT OR SIMILAR STATE SECURITIES LAWS WILL BE INVOLVED IN SUCH TRANSFER. THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE ARE SUBJECT TO THE RIGHTS AND OBLIGATIONS CONTAINED IN THAT CERTAIN SECURITIES PURCHASE AGREEMENT, DATED AS OF JULY 18, 2001, BY AND AMONG CURIS, INC., ELAN INTERNATIONAL SERVICES, LTD. AND ELAN PHARMA INTERNATIONAL LIMITED. CURIS, INC. EXERCISEABLE AT OR BEFORE 5:00 P.M., NEW YORK TIME, JULY 18, 2006 No. W-1 Warrant to Purchase 50,000 Shares WARRANT TO PURCHASE SHARES OF COMMON STOCK THIS CERTIFIES THAT, for value received, Elan International Services, Ltd., a Bermuda exempted limited liability company, or its permitted transferees and successors as provided herein (each, a "Holder"), is entitled to subscribe for and purchase up to 50,000 shares, as adjusted pursuant to Section 4 (the "Shares"), of the fully paid and nonassessable common stock, par value U.S.$0.01 per share, of Curis, Inc. (the "Common Stock"), a Delaware corporation (the "Company"), at the price of U.S.$10.46 per share (such price, and such other prices that shall result from time to time, from the adjustments specified in Section 4, the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. -2- 1. Term. Subject to the limitations set forth in Sections 3 and 4, the purchase right represented by this Warrant is exercisable, in whole or in part, at any time, and from time to time, from and after the date hereof and until 5:00 p.m., New York time, July 18, 2006. To the extent not exercised before 5:00 p.m., New York time, on July 18, 2006, this Warrant shall completely and automatically terminate and expire, and thereafter it shall be of no force or effect. 2. Method of Exercise; Payment; Issuance of New Warrant. (a) The purchase right represented by this Warrant may be exercised by the Holder, in whole or in part and from time to time, by the surrender of this Warrant (with the notice of exercise form attached hereto as Annex A duly executed) at the principal office of the Company and by the payment to the Company of an amount, at the option of the Holder, (i) in cash or other immediately available funds, (ii) by the surrender of this Warrant (or a portion hereof) in accordance with the terms hereof but without payment in cash (a "Cashless Exercise") or (iii) with any combination of (i) and (ii). The number of shares of Common Stock issuable in respect of a Cashless Exercise shall be computed using the following formula: X = Y (A-B) ------ A Where: X = the number of shares of Common Stock to be issued to the Holder in respect of a Cashless Exercise Y = the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled in connection with such Cashless Exercise (at the date of such calculation) A = the Fair Market Value (as defined below) of one share of the Company's Common Stock (at the date of such calculation) B = Warrant Price (as adjusted to the date of such calculation) The "Fair Market Value" of one share of Common Stock shall be deemed to be the average of the closing sale prices for the Common Stock over the 30 trading day period ending one trading day prior to the date of the exercise of this Warrant. -3- (b) The persons or entities in whose name(s) any certificate(s) representing Shares shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the Shares represented thereby (and such Shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is properly exercised and full payment for the Shares acquired pursuant to such exercise is made. Upon any exercise of the rights represented by this Warrant, certificates for the Shares purchased shall be delivered to the holder hereof as soon as possible and in any event within 30 days of receipt of such notice and payment, and unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such 30-day period. 3. Stock Fully Paid, Reservation of Shares. All Shares that may be issued upon the exercise of this Warrant will, upon issuance, be duly and validly authorized and issued, fully paid and nonassessable, and will be free from all transfer taxes, liens and charges with respect to the issue thereof and assuming payment of the applicable consideration for all Shares so purchased, legally and validly owned by the Holder. During the period within which this Warrant may be exercised, the Company will at all times have authorized, and reserved for the sole purpose of the issue upon the exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. As long as this Warrant shall be outstanding, the Company shall use its best efforts to cause all shares of Common Stock issuable upon exercise of this Warrant to be listed and/or quoted on all securities exchanges and/or Nasdaq or other medium on which such shares may then be listed. 4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to the adjustment from time to time upon the occurrence of certain events, as follows: (a) No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or bylaws or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Holder against impairment. (b) Certain Adjustments. If at any time prior to the earlier of the exercise or expiration hereof the Company shall: -4- (i) Adjustment for Common Stock Dividends and Distributions. If, at any time after the date hereof (the "Original Issue Date"), the Company makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock or Common Stock Equivalents, in each such event the Warrant Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Warrant Price then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock and Common Stock Equivalents issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of shares of Common Stock and Common Stock Equivalents issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock or Common Stock Equivalents issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Warrant Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Warrant Price shall be adjusted pursuant to this Section 4(b)(i) to reflect the actual payment of such dividend or distribution. A "Common Stock Equivalent" shall mean each share of Common Stock into which securities or property or rights are convertible, exchangeable or exercisable for or into shares of Common Stock, or otherwise entitle the holder thereof to receive directly or indirectly, any of the foregoing. (ii) Adjustments for Stock Splits, Stock Subdivisions and Combinations. If, at any time after the Original Issue Date, the Company subdivides or combines the Common Stock, (A) in the case of a subdivision (including a stock split), the Warrant Price in effect immediately prior to such event shall be proportionately decreased and the number of shares of Common Stock purchasable thereunder shall be proportionately increased, and (B) in the case of a combination (including a reverse stock split), the Warrant Price in effect immediately prior to such event shall be proportionately increased and the number of shares of Common Stock purchasable thereunder shall be proportionately decreased. Any adjustment under this Section 4(b)(ii) shall become effective at the close of business on the date the subdivision or combination becomes effective. (iii) Adjustments for Reclassification, Reorganization and Consolidation. In case of (A) any reclassification, reorganization, change or conversion of securities of the Common Stock (other than a change in par value, or from par value to no par value) into other shares or securities of the Company, or (B) any merger or consolidation of the Company with or into another entity (other than a merger or consolidation with another entity in which the Company is the acquiring and the surviving entity and that does not result in any reclassification or change of the Common Stock), or (C) any sale of all or substantially all the assets of the Company, the -5- Holder shall have the right to receive, in lieu of the shares of Common Stock for which this Warrant is exercisable, the kind and amount of shares of stock and other securities, money and property receivable upon such reclassification, reorganization, change, merger or consolidation upon exercise by the Holder of the maximum number of shares of Common Stock for which this Warrant could have been exercised immediately prior to such reclassification, reorganization, change, merger or consolidation, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. The provisions of this clause (iii) shall similarly attach to successive reclassifications, reorganizations, changes, mergers or consolidations. (c) Other Distributions. In the event the Company provides the holders of its Common Stock with consideration that is not otherwise addressed in Section 4 (including, without limitation, declaring a distribution payable in securities, assets, cash or evidences of indebtedness issued by other persons or the Company (excluding cash dividends declared and paid by the Company out of retained earnings), then, in each such case, the Holder shall be entitled to a pro rata share of any such distribution as though the Holder was a holder of the number of shares of Common Stock of the Company as though this Warrant had been exercised in whole as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution. (d) Recapitalizations. If at any time there occurs a recapitalization of the Common Stock (other than a subdivision, combination, or merger or sale of assets provided for in Section 4), the Holder shall be entitled to receive upon exercise of this Warrant the number of shares of capital stock or other securities or property of the Company or otherwise, to which a holder of the Common Stock deliverable upon exercise would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of Section 4 with respect to the rights of the Holder after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Warrant Price then in effect and the number of shares purchasable upon exercise of this Warrant) shall be applicable after that event as nearly equivalent as may be practicable. (e) Notice of Adjustments. Whenever the consideration issuable upon an exercise hereunder shall be changed pursuant to this Section 4, the Company shall prepare a certificate setting forth, in reasonable detail, the event requiring the change and the kind and amount of shares of stock and other securities, money and property subsequently issuable upon an exercise hereof. Such certificate shall be signed by its chief financial officer and shall be delivered to the Holder or such other person as the Holder or any successor notice recipient may designate. -6- (f) Fractional Shares; Rounding. No fractional shares of Common Stock will be issued in connection with any exercise hereunder. All shares of Common Stock (including fractions thereof) issuable upon any exercise of this Warrant shall be aggregated for purposes of determining whether such exercise would result in the issuance of any fractional share. If, after the aforementioned aggregation, such exercise would result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of issuing any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the closing price of the Company's Common Stock on the Nasdaq National Market (or any other national securities exchange on which the Common Stock is then traded) on the day immediately preceding the conversion. All calculations under this Section 4 shall be made to the nearest cent or to the nearest share, as the case may be. (g) Cumulative Adjustments. No adjustment in the Warrant Price shall be required under this Section 4 until cumulative adjustments result in a concomitant change of 1% or more of the Warrant Price or in the number of shares of Common Stock purchasable upon exercise of this Warrant as in effect prior to the last such adjustment; provided, however, that any adjustments that by reason of this Section 4 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 4 shall be made to the nearest cent or to the nearest share, as the case may be. -7- 5. Compliance with Securities Act; Disposition of Warrant or Shares of Common Stock. (a) The Holder, by acceptance hereof, agrees that this Warrant and the Shares to be issued upon exercise hereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant or any Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of applicable securities laws. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Securities Act of 1933, as amended (the "Act"), or an exemption from the registration requirements of such Act is available, the Holder shall confirm in writing, by executing an instrument in form reasonably satisfactory to the Company, that the Shares so purchased are being acquired for investment and not with a view toward distribution or resale in a manner that would cause the issuance of the underlying shares to be in violation of applicable securities laws. In addition, to the extent reasonably requested by the Company and applicable to a purchaser of the underlying shares to be issued upon exercise of this Warrant at such time of exercise, the Holder upon issuance of underlying shares shall make such representations consistent with those set forth in Section 3(e) of the Securities Purchase Agreement among the Company, Elan International Services, Ltd. and Elan Pharma International Limited dated as of July 18, 2001. All Shares issued upon exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND NO INTEREST THEREIN MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) SUCH SECURITIES ARE TRANSFERRED PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT (OR ANY SUCCESSOR RULE) OR (3) CURIS, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO CURIS, INC. THAT NO VIOLATION OF THE ACT OR SIMILAR STATE SECURITIES LAWS WILL BE INVOLVED IN SUCH TRANSFER." (i) This Warrant may be transferred or assigned, in whole or in part, by the Holder to its affiliates and subsidiaries, including any special purpose financing or similar vehicle affiliate. Subject to the foregoing, this Warrant and all of the provisions hereof shall be binding upon and inure to the benefit of the Company, the Holders and their respective successors and assigns. -8- (ii) The shares of Common Stock for which this Warrant is exercisable are entitled to the benefit of certain registration rights as set forth in a Registration Rights Agreement dated as of the initial issuance date hereof between the Company and the initial Holder named herein. 6. Rights as Shareholders. No Holder, as such, shall be entitled to vote or receive dividends or be deemed the holder of Shares or any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the Holder, as such, any right to vote as a shareholder for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant is exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. 7. Representations and Warranties. The Company represents and warrants to the Holder as follows: (a) The Company has all requisite corporate power and authority to authorize and execute this Warrant and the certificates evidencing the Shares and to perform all obligations and undertakings under this Warrant and the certificates evidencing the Shares; (b) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms; (c) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable; and (d) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company's Certificate of Incorporation or bylaws, as amended, and do not and will not constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound. 8. Miscellaneous. (a) This Warrant may not be modified or amended, or any provisions hereof waived, except by written agreement of the Company and the Holder. (b) All notices, demands and requests of any kind to be delivered to any party in connection with this Warrant shall be in writing and shall be deemed to have been duly given if personally or hand delivered, at the time of receipt; if sent by an internationally- -9- recognized overnight delivery courier, on the first business day after the package is in the custody of the courier; by registered or certified mail, return receipt requested and postage prepaid, on the fourth business day after the package is delivered in the custody of the postage service; or by facsimile transmission, upon receipt of confirmation of delivery, in each case addressed as follows: (i) if to the Company, to: Curis, Inc. 61 Moulton Street Cambridge, Massachusetts 02138-1118 Attention: Doros Platika, M.D., President and Chief Executive Officer Facsimile: (617) 503-6501 with a copy to: Cooley Godward LLP 4635 Executive Drive San Diego, California 92121 Attention: L. Kay Chandler, Esq. Facsimile: (858) 453-3555 (ii) if to the Holder, to: Elan International Services, Ltd. 102 St. James Court Flatts, Smiths Parish Bermuda FL 04 Attention: Chief Executive Officer Facsimile: (441) 292-2224 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: William M. Hartnett, Esq. Facsimile: (212) 269-5420 (c) The Company covenants to the Holder that upon receipt of a description of circumstances reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt -10- of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant, the Company will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant. (d) The descriptive headings of the several sections and paragraphs contained in this Warrant are for reference purposes only and shall not affect in anyway the meaning or interpretation of this Warrant. (e) This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the principles of conflicts of laws. Any dispute under this Warrant that is not settled by mutual consent shall be finally adjudicated by any federal or state court sitting in the City, County and State of New York, and the Company consents to the exclusive jurisdiction of such courts (or any appellate court therefrom) over any such dispute. [Signature page follows] IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by a duly authorized officer as of the ____ day of July, 2001. CURIS, INC. By: --------------------------------------- Name: Doros Platika, M.D. Tittle: President and Chief Executive Officer Annex A NOTICE OF EXERCISE To: Curis, Inc. 61 Moulton Street Cambridge, Massachusetts 02138-1118 Attention: President Facsimile: 1. The undersigned hereby elects to purchase _______ shares of Common Stock of Curis, Inc. pursuant to the terms of the attached Warrant, and tenders herewith full payment of the purchase price of such shares, [CHOOSE ONE OR A COMBINATION][in cash or other immediately available funds][by [partial[specify amount]] surrender of this Warrant in connection with a Cashless Exercise] in accordance with Section 2 thereof. 2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name or names as are specified below: _______________________________________(Name) _______________________________________ _______________________________________(Address) 3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares in a manner that would cause the issuance of the underlying shares to be in violation of applicable securities laws.(1) Signature:______________________________________ Name:___________________________________________ Address:________________________________________ ________________________________________ ________________________________________ Social Security or taxpayer identification number, if applicable: ___________________________________ ___________________________________ 1 To be supplemented by the investment representations referred to in Section 5(a) of the Warrant as applicable. EX-5 4 elan13dex5.txt AMENDED AND RESTATED PROMISSORY NOTE THIS AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND NO INTEREST THEREIN MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) SUCH SECURITIES ARE TRANSFERRED PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT (OR ANY SUCCESSOR RULE) OR (3) CURIS, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL FOR THE HOLDER OF THIS CONVERTIBLE PROMISSORY NOTE SATISFACTORY TO CURIS, INC. THAT NO VIOLATION OF THE ACT OR SIMILAR STATE SECURITIES LAWS WILL BE INVOLVED IN SUCH TRANSFER. CURIS, INC. AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE U.S.$3,000,000 (excluding Originally issued: July 18, 2001 capitalized interest) Amended and Restated: May 16, 2003 The undersigned, Curis, Inc., a Delaware corporation with offices at 61 Moulton Street, Cambridge, Massachusetts 02138-1118 (the "Company"), unconditionally promises to pay to Elan Pharma International Limited, an Irish private limited liability company ("EPIL"), or its assigns, transferees and successors (collectively with EPIL, the "Holder"), on July 18, 2007 (the "Maturity Date"), at such place as may be designated by the Holder to the Company, the principal amount of U.S.$3,000,000 (excluding capitalized interest), together with interest thereon accrued at a rate per annum set forth in Section 2 hereof from and after May _, 2003, compounded on a semi-annual basis, the initial such compounding to commence on July 18, 2003 and thereafter on each one-year anniversary of July 18, 2003 and 180 days thereafter (each such date, a "Compounding Date"). -2- SECTION 1. SECURITIES PURCHASE AGREEMENT. This Note was originally issued pursuant to a Securities Purchase Agreement dated as of July 18, 2001, as amended, by and among the Company, Elan International Services, Ltd., a Bermuda exempted limited liability company and an affiliate of EPIL ("EIS"), and EPIL (as amended at any time, the "Securities Purchase Agreement"), and the Holder hereof is intended to be afforded the benefits thereof, including the representations and warranties set forth therein. Capitalized terms used but not otherwise defined herein shall, unless otherwise indicated, have the meanings given such terms in the Securities Purchase Agreement. SECTION 2. PAYMENTS OF PRINCIPAL AND INTEREST. (a) Unless earlier (i) converted in accordance with the terms of Section 4 below or (ii) repaid in accordance with the terms hereof, the entire outstanding principal amount of this Note (including capitalized interest, if any), together with any accrued interest thereon (the "Outstanding Amount"), shall be due and payable on the Maturity Date, at the option of the Company, in cash or, subject to applicable regulatory approvals, by the issuance of such number of shares of Common Stock equal to the Outstanding Amount divided by the Fair Market Value per share of Common Stock. The "Fair Market Value" of one share of Common Stock shall be deemed to be the average of the closing sale prices for the Common Stock over the 30 trading day period ending one trading day prior to the date of conversion or the Maturity Date, as the case may be. (b) Accrued interest hereon shall not be paid in cash, but shall be capitalized and added to the principal amount outstanding hereunder on each Compounding Date. Accrued interest hereon shall be due and payable in arrears on each Compounding Date. Interest shall accrue on this Note at a rate per annum of 6%. SECTION 3. [INTENTIONALLY OMITTED]. SECTION 4. CONVERSION. (a) Conversion Right. (i) Until this Note is repaid in full, the Holder shall have the right, at any time after the second anniversary of the Initial Closing Date, in its sole discretion, to convert all or any portion of the Outstanding Amount (the "Conversion Right") into such number of shares of Common Stock that shall be obtained by dividing the Outstanding Amount by U.S.$10.00 per share (subject to adjustment as provided below in this Section 4, the "Conversion Price"). Notwithstanding the above, in the event that there shall occur any consolidation, merger or reorgani- -3- zation of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the holders of the outstanding voting securities of the Company immediately prior to such consolidation, merger or reorganization, own 50% or less of the outstanding voting securities of the survivor corporation (or the parent company of the survivor corporation) or resulting entity immediately after such consolidation, merger or reorganization, then the Outstanding Amount shall, immediately prior to the consummation thereof, at the option of the Holder and subject to applicable regulatory approvals, be converted into the same number of shares of Common Stock into which such shares are convertible pursuant to the immediately preceding sentence (a "Significant Transaction Conversion"). (ii) The Holder shall be entitled to exercise the Conversion Right from time to time as to the unconverted portion of this Note upon at least 10 days' prior written notice to the Company, such notice to be in the form attached hereto as Annex I. Within 10 days of the conversion date specified in such notice, or within 10 days of the election by the Holder to compel a Significant Transaction Conversion, the Company shall issue appropriate stock certificates to the Holder (or such affiliate designated by the Holder) representing the aggregate number of shares of Common Stock due to the Holder as a result of such conversion. The Holder and the Company shall take all other necessary or appropriate actions in connection with or to effect such conversion. (b) Certain Adjustments. (i) Adjustment for Common Stock Dividends and Distributions. If, at any time after the Initial Closing Date, the Company makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock or Common Stock Equivalents, in each such event the Conversion Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock and Common Stock Equivalents issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of shares of Common Stock and Common Stock Equivalents issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock or Common Stock Equivalents issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this Section 4(b)(i) to reflect the actual payment of such dividend or distribution. A "Common Stock Equivalent" shall mean each share of Common Stock into which securities or property or rights are convertible, exchangeable or exercisable for or into -4- shares of Common Stock, or otherwise entitle the holder thereof to receive directly or indirectly, any of the foregoing. (ii) Adjustments for Stock Splits, Stock Subdivisions and Combinations. If, at any time after the Initial Closing Date, the Company subdivides or combines the Common Stock, (A) in the case of a subdivision (including a stock split), the Conversion Price in effect immediately prior to such event shall be proportionately decreased and the number of shares of Common Stock purchasable thereunder shall be proportionately increased, and (B) in the case of a combination (including a reverse stock split), the Conversion Price in effect immediately prior to such event shall be proportionately increased and the number of shares of Common Stock purchasable thereunder shall be proportionately decreased. Any adjustment under this Section 4(b)(ii) shall become effective at the close of business on the date the subdivision or combination becomes effective. (iii) Adjustments for Reclassification, Reorganization and Consolidation. In case of (A) any reclassification, reorganization, change or conversion of securities of the Common Stock (other than a change in par value, or from par value to no par value) into other shares or securities of the Company, or (B) any merger or consolidation of the Company with or into another entity (other than a merger or consolidation with another entity in which the Company is the acquiring and the surviving entity and that does not result in any reclassification or change of the Common Stock), or (C) any sale of all or substantially all the assets of the Company, the Holder shall have the right to receive, in lieu of the shares of Common Stock into which this Note is convertible, the kind and amount of shares of stock and other securities, money and property receivable upon such reclassification, reorganization, change, merger or consolidation upon conversion by the Holder of the maximum number of shares of Common Stock into which this Note could have been converted immediately prior to such reclassification, reorganization, change, merger or consolidation, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. The provisions of this clause (iii) shall similarly attach to successive reclassifications, reorganizations, changes, mergers or consolidations. (c) Other Distributions. In the event the Company provides the holders of its Common Stock with consideration that is not otherwise addressed in this Section 4 (including, without limitation, declaring a distribution payable in securities, assets, cash or evidences of indebtedness issued by other persons or the Company (excluding cash dividends declared and paid by the Company out of retained earnings), then, in each such case, the Holder shall be entitled to a pro rata share of any such distribution as though the Holder was a holder of the number of shares of Common Stock of the Company as though this Note had been converted in whole as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution. -5- (d) Recapitalizations. If at any time there occurs a recapitalization of the Common Stock (other than a subdivision, combination, or merger or sale of assets provided for in Section 4), the Holder shall be entitled to receive upon conversion of this Note the number of shares of capital stock or other securities or property of the Company or otherwise, to which a holder of the Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the Holder after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of this Note) shall be applicable after that event as nearly equivalent as may be practicable. (e) No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or bylaws or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Holder against impairment. (f) Notice of Adjustments. Whenever the consideration issuable upon a conversion hereunder shall be changed pursuant to this Section 4, the Company shall prepare a certificate setting forth, in reasonable detail, the event requiring the change and the kind and amount of shares of stock and other securities, money and property subsequently issuable upon a conversion hereof. Such certificate shall be signed by its chief financial officer and shall be delivered to the Holder or such other person as the Holder or any successor notice recipient may designate. (g) Fractional Shares; Rounding. No fractional shares of Common Stock will be issued in connection with any conversion hereunder. All shares of Common Stock (including fractions thereof) issuable upon conversion of this Note shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of issuing any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the closing price of the Company's Common Stock on the Nasdaq National Market (or any other national securities exchange on which the Common Stock is then traded) on the day immediately preceding the conversion. All calculations under this Section 4 shall be made to the nearest cent or to the nearest share, as the case may be. SECTION 5. EVENTS OF DEFAULT. The occurrence of any of the following events shall constitute an event of default (an "Event of Default"): -6- (a) a default in the payment of the principal amount of this Note, when and as the same shall become due and payable; (b) a default in the payment of any accrued and unpaid interest on this Note, when and as the same shall become due and payable; (c) a breach by the Company of its obligations under any of the Joint Venture Termination Agreement, dated of even date herewith, among the Company, Curis Newco, Ltd., EPIL, Elan Corporation, plc and Elan International Services, Ltd., this Note, the Securities Purchase Agreement, the Warrant (as defined in the Securities Purchase Agreement) and the Company Registration Rights Agreement (as defined in the Securities Purchase Agreement) (collectively, the "Transaction Documents"), which breach remains uncured at the conclusion of the cure period specified within the relevant Transaction Documents (provided that, for the purposes of this clause (c), to the extent such relevant Transaction Document does not specify a cure period, the Company shall have a 45-day cure period), after written notice thereof by the Holder; provided that such breach has had or could reasonably be expected to have a material adverse effects on the rights of EIS or its affiliates or their respective transferees under the Transaction Documents; provided, further, that (i) if the Company has proposed a course of action to rectify the breach and (x) the Company is acting in good faith to rectify the breach by the end of the applicable cure period (or the 45-day period set forth above) and (y) the party whose rights were breached under the applicable Transaction Document has acknowledged its consent in writing to such proposed course of action, then such period shall be extended as is reasonably necessary to permit such breach to be rectified, and (ii) if such default involves a good faith dispute regarding the amount of any required payment, provided that any undisputed amount is paid and any disputed amount in excess of U.S.$1,000,000 is placed in an escrow account pending resolution of the determination of such disputed amount, such default shall be stayed for a reasonable period during which a good faith resolution of the amount owed is being pursued; (d) a distress, execution, sequestration or other process is levied or enforced upon the Company or sued out against, in each case, a material part of its property which is not discharged or challenged within 60 days; (e) the Company is unable to generally pay its debts and continue its day-to-day operations in the normal course of business; (f) the Company ceases wholly or substantially to carry on its business (other than (x) as a result of the merger or consolidation of the Company with another entity or (y) changes in the nature of its business to a related business), without the prior written consent of the Holder (such consent not to be unreasonably withheld); -7- (g) the Company shall make a general assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due and such failure continues or shall have been uncured for a period of 60 days, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Company or of any substantial part of the assets of the Company or shall commence any case or other proceeding relating to the Company under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against the Company and any such person shall indicate in writing its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed or stayed within sixty (60) days following the filing thereof; (h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Company bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Company in an involuntary case under federal bankruptcy laws as now or hereafter constituted; or (i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than sixty (60) days, whether or not consecutive, any final judgment against the Company that, with other outstanding final judgments, undischarged, against the Company exceeds in the aggregate U.S.$1,000,000. SECTION 6. REMEDIES IN THE EVENT OF DEFAULT. (a) In the case of any Event of Default by the Company, the Holder may in its sole discretion demand that the Outstanding Amount shall, in addition to all other rights and remedies of the Holder hereunder and under applicable law, be and become immediately due and payable in cash upon written notice delivered by the Holder to the Company; provided that, in the event of any Event of Default specified in Section 5(g) or 5(h), all such amounts shall become immediately due and payable automatically and without any requirement of demand from or by the Holder. Notwithstanding the preceding sentence, the rights of the Holder as set forth in Sections 4 and 5 hereunder shall survive any such acceleration and payment. (b) The Company hereby waives demand and presentment for payment, notice of nonpayment, protest and notice of protest, diligence, filing suit, and all other notice and promises to pay the Holder its costs of collection of all amounts due hereunder, including reasonable attorneys' fees. -8- (c) In the case of any Event of Default under this Note by the Company, this Note shall continue to bear interest after such default at the interest rate otherwise in effect hereunder plus 3% per annum (but in any event not in excess of the maximum rate of interest permitted by applicable law). SECTION 7. VOTING RIGHTS. This Note shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to its conversion. SECTION 8. COVENANTS OF THE COMPANY. The Company shall not incur any indebtedness for money borrowed which shall rank senior to this Note as to priority of payment (provided that the foregoing shall not restrict the Company's ability to incur indebtedness for money borrowed which shall (x) rank pari passu or subordinated to this Note as to priority of payment and/or (y) be secured). SECTION 9. MISCELLANEOUS. (a) This Note may be transferred or assigned by the Holder, in whole or in part. This Note and all of the provisions hereof shall be binding upon and inure to the benefit of the Holders and their respective successors and assigns. The Company shall not assign any of its rights or obligations hereunder. (b) All notices, demands and requests of any kind to be delivered to any party in connection with this Note shall be in writing and shall be deemed to have been duly given if personally or hand delivered or if sent by an internationally-recognized overnight delivery courier or by registered or certified mail, return receipt requested and postage prepaid, or by facsimile transmission, in each case, addressed as follows: (i) if to the Company, to: Curis, Inc. 61 Moulton Street Cambridge, Massachusetts 02138-1118 Attention: Daniel Passeri, President and Chief Executive Officer Facsimile: (617) 503-6501 with a copy to: -9- Cooley Godward LLP 4635 Executive Drive San Diego, California 92121 Attention: L. Kay Chandler, Esq. Facsimile: (858) 453-3555 (ii) if to the Holder, to: Elan Pharma International Limited Wil House Shannon Business Park Shannon Co. Clare, Ireland Attention: Secretary Facsimile: 011-353-61-362097 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: William M. Hartnett, Esq. Facsimile: (212) 269-5420 or to such other address as the party to whom notice is to be given may have furnished to the other party hereto in writing in accordance with provisions of this Section 9. Any such notice or communication shall be deemed to have been effectively given (i) in the case of personal or hand delivery, on the date of such delivery, (ii) in the case of an internationally-recognized overnight delivery courier, on the second business day after the date when sent, (iii) in the case of mailing, on the fifth business day following that day on which the piece of mail containing such communication is posted and (iv) in the case of facsimile transmission, the date of telephone confirmation of receipt. (c) This Note may not be modified or amended, or any of the provisions hereof waived, except by written agreement of the Company and the Holder dated after the date hereof. (d) This Note shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflicts of laws. Any dispute under this Note that is not settled by mutual consent shall be finally adjudicated by any federal or state court sitting in the City, County and State of New York, and the Company -10- consents to the exclusive jurisdiction of such courts (or any appellate court therefrom) over any such dispute. [Signature page follows] IN WITNESS WHEREOF, the Company has executed and delivered this Note on the date first above written. CURIS, INC. By: -------------------------------------- Name: Daniel Passeri Title: President and Chief Executive Officer ANNEX I FORM OF NOTICE OF ELECTION TO EXERCISE A CONVERSION RIGHT Date: To: Curis, Inc. From: Re: Exercise of a Conversion Right - -------------------------------------------------------------------------------- Pursuant to the terms of the Amended and Restated Convertible Promissory Note (the "Note") issued by Curis, Inc. (the "Company") to Elan Pharma International Limited, dated May __, 2003, specifically Section 4 thereof, [ ], the holder of the conversion rights under the Note (the "Holder"), hereby notifies the Company of its intention to exercise a right of conversion. Pursuant to Section 4 of the Note, the Holder hereby elects to convert U.S.$__________ in aggregate principal amount and all accrued and unpaid interest thereon for shares of the Company's Common Stock, par value U.S.$0.01 per share, effective __________, 200_. We have instructed our attorneys to contact the Company to discuss the timing and documentation of the conversion. Sincerely, [HOLDER] By: ----------------------------------- Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----