-----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, Ly8WnJUqz6o39FlnyUfkJU9+mu+53er/IJE0xvh6DdTGUjDSmEDEQ+0WLMWMW+/M LQbhiRqbp4X6+UKYjq1lXQ== 0000893220-97-000910.txt : 19970508 0000893220-97-000910.hdr.sgml : 19970508 ACCESSION NUMBER: 0000893220-97-000910 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970507 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970507 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CEPHALON INC CENTRAL INDEX KEY: 0000873364 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 232484489 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19119 FILM NUMBER: 97597601 BUSINESS ADDRESS: STREET 1: 145 BRANDYWINE PKWY CITY: WEST CHESTER STATE: PA ZIP: 19380 BUSINESS PHONE: 6103440200 MAIL ADDRESS: STREET 1: 145 BRANDYWINE PARKWAY CITY: WEST CHESTER STATE: PA ZIP: 19380 8-K 1 FORM 8-K CEPHALON 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 May 7, 1997 (Date of earliest event reported) Cephalon, Inc. (Exact name of registrant as specified in its charter) Delaware 0-19119 23-2484489 (State or other jurisdiction (Commission (IRS Employer of incorporation or organization) File Number) ID No.) 145 Brandywine Parkway West Chester, Pennsylvania 19380 (Address of principal executive offices) (Zip Code) (610) 344-0200 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) 2 ITEM 5. OTHER EVENTS. GENERAL Cephalon, Inc. (the "Company") has confirmed the terms of its previously-announced arrangement for the purchase of capped call options with respect to shares of its Common Stock. The Company has acquired capped call options (the "Options") from Swiss Bank Corporation, London Branch ("SBC") on an aggregate of 2,500,000 shares of Common Stock, pursuant to an ISDA Master Agreement (the "Master Agreement"), dated as of May 2, 1997, between the Company and SBC, and a Confirmation (the "Confirmation") executed pursuant to the Master Agreement on May 7, 1997. In payment of the premium on such Options, the Company will issue to SBC, on May 8, 1997, an aggregate of 490,000 shares of Common Stock (the "Shares") pursuant to an Agreement in Regard to Premium Shares (the "Share Agreement"), dated as of May 2, 1997, by and among the Company, SBC and SBC Warburg Inc. The Shares are being issued to SBC in a private placement transaction pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and the Company has registered the resale of the Shares by SBC and SBC Warburg under the Securities Act on a Registration Statement on Form S-3, which was declared effective by the Securities and Exchange Commission on May 1, 1997. TERMS OF THE CALL OPTIONS The Options, which are European-style, have been written on an aggregate of 2,500,000 shares of Common Stock. The Options, which will expire on October 31, 1997, have a strike price of $21.50 per share (the "Strike Price") and a cap price of $39.50 per share (the "Cap Price"). The aggregate purchase price for the Options is being paid by the Company through the issuance of the Shares to SBC. Although at this time the Company expects that the Options will be settled in cash, the Company may elect to physically settle the Options by requiring delivery by SBC to the Company of shares of the Common Stock. In the event that the Options are settled in cash, SBC or its affiliates would likely sell shares of the Common Stock, which may include some or all of the Shares, then held by them as a hedge with respect to the Options. In the event that the Options are physically settled, SBC will deliver shares of the Common Stock to the Company, which likely would include some or all of the Shares, upon payment by the Company of the applicable exercise price. COMPANY REASONS FOR THE OPTION TRANSACTION; RISKS TO THE COMPANY The Company purchased the Options to allow the Company to benefit, subject to the terms of the Options, from any appreciation in the market value of the Company's Common Stock at expiration of the Options. If the Company elects cash settlement, it will receive on exercise of each Option an amount in cash equal to the excess, if any, of (i) an average of the market prices of the Common Stock during a specified period prior to expiration, determined in accordance with the Confirmation or (ii) the Cap Price, whichever is less, over the Strike Price. If the Company elects settlement in stock, it will receive on exercise of each Option one share of Common Stock against payment of an amount equal to the sum of (x) the Strike Price and (y) the excess, if any, of the market price of the Common Stock at expiration over the Cap Price. The Company's board of directors has determined that the purchase of the Options, in exchange for the Shares, is an appropriate method to take advantage of any stock price appreciation. The funds, if any, received from the exercise of the Options may be used by the Company to fund a portion of its payment obligations related to Cephalon Clinical Partners, L.P. (the "Partnership"). If MYOTROPHIN (rhIGF-I) were to be approved for commercialization in the United States or certain other territories, the Company is obligated to make a $16,000,000 milestone payment to the Partnership. In addition, at a specified time following commercialization, the Company is required to purchase the outstanding limited partnership interests for approximately $40,000,000 plus royalties, in order to retain its rights to commercialize MYOTROPHIN in the United States and Europe. 3 As an alternative to making these payments, the Company may seek to acquire some or all of the remaining limited partnership interests. Although the Company has actively discussed this possibility with the General Partner of the Partnership, there can be no assurance that any agreement can be reached with the General Partner to acquire the limited partnership interests. Even if an agreement can be reached, the Company estimates that to reach an agreement the purchase price could be significant, possibly in the $125 million range. In addition to using the proceeds, if any, from exercising the Options, the Company would explore one or more additional financing alternatives, after the May 8th meeting of the Advisory Committee referred to below, if it were to proceed with an acquisition of limited partnership interests. Any funds received from the exercise of the Options that are not used to fund the Company's obligations related to the Partnership would be used to fund the research and development activities of the Company and the acquisition of technologies, and for other general corporate purposes. Purchase of the Options by the Company involves certain risks. Particularly, as described above, the purchase of the Options will benefit the Company only if the market price of the Common Stock appreciates to a level above the strike price of the Options during the term of the Options and remains at such a level at the expiration of the Options. If the market price of the Common Stock at expiration of the Options does not exceed the Strike Price, the Company will have sold Shares for a consideration which, at expiration of the Options, has no value. If the market price of the Common Stock at expiration of the Options exceeds the Strike Price, but by less than the premium for the Options, the Company will have issued Shares for a consideration which, at the expiration of the Options, is worth less than the market value of the Shares when they were sold. The benefit to the Company would, in each case, be affected by applicable transaction costs. In any event, the number of the Company's issued and outstanding shares of Common Stock will increase by 490,000 Shares, representing a dilution of approximately 2% based on the number of shares of Common Stock currently outstanding. One near-term event that is expected to directly affect the value of the Options is the scheduled meeting of the Peripheral and Central Nervous System Drugs Advisory Committee (the "Advisory Committee") of the Food and Drug Administration (the "FDA") on May 8, 1997 with respect to MYOTROPHIN (rhIGF-I). The Company has not received any indication as to the outcome of the Advisory Committee meeting or any subsequent FDA decision on the New Drug Application with respect to MYOTROPHIN (rhIGF-I) (the "NDA"). If the Advisory Committee recommends approval of MYOTROPHIN (rhIGF-I) and if the FDA subsequently approves the commercialization of the product, the market price of the Company's Common Stock may increase, in which case the Company could realize a financial benefit from the Options. If the Advisory Committee does not recommend approval of the NDA or if the FDA does not approve the NDA, the price of the Common Stock is likely to decrease and the Options will have no value. Because the Option financing is innovative and is structured to take advantage of increases in the price of the Company's Common Stock, there is a risk that a third party could assert that the Company has not fully complied with its applicable disclosure obligations. Although the Company believes that it has complied with its obligations under applicable securities laws, there can be no assurance that such a claim will not be asserted. Defense of any such claim could be costly to the Company and there can be no assurance that any such defense would be successful. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Business Acquired: None (b) Pro Forma Financial Information: None (c) Exhibits: Reference is made to the Exhibit Index annexed hereto and made a part hereof. 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CEPHALON, INC. Date: May 7, 1997 By: /s/ J. Kevin Buchi ----------------------------------- J. Kevin Buchi Senior Vice President and Chief Financial Officer 5 EXHIBIT INDEX
EXHIBIT PAGE - ------- ---- 10.1 Confirmation entered into on May 7, 1997, pursuant to ISDA Master Agreement by and between Cephalon, Inc. and Swiss Bank Corporation, London Branch
EX-10.1 2 CONFIRMATION BETWEEN CEPHALON AND SWISS BANK 1 Exhibit 10.1 CONFIRMATION Date: May 7, 1997 To: Cephalon, Inc. ("Party B") Attention: J. Kevin Buchi From: Swiss Bank Corporation, London Branch ("Party A") Re: Equity Option Confirmation Reference Number ____________ - -------------------------------------------------------------------------------- The purpose of this communication is to confirm the terms and conditions of the transaction (the "Transaction") to be 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 2, 1997, as amended and supplemented from time to time (the "Agreement"), between you and us. 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 7, 1997 Buyer : Party B Seller : Party A Option Style : European Option Option Type : Capped Call Shares : Common Stock of Cephalon, Inc. (Symbol: CEPH) Number of Options : 2,500,000 Contract Multiplier : 1.00 2 Strike Price : USD 21.50 Cap Price : USD 39.50 Total Premium : 490,000 shares of common stock of Cephalon, Inc. (the "Premium Shares"). The Premium Shares are subject to the Agreement in Regard to Premium Shares dated as of May 2, 1997 between Party A, Party B and SBC Warburg Inc. Premium Payment Date : May 8, 1997. Expiration Date : October 31, 1997, or, if that date is not an Exchange Business Day, the following day that is an Exchange Business Day. Currency Business Day : Any day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in the cities from which and in which a payment is to be made. Exchange Business Day : A day that is (or but for the occurrence of a Market Disruption Event, would have been) a trading day on the Exchange and the American 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 Price Point : A Price Point for which no Market Disruption Event has occurred or is continuing. Price Point : On any Exchange Business Day, each of 10:00 am, 12:00 noon and 3:00 pm local time in New York City. Market Disruption Event : The occurrence or existence during the Relevant Period with respect to a particular Price Point of any suspension of or limitation imposed on trading (by reason of movements in price exceeding levels permitted by the relevant exchange or otherwise), which suspension or limitation is imposed for a period in excess of the Disrupted Period, provided that any such event is material in the joint determination of the parties, on: (i) the Exchange in the Shares; or (ii) the American Stock Exchange in option contracts on the Shares. 2 3 Relevant Period and Disruption Period : With respect to a Price Point taken at the following times, the following periods (all times, local time in New York City): Time Relevant Period Disrupted Period ---- --------------- ---------------- 10:00 am 9:30 am to 10:00 am 15 minutes 12:00 noon 10:00 am to 12:00 noon 1 hour 3:00 pm 12:00 noon to 3:00 pm 1 hour Exchange : NASDAQ National Market System Clearance System Business Day : Any day on which the Clearance System is open for the acceptance and execution of settlement instructions. Clearance System : Depository Trust Company, or any successor to or transferee of such clearance system. Calculation Agent : Party A, whose calculations shall be binding absent manifest error. Procedure for Exercise - ---------------------- Exercise Date : The Expiration Date. Expiration Time : 5:00 p.m. local time in New York City Automatic Exercise : The Transaction will be deemed to be automatically exercised if it is In-the-Money on the Expiration Date, unless (i) the Buyer has notified the Seller or its agent (by telephone or in writing) prior to 5:00 p.m. local time in New York City on the Expiration Date that it does not wish to exercise the Transaction; or (ii) the Closing Value cannot be determined on the Expiration Date. If the Transaction is to be cash settled, "In-the-Money" means that the Cash Settlement Amount is greater than zero. If the Transaction is to be physically settled, "In-the-Money" means that the Closing Value is greater than the Strike Price. "Closing Value" means the closing price of the Shares, as reported on the Exchange, on the Expiration Date. Telephone and facsimile number of Seller's agent for purposes of giving notice : Telephone: (312) 554-5249 Fax: (312) 554-6271 Attention: David P. Stowell 3 4 Settlement Terms - ---------------- Settlement : The Transaction will be cash settled; provided, however, that Party B may elect to physically settle the Transaction by giving notice to Party A no later than 30 Exchange Business Days before the Expiration Date. Physical Settlement : If the Transaction is to be physically settled, the Seller shall deliver to the Buyer the number of Shares equal to the Contract Multiplier multiplied by the number of Options, in three separate deliveries of 833,334 Options on the first Settlement Date and 833,333 Options on each of the second and third Settlement Dates, against payment by the Buyer to the Seller on each such Settlement Date of an amount equal to the product of (a) the Strike Price, adjusted as hereinafter provided, multiplied by (b) the Contract Multiplier multiplied by (c) the number of Shares to be delivered on such Settlement Date. If the Closing Value exceeds the Cap Price, the Strike Price shall be increased by the amount by which the Closing Value exceeds the Cap Price; if the Closing Value is equal to or less than the Cap Price, no adjustment will be made to the Strike Price. Such payments and deliveries shall be made through the Clearance System at the accounts specified below, on a delivery versus payment basis. Cash Settlement : If the Transaction is to be cash settled, on the Settlement Date, Party A shall pay to Party B the Cash Settlement Amount, if any. The "Cash Settlement Amount" shall be the greater of (a) zero and (b) an amount calculated by the Calculation Agent equal to (i) the Contract Multiplier multiplied by (ii) the number of Options exercised multiplied by (iii) the Price Differential. "Price Differential" means (x) if the Reference Price exceeds the Cap Price, the result of subtracting the Strike Price from the Cap Price, and (y) if the Reference Price is equal to or less than the Cap Price, the result of subtracting the Strike Price from the Reference Price. Reference Price : (a) If the Valuation Period contains 60 Normal Price Points, the Reference Price shall be the arithmetic average of the Share Prices at those 60 Normal Price Points. (b) If the Valuation Period does not contain 60 Normal Price Points, the parties shall jointly determine the Share Price for the last Price Point on Valuation Date and as many Price Points immediately preceding the Valuation Date as shall be necessary, when such Share Prices are taken together with the 4 5 Share Prices on all Normal Price Points occurring within the Valuation Period, to provide 60 Share Prices, and in such case the Reference Price shall be the arithmetic average of those 60 Share Prices. Share Price : The bid price per Share as reported on the QRM screen on Bloomberg at the relevant Price Point, or, if there is no bid price at such time, the last previous bid price as reported on the QRM screen on Bloomberg. Valuation Period : The period from and including the nineteenth 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 include three Normal Price Points, the Valuation Period shall be extended so that the Valuation Period includes 60 Normal Price Points, but in no event shall the last day of the Valuation Period be later than the twentieth Exchange Business Day after the Expiration Date, and in no event shall the Valuation Period include any day before the Initial Date. Valuation Date : The last day of the Valuation Period. Settlement Dates : If the Transaction is to be cash settled, there shall be a single Settlement Date, which date shall be the third Currency Business Day after the Valuation Date. If the Transaction is to be physically settled, the Settlement Dates shall be the third, fourth and fifth Clearance System Business Days after the Exercise Date. 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, 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. If at any time during the life of the Transaction there shall be no outstanding OCC Options on the Shares, and an event shall 5 6 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. Miscellaneous - ------------- Transfer : Neither party may transfer the Transaction, in whole or in part, without the prior written consent of the non-transferring party. Account Details - --------------- Payments and deliveries to Party A: Previously provided Payments and deliveries to Party B: Previously provided 6 7 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/ Martin Perkins By: /s/ Karen Hayes - ------------------------------ ------------------------------- Name: Martin Perkins Name: Karen Hayes Title: Associate Director Title: Associate Director Confirmed as of the 7th day of May, 1997 CEPHALON, INC. By: /s/ J. Kevin Buchi - ------------------------------- Name: J. Kevin Buchi Title: Senior Vice President and Chief Financial Officer 7 -----END PRIVACY-ENHANCED MESSAGE-----