<PAGE> 1
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO
SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
UNIMED PHARMACEUTICALS, INC.
(NAME OF SUBJECT COMPANY)
UTAH ACQUISITION CORPORATION
(BIDDER)
COMMON STOCK, PAR VALUE $.25 PER SHARE
(TITLE OF CLASS OF SECURITIES)
904801 10 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
JEFFREY D. LINTON
VICE PRESIDENT, LAW, GOVERNMENT AND PUBLIC AFFAIRS
SOLVAY PHARMACEUTICALS, INC.
901 SAWYER ROAD
MARIETTA, GEORGIA 30062
(770) 578-9000
WITH COPY TO:
EARL D. WEINER
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
(NAME, ADDRESS AND TELEPHONE NUMBERS OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE*
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
$122,168,605 $24,434
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* For the purpose of calculating the filing fee only. This calculation assumes
the purchase of (i) 9,191,538 shares of Common Stock, par value $.25 per
share, issued and outstanding as of June 16, 1999 according to the Subject
Company, (ii) 1,657,644 options on the Common Stock issued and outstanding
as of June 16, 1999 according to the Subject Company, with an average
exercise price of $5.42 and (iii) 212,550 warrants on the Common Stock
issued and outstanding as of June 16, 1999 according to the Subject Company,
with an average exercise price of $7.47.
[ ] Check box if any part of the fees is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: Not applicable Filing party: Not applicable
Form of registration number: Not applicable Date filed: Not applicable
- --------------------------------------------------------------------------------
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<PAGE> 2
SCHEDULE 14D-1
CUSIP NO. 904801 10 7 PAGE 1 OF 7 PAGES
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
SOLVAY S.A. S.S. OR I.R.S. IDENTIFICATION NUMBER OF ABOVE
PERSON
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS AF, WC
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f) [ ]
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Belgium
- ---------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
- ---------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [ ]
- ---------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0%
- ---------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON CO
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 3
SCHEDULE 14D-1
CUSIP NO. 904801 10 7 PAGE 2 OF 7 PAGES
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
SOLVAY AMERICA, INC. S.S. OR I.R.S. IDENTIFICATION NUMBER OF
ABOVE PERSON
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS AF, WC
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f) [ ]
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- ---------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
- ---------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [ ]
- ---------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0%
- ---------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON CO
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 4
SCHEDULE 14D-1
CUSIP NO. 904801 10 7 PAGE 3 OF 7 PAGES
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
SOLVAY PHARMACEUTICALS, INC. S.S. OR I.R.S. IDENTIFICATION
NUMBER OF ABOVE PERSON
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS AF, WC
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f) [ ]
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Georgia
- ---------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
- ---------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [ ]
- ---------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0%
- ---------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON CO
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 5
SCHEDULE 14D-1
CUSIP NO. 904801 10 7 PAGE 4 OF 7 PAGES
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
UTAH ACQUISITION CORPORATION S.S. OR I.R.S. IDENTIFICATION
NUMBER OF ABOVE PERSON
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS AF
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f) [ ]
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- ---------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
- ---------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [ ]
- ---------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0%
- ---------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON CO
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 6
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Unimed Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and the address of its principal executive
offices is 2150 East Lake Cook Road, Buffalo Grove, Illinois 60089.
(b) The class of securities to which this statement relates is the Common
Stock, par value $.25 per share (the "Common Stock"), of the Company and the
associated rights (the "Rights") issued pursuant to the Rights Agreement, dated
as of June 16, 1997, as amended as of June 11, 1999, between the Company and
Harris Trust and Savings Bank, as Rights Agent. The Common Stock and the Rights
together are referred to herein as the "Shares". The information set forth in
the Introduction and Section 1 of the Offer to Purchase annexed hereto as an
exhibit (the "Offer to Purchase") is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) The information set forth in Section 9 and Schedule A of the
Offer to Purchase is incorporated herein by reference. The name, business
address, present principal occupation or employment, the material occupations,
positions, offices or employments for the past five years and citizenship of
each director and executive officer of Solvay S.A., a Belgian societe anonyme
("Parent"), Solvay America, Inc., a Delaware corporation which is a direct
wholly owned subsidiary of Parent ("Solvay America"), Solvay Pharmaceuticals,
Inc., a Georgia corporation which is a direct wholly owned subsidiary of Solvay
America ("Purchaser"), and Utah Acquisition Corporation., a Delaware corporation
which is a direct wholly owned subsidiary of Purchaser ("Merger Sub"), and the
name, principal business and address of each corporation or other organization
in which such occupations, positions, offices and employments are or were
carried on are set forth in Schedule A to the Offer to Purchase and are
incorporated herein by reference.
(e); (f) During the last five years, none of Parent, Solvay America,
Purchaser or Merger Sub, or, to the best of their knowledge, any of the
directors or executive officers of Parent, Solvay America, Purchaser or the
Merger Sub has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
any such person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction and Sections 10 and
11 of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 12 of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
The information set forth in the Introduction and Sections 7 and 11 of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction and Sections 9, 10
and 11 of the Offer to Purchase is incorporated herein by reference.
5
<PAGE> 7
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Sections 9, 10 and 11 of
the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 of the Offer to Purchase is
incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase and the
documents incorporated by reference therein are incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(c) The information set forth in Section 15 of the Offer to Purchase is
incorporated herein by reference.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(1) Offer to Purchase, dated June 17, 1999.
(2) Letter of Transmittal.
(3) Letter to brokers, dealers, commercial banks, trust companies and
nominees.
(4) Letter to clients to be used by brokers, dealers, commercial banks,
trust companies and nominees.
(5)(a) Press Release, dated June 11, 1999.
(5)(b) Press Release, dated June 17, 1999.
(6) Form of newspaper advertisement, dated June 17, 1999.
(7) Notice of Guaranteed Delivery.
(8) IRS Guidelines to Substitute Form W-9.
(9) Agreement and Plan of Merger, dated as of June 11, 1999, among the
Company, Purchaser and Merger Sub.
(10) Confidentiality Agreement, effective as of March 4, 1999, between
Purchaser and the Company.
(11) Amendment No. 1 to the Rights Agreement, dated as of June 11, 1999,
between the Company and Harris Trust and Savings Bank, as Rights Agent.
(12) Financial information contained in Parent's 1997 Annual Report.
(13) Financial information contained in Parent's 1998 Annual Report.
(14) Letter, dated June 8, 1999, from John N. Kapoor of the Company to
David A. Dodd of Purchaser.
6
<PAGE> 8
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: June 17, 1999
SOLVAY S.A.
By: /s/ JURGEN ERNST
------------------------------------
Name: Jurgen Ernst
Title: Director
Member of the Executive
Committee
By: /s/ RENE DEGREVE
------------------------------------
Name: Rene Degreve
Title: Director
Member of the Executive
Committee
SOLVAY AMERICA, INC.
By: /s/ E.J. BUCKINGHAM III
------------------------------------
Name: E.J. Buckingham III
Title: Vice President and General
Counsel
SOLVAY PHARMACEUTICALS, INC.
By: /s/ ROBERT A. SOLHEIM
------------------------------------
Name: Robert A. Solheim
Title: Vice President, Finance &
Administration
UTAH ACQUISITION CORPORATION
By: /s/ JEFFREY D. LINTON
------------------------------------
Name: Jeffrey D. Linton
Title: Vice President
7
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
UNIMED PHARMACEUTICALS, INC.
AT
$12.00 NET PER SHARE
BY
UTAH ACQUISITION CORPORATION
A DIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY PHARMACEUTICALS, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 15, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES OF COMMON STOCK, PAR VALUE $.25 PER SHARE (INCLUDING THE ASSOCIATED
RIGHTS) (COLLECTIVELY, THE "SHARES"), OF UNIMED PHARMACEUTICALS, INC. (THE
"COMPANY") WHICH, TOGETHER WITH ANY SHARES OWNED BY SOLVAY PHARMACEUTICALS,
INC., UTAH ACQUISITION CORPORATION AND ANY OTHER DIRECT OR INDIRECT SUBSIDIARY
OF SOLVAY PHARMACEUTICALS, INC., CONSTITUTES MORE THAN 50% OF THE VOTING POWER
(DETERMINED ON A FULLY DILUTED BASIS) OF ALL THE SECURITIES OF THE COMPANY
ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN CONNECTION WITH A
MERGER, (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER APPLICABLE
TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN
TERMINATED, AND (3) ALL SHARES OF WHICH ANY MEMBER OF THE COMPANY'S BOARD OF
DIRECTORS, OR ANY TRUST WITH WHICH ANY SUCH MEMBER OR SUCH MEMBER'S SPOUSE IS
AFFILIATED, IS A RECORD HOLDER OR BENEFICIAL OWNER AS OF JUNE 4, 1999 BEING
VALIDLY TENDERED INTO THE OFFER PRIOR TO JULY 13, 1999 AND NO SUCH SHARES BEING
WITHDRAWN FROM THE OFFER. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
DESCRIBED IN SECTION 13.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY. THE
BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT
THE OFFER AND IMMEDIATELY TENDER THEIR SHARES PURSUANT TO THE OFFER. DR. JOHN N.
KAPOOR, CHAIRMAN OF THE BOARD OF DIRECTORS OF THE COMPANY AND THE SINGLE LARGEST
HOLDER OF SHARES, HAS EXECUTED A LETTER CONFIRMING THAT HE WILL, SUBJECT TO HIS
FIDUCIARY DUTIES AS A TRUSTEE OF CERTAIN TRUSTS HOLDING SHARES, TENDER ALL
SHARES THAT HE OWNS EITHER DIRECTLY OR BENEFICIALLY TO UTAH ACQUISITION
CORPORATION. THE BOARD OF DIRECTORS OF THE COMPANY HAS RESOLVED THAT ALL
DIRECTORS INTEND TO TENDER THE SHARES THAT THEY OWN DIRECTLY OR BENEFICIALLY TO
UTAH ACQUISITION CORPORATION.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of Common Stock, par value $.25 per share, of the Company (the "Common
Stock"), including the associated rights (the "Rights" and, together with the
Common Stock, the "Shares") should either (1) complete and sign the Letter of
Transmittal or a facsimile thereof in accordance with the instructions in the
Letter of Transmittal, including any required signature guarantees, and mail or
deliver the Letter of Transmittal or such facsimile with such stockholder's
certificate(s) for the tendered Shares and any other required documents to the
Depositary (as defined herein), (2) follow the procedure for book-entry tender
of Shares set forth in Section 3, or (3) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee are
urged to contact such broker, dealer, commercial bank, trust company or other
nominee if they desire to tender Shares so registered. Unless the context
requires otherwise, all references to Shares herein shall include the associated
Rights.
<PAGE> 2
The Rights are presently evidenced by the certificates for the Common Stock
and a tender by a stockholder of such stockholder's shares of Common Stock will
also constitute a tender of the associated Rights. A stockholder who desires to
tender Shares and whose certificates for such Shares are not immediately
available, or who cannot comply with the procedure for book-entry transfer on a
timely basis, may tender such Shares by following the procedures for guaranteed
delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) at its address and telephone numbers set forth on the
back cover of this Offer to Purchase. Requests for additional copies of this
Offer to Purchase and the Letter of Transmittal may be directed to the
Information Agent or to brokers, dealers, commercial banks or trust companies.
------------------------
The date of this Offer to Purchase is June 17, 1999.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
Introduction................................................ 1
1. Terms of the Offer.......................................... 2
2. Acceptance for Payment and Payment for Shares............... 4
3. Procedure for Tendering Shares.............................. 5
4. Rights of Withdrawal........................................ 8
5. Certain Federal Income Tax Consequences of the Offer........ 9
6. Price Range of Shares; Dividends............................ 9
7. Effect of the Offer on Market for the Shares, Stock Exchange
Listing, and Exchange Act Registration.................... 10
8. Certain Information Concerning the Company.................. 11
9. Certain Information Concerning Merger Sub, Purchaser and
Parent.................................................... 14
10. Background of the Offer; Contacts with the Company.......... 16
11. Purpose of the Offer; Plans for the Company; the Merger..... 21
12. Source and Amount of Funds.................................. 29
13. Certain Conditions of the Offer............................. 30
14. Dividends and Distributions................................. 32
15. Certain Legal Matters....................................... 33
16. Fees and Expenses........................................... 34
17. Miscellaneous............................................... 35
Schedule A Information Concerning the Directors and Executive
Officers of Parent, Solvay America, Purchaser and A-1
Merger Sub...........................................
</TABLE>
i
<PAGE> 4
TO THE HOLDERS OF SHARES OF
UNIMED PHARMACEUTICALS, INC.:
INTRODUCTION
Utah Acquisition Corporation, a Delaware corporation ("Merger Sub") which
is a direct wholly owned subsidiary of Solvay Pharmaceuticals, Inc., a Georgia
corporation ("Purchaser") and an indirect wholly owned subsidiary of Solvay
S.A., a Belgian societe anonyme ("Parent"), hereby offers to purchase all of the
outstanding shares of Common Stock, par value $.25 per share (the "Common
Stock"), of Unimed Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), including the associated rights (the "Rights") issued pursuant to
the Rights Agreement, dated as of June 16, 1997, as amended as of June 11, 1999
(the "Rights Agreement"), between the Company and Harris Trust and Savings Bank,
as Rights Agent (the Common Stock and the Rights together are referred to herein
as the "Shares"), at $12.00 per Share, net to the seller in cash (but subject to
any applicable tax withholdings) (the "Merger Consideration"), on the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which collectively, together with any amendments or
supplements hereto or thereto, constitute the "Offer"). Tendering stockholders
will not be obligated to pay brokerage fees or commissions or, subject to
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of
Shares by Merger Sub pursuant to the Offer. Merger Sub will pay all charges and
expenses of Harris Trust Company of New York (the "Depositary") and MacKenzie
Partners, Inc., (the "Information Agent"). UNLESS THE CONTEXT REQUIRES
OTHERWISE, ALL REFERENCES TO SHARES HEREIN SHALL INCLUDE THE ASSOCIATED RIGHTS,
AND ALL REFERENCES TO THE RIGHTS SHALL INCLUDE ALL BENEFITS THAT MAY INURE TO
THE HOLDERS OF THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES OWNED BY PURCHASER, MERGER SUB AND ANY
OTHER DIRECT OR INDIRECT SUBSIDIARY OF PURCHASER, CONSTITUTES MORE THAN 50% OF
THE VOTING POWER (DETERMINED ON A FULLY DILUTED BASIS) OF ALL THE SECURITIES OF
THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN
CONNECTION WITH A MERGER, (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER
(THE "HSR ACT") APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER
HAVING EXPIRED OR BEEN TERMINATED, AND (3) ALL SHARES OF WHICH ANY MEMBER OF THE
COMPANY'S BOARD OF DIRECTORS, OR ANY TRUST WITH WHICH ANY SUCH MEMBER OR SUCH
MEMBER'S SPOUSE IS AFFILIATED, IS A RECORD HOLDER OR BENEFICIAL OWNER AS OF JUNE
4, 1999 BEING VALIDLY TENDERED INTO THE OFFER PRIOR TO JULY 13, 1999 AND NO SUCH
SHARES BEING WITHDRAWN FROM THE OFFERING. THE OFFER IS ALSO SUBJECT TO CERTAIN
OTHER CONDITIONS DESCRIBED IN SECTION 13.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY. THE
BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT
THE OFFER AND IMMEDIATELY TENDER THEIR SHARES PURSUANT TO THE OFFER. DR. JOHN N.
KAPOOR, CHAIRMAN OF THE BOARD OF DIRECTORS OF THE COMPANY AND THE SINGLE LARGEST
HOLDER OF SHARES, HAS EXECUTED A LETTER CONFIRMING THAT HE WILL, SUBJECT TO HIS
FIDUCIARY DUTIES AS A TRUSTEE OF CERTAIN TRUSTS HOLDING SHARES, TENDER ALL
SHARES THAT HE OWNS EITHER DIRECTLY OR BENEFICIALLY TO MERGER SUB. THE BOARD OF
DIRECTORS OF THE COMPANY HAS RESOLVED THAT ALL DIRECTORS INTEND TO TENDER THE
SHARES THAT THEY OWN DIRECTLY OR BENEFICIALLY TO MERGER SUB.
<PAGE> 5
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 11, 1999 (the "Merger Agreement"), among the Company, Purchaser and
Merger Sub, pursuant to which, after the completion of the Offer, Merger Sub
will be merged with and into the Company (the "Merger") and each issued and
outstanding Share (other than Shares owned by Purchaser, Merger Sub or any other
direct or indirect subsidiary of Purchaser (collectively, the "Purchaser
Companies") and Shares that are held by stockholders ("Dissenting Stockholders")
exercising appraisal rights pursuant to Section 262 of the Delaware General
Corporation Law (the "DGCL")) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive, without interest, the Merger Consideration or such greater amount per
Share as may be paid pursuant to the Offer. As a result of the Merger, the
Company (sometimes referred to herein as the "Surviving Corporation") will
become a direct wholly owned subsidiary of Purchaser and an indirect wholly
owned subsidiary of Parent.
According to the Company, as of June 11, 1999, there were 9,191,538 Shares
outstanding and there were 1,100,144 Shares reserved for issuance pursuant to
the Company's 1991 Stock Option Plan, as amended, 358,500 Shares reserved for
issuance pursuant to the Company's 1998 Long-Term Incentive Plan, 200,000 Shares
reserved for issuance pursuant to a letter agreement, dated August 7, 1992,
between the Company and Dr. John N. Kapoor, 72,550 Shares reserved for issuance
pursuant to the Stock and Warrant Agreement, dated as of August 11, 1995,
between the Company and Laboratoires Besins Iscovesco S.A. and the related
Warrant and 140,000 Shares reserved for issuance pursuant to the Share Purchase
Warrant granted by the Company to Sunrise Securities Corp., dated as of February
29, 1996.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
On the terms and subject to the conditions set forth in the Offer
(including the terms and conditions set forth in Section 13 (the "Offer
Conditions") and together with, if the Offer is extended or amended, the terms
and conditions of such extension or amendment) Merger Sub will accept for
payment, and pay for, any and all Shares validly tendered on or prior to the
Expiration Date (as herein defined) and not withdrawn as permitted by Section 4.
The term "Expiration Date" means 12:00 Midnight, New York City time, on July 15,
1999, unless and until Merger Sub shall, in its sole discretion, have extended
the period for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Offer, as so extended by
Merger Sub, shall expire.
Rights are presently evidenced by the certificates for the Common Stock
and the tender by a stockholder of his shares of Common Stock will also
constitute a tender of the associated Rights. Pursuant to the Offer, no
separate payment will be made by Merger Sub for the Rights. Pursuant to the
Merger Agreement, the Board of Directors of the Company, at its meeting on June
8, 1999, authorized an amendment to the Rights Agreement (the "Rights
Amendment") to provide that neither Purchaser, Merger Sub, nor any Affiliate
(as defined in the Rights Agreement) of Purchaser or Merger Sub shall be or
become an Acquiring Person (and no Stock Acquisition Date, Distribution Date or
Triggering Event shall occur) as a result of, the provisions of Section 11 of
the Rights Agreement will not apply to or be triggered by, and the provisions
of Section 13 of the Rights Agreement will not apply to or be triggered by, (x)
the announcement, commencement or consummation of the Offer or (y) the
execution, delivery or performance of the Merger Agreement (or any amendment
thereto in accordance with the terms thereof) or the consummation of the
transactions contemplated thereby (including, without limitation, the Offer and
the Merger). The Rights Amendment was executed and delivered on June 11, 1999.
Subject to the terms of the Merger Agreement and applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"), Merger Sub
expressly reserves the right, in its sole discretion, at any time or from time
to time, to extend the period of time during which the Offer is open by giving
oral or written notice of such extension to Harris Trust Company of New York
(the "Depositary"). Any such extension will also be publicly announced by press
release issued no later than 9:00 A.M., New York City time, on the next
2
<PAGE> 6
business day after the previously scheduled Expiration Date. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares. See Section 4. Notwithstanding any other provision of the
Offer, Merger Sub will not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act") (relating to Merger Sub's obligation to pay for
or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, or may delay the acceptance for payment of, any tendered
Shares, or may, in its sole discretion, subject to the Merger Agreement,
terminate or amend the Offer as to any Shares not then paid for if, among other
things, (i) prior to the Expiration Date, (x) a number of Shares which,
together with any Shares owned by Purchaser, Merger Sub and the Purchaser
Companies, constitutes more than 50% of the voting power (determined on a
fully-diluted basis) of all the securities of the Company entitled to vote
generally in the election of directors or in connection with a merger shall not
have been validly tendered and not withdrawn prior to the expiration of the
Offer (the "Minimum Condition") or (y) any waiting period under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall not have
expired or been terminated, or any material approval, permit, authorization or
consent of any Governmental Entity shall not have been obtained on terms
satisfactory to the Purchaser in its reasonable discretion, or (ii) on or after
June 11, 1999, and at or before the time of acceptance for payment for any of
such Shares, any of the events specified in Section 13 shall occur (including
the failure of all Shares of which any member of the Company's Board of
Directors, or any trust with which any such member or such member's spouse is
affiliated, is a record holder or beneficial owner as of June 4, 1999 to be
validly tendered into the Offer prior to July 13, 1999 or the withdrawal from
the Offer of any such Shares) which, in the sole judgment of Purchaser and
Merger Sub, in any such case, and regardless of the circumstances (including
any action or inaction by Purchaser or Merger Sub) giving rise to any such
conditions, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment of or payment for Shares. Subject to the applicable
regulations of the SEC, Merger Sub also expressly reserves the right, in its
sole discretion (subject to the Merger Agreement), at any time or from time to
time, (i) to delay acceptance for payment of, or (regardless of whether such
Shares were theretofore accepted for payment) payment for, any tendered Shares,
or to terminate or amend the Offer as to any Shares not then paid for, on the
occurrence of any of the conditions specified in Section 13, and (ii) to waive
any condition (other than the Minimum Condition) and to set forth or change any
other term and condition of the Offer, by giving oral or written notice of such
delay, termination or amendment to the Depositary and by making a public
announcement thereof, provided that Merger Sub shall not, without the prior
written consent of the Company, decrease the price per Share offered in the
Offer, change the form of consideration offered or payable in the Offer,
decrease the number of Shares sought in the Offer, change the conditions to the
Offer in any manner adverse to the holders of Shares, impose conditions to the
Offer in addition to the Offer Conditions, amend any term of the Offer in any
manner adverse to the holders of Shares or waive the Minimum Condition. If
Merger Sub accepts any Shares for payment pursuant to the terms of the Offer,
it will accept for payment all Shares validly tendered prior to the Expiration
Date and not withdrawn, and, subject to the immediately preceding sentence and
the terms and conditions of the Offer, including but not limited to the Offer
Conditions, will promptly pay for all Shares so accepted for payment. Merger
Sub confirms that its reservation of rights to delay payment for Shares which
it has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return
the tendered securities promptly after the termination or withdrawal of a
tender offer limited by Rule 14e-1(c).
Any extension, delay, termination or amendment of the Offer will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 A.M.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that any material change in the
information published, sent or given to stockholders in connection with the
Offer be promptly disseminated to stockholders in a manner reasonably designed
to inform stockholders of such change) and without limiting the manner in which
Merger Sub may choose to make any public announcement, Merger Sub shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release or other announcement.
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<PAGE> 7
Merger Sub confirms that if it makes a material change in the terms of the
Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, Merger Sub will extend the Offer to the extent required
by Rules 14d-4(c) and 14d-6(d) under the Exchange Act.
If, prior to the Expiration Date, Merger Sub, if previously consented to by
the Company in writing, shall decrease the percentage of Shares being sought or
the consideration offered to holders of Shares, such decrease shall be
applicable to all holders whose Shares are accepted for payment pursuant to the
Offer and, if at the time notice of any decrease is first published, sent or
given to holders of Shares, the Offer is scheduled to expire at any time earlier
than the tenth business day from and including the date that such notice is
first so published, sent or given, the Offer will be extended until the
expiration of such ten business day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
The Offer is being mailed to holders of Shares from a list provided to
Merger Sub by the Company.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
On the terms and subject to the terms and conditions set forth in the Offer
(including the Offer Conditions and together with, if the Offer is extended or
amended, the terms and conditions of such extension or amendment), Merger Sub
will accept for payment, and will pay for, Shares validly tendered and not
withdrawn as promptly as practicable after the later of (i) the expiration or
termination of the waiting period under the HSR Act applicable to the purchase
of Shares pursuant to the Offer, and any material consent, approval, permit or
authorization of any Governmental Entity (as defined in the Merger Agreement)
having been obtained on terms satisfactory to the Purchaser in its reasonable
discretion and (ii) the Expiration Date, if at the time of the later of the
occurrence of (i) and (ii) above, the Minimum Condition has been satisfied or
waived; provided that Merger Sub expressly reserves the right to extend the
Offer from time to time notwithstanding prior satisfaction of the Offer
Conditions and, subject to applicable rules of the SEC, expressly reserves the
right to delay acceptance for payment of or payment for Shares in order to
comply, in whole or in part, with any applicable law. See Section 13. In all
cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for such Shares (or a confirmation of a book-entry transfer of such Shares into
the Depositary's account at The Depository Trust Company (the "Depository
Institution")), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other required documents.
For purposes of the Offer, Merger Sub will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when Merger Sub
gives oral or written notice to the Depositary of its acceptance for payment of
such Shares pursuant to the Offer. Payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering stockholders for
purpose of receiving payments from Merger Sub and transmitting such payments to
the tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE
PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased Shares will be
returned without expense to the tendering stockholder (or, in the case of Shares
tendered by book-entry transfer of such Shares into the Depositary's account at
the Depository Institution pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained with the Depository
Institution), as soon as practicable following expiration or termination of the
Offer.
Merger Sub reserves the right to transfer or assign in whole or in part
from time to time to one or more direct or indirect subsidiaries of Purchaser
the right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Merger Sub of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
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<PAGE> 8
3. PROCEDURE FOR TENDERING SHARES.
Valid Tender. To tender Shares pursuant to the Offer, either (a) a Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed in
accordance with the instructions of the Letter of Transmittal, with any required
signature guarantees, certificates for Shares to be tendered, and any other
documents required by the Letter of Transmittal, must be received by the
Depositary prior to the Expiration Date at one of its addresses set forth on the
back cover of this Offer to Purchase, (b) such Shares must be delivered pursuant
to the procedures for book-entry transfer described below (and a confirmation of
such delivery received by the Depositary, including an Agent's Message if the
tendering stockholder has not delivered a Letter of Transmittal), prior to the
Expiration Date, or (c) the tendering stockholder must comply with the
guaranteed delivery procedures set forth below. The term "Agent's Message" means
a message, transmitted by the Depository Institution to, and received by, the
Depositary and forming a part of a book-entry confirmation, which states that
the Depository Institution has received an express acknowledgment from the
participant in the Depository Institution tendering the Shares which are the
subject of such book-entry confirmation, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Merger Sub
may enforce such agreement against the participant.
Pursuant to the Rights Agreement, until the Distribution Date, the Rights
will be evidenced by the certificates for the Common Stock registered in the
names of the holders of the Common Stock (which certificates for Common Stock
shall be deemed also to be certificates for Rights) and not by separate
certificates, and the Rights will be transferable only in connection with the
transfer of the underlying shares of Common Stock (including a transfer to the
Company), and, until the earlier of the Distribution Date and the expiration
date for the Rights as described below, the transfer of any of such certificates
shall also constitute the transfer of the Rights associated with the Common
Stock represented by such certificates. Pursuant to the Rights Amendment,
neither Purchaser, Merger Sub, nor any Affiliate (as defined in the Rights
Agreement) of Purchaser or Merger Sub shall be or become an Acquiring Person
(and no Stock Acquisition Date, Distribution Date or Triggering Event shall
occur) as a result of, no Distribution Date shall occur as a result of, the
provisions of Section 11 of the Rights Agreement will not apply to or be
triggered by, and the provisions of Section 13 of the Rights Agreement will not
apply to or be triggered by, (x) the announcement, commencement or consummation
of the Offer or (y) the execution, delivery or performance of the Merger
Agreement (or any amendment thereto in accordance with the terms thereof) or the
consummation of the transactions contemplated thereby (including, without
limitation, the Offer and the Merger). See "Purpose of the Offer; Plans for the
Company; the Merger -- Rights Agreement.
If separate certificates representing the Rights are issued to holders of
Shares prior to the time a holder's Shares are tendered pursuant to the Offer,
certificates representing a number of Rights equal to the number of shares of
Common Stock tendered must be delivered to the Depositary, or, if available, a
Book-Entry Confirmation (as defined herein) must be received by the Depositary
with respect thereto, in order for such shares of Common Stock to be validly
tendered. If the Distribution Date occurs and separate certificates representing
the Rights are not distributed prior to the time Shares are tendered pursuant to
the Offer, Rights may be tendered prior to a stockholder receiving the
certificates for Rights by use of the guaranteed delivery procedure described
below. A tender of shares of Common Stock constitutes an agreement by the
tendering stockholder to deliver certificates representing all Rights formerly
associated with the number of shares of Common Stock tendered pursuant to the
Offer to the Depositary prior to expiration of the period permitted by such
guaranteed delivery procedures for delivery of certificates for, or a Book-Entry
Confirmation with respect to, Rights (the "Rights Delivery Period"). However,
after expiration of the Rights Delivery Period, Merger Sub may elect to reject
as invalid a tender of shares of Common Stock with respect to which certificates
for, or a Book-Entry Confirmation with respect to, the number of Rights required
to be tendered with such Common Stock have not been received by the Depositary.
Nevertheless, Merger Sub will be entitled to accept for payment shares of Common
Stock tendered by a stockholder prior to receipt of the certificates for the
Rights required to be tendered with such shares of Common Stock, or a Book-Entry
Confirmation with respect to such Rights, and either (a) subject to complying
with applicable rules and regulations of the SEC, withhold payment for such
shares of Common Stock pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights or (b) make payment for shares of
Common Stock accepted for
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<PAGE> 9
payment pending receipt of the certificates for, or a Book-Entry Confirmation
with respect to, such Rights in reliance upon the agreement of a tendering
stockholder to deliver Rights and such guaranteed delivery procedures. Any
determination by Merger Sub to make payment for shares of Common Stock in
reliance upon such agreement and such guaranteed delivery procedures or, after
expiration of the Rights Delivery Period, to reject a tender as invalid will be
made in the sole and absolute discretion of Merger Sub.
Book-Entry Delivery. The Depositary will establish accounts with respect
to the Shares at the Depository Institution for purposes of the Offer within two
business days after the date of this Offer to Purchase. Any financial
institution that is a participant in any of the Depository Institution's systems
may make a book-entry transfer of Shares by causing the Depository Institution
to transfer such Shares into the Depositary's account in accordance with the
Depository Institution's procedures for such transfer. Although delivery of
Shares may be effected through book-entry transfer, either the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in lieu
of the Letter of Transmittal, and any other required documents, must, in any
case, be transmitted to and received by the Depositary by the Expiration Date at
one of its addresses set forth on the back cover of this Offer to Purchase, or
the tendering stockholder must comply with the guaranteed delivery procedures
described below. If the Distribution Date occurs, the Depositary will also make
a request to establish an account with respect to the Rights at the Depository
Institution, but no assurance can be given that book-entry transfer of Rights
will be available. If book-entry transfer of Rights is available, the foregoing
book-entry transfer procedures will also apply to Rights. If book-entry transfer
of Rights is not available and the Distribution Date occurs, a tendering
stockholder will be required to tender Rights by means of physical delivery to
the Depositary of certificates for Rights (in which event references in this
Offer to Purchase to Book-Entry Confirmations with respect to Rights will be
inapplicable). The confirmation of a book-entry transfer of Shares or Rights
into the Depositary's account at the Depository Institution as described above
is referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE DEPOSITORY INSTITUTION'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, RIGHTS, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE DEPOSITORY INSTITUTION,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT THE STOCKHOLDER USE PROPERLY INSURED REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Signature Guarantees. Except as otherwise provided below, all signatures
on a Letter of Transmittal must be guaranteed by a financial institution
(including most commercial banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion Program,
the New York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program (an "Eligible Institution"). Signatures on a Letter
of Transmittal need not be guaranteed (a) if the Letter of Transmittal is signed
by the registered holders (which term, for purposes of this section, includes
any participant in any of the Depository Institution's systems whose name
appears on a security position listing as the owner of the Shares or Rights) of
Shares (or Rights, if applicable) and such registered holder has not completed
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal, or (b) if such Shares and
Rights are tendered for the account of an Eligible Institution. See Instructions
1 and 5 of the Letter of Transmittal. If the certificates for Shares or Rights
are registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made or certificates for Shares or Rights
not tendered or not accepted for payment are to be returned to a person other
than the registered holder of the certificates surrendered, then the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as described above. See Instructions 1 and 5 of the
Letter of Transmittal.
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<PAGE> 10
Guaranteed Delivery. A stockholder who desires to tender Shares (or
Rights, if applicable) pursuant to the Offer and whose certificates for Shares
(or Rights, if applicable) are not immediately available (including because
certificates for Rights have not yet been distributed by the Rights Agent), or
who cannot comply with the procedure for book-entry transfer on a timely basis,
or who cannot deliver all required documents to the Depositary prior to the
Expiration Date, may tender such Shares (and/or Rights, if applicable) by
following all of the procedures set forth below:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Merger Sub, is received by
the Depositary (as provided below) prior to the Expiration Date; and
(iii) the certificates for all tendered Shares and/or Rights, in
proper form for transfer (or a Book-Entry Confirmation with respect to all
such Shares and/or Rights), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal), and any other required
documents, are received by the Depositary (a) in the case of Shares, within
three trading days after the date of execution of such Notice of Guaranteed
Delivery or (b) in the case of Rights, within a period ending on the later
of (1) three trading days after the date of execution of such Notice of
Guaranteed Delivery or (2) three trading days after the date certificates
for Rights are distributed to stockholders by the Rights Agent. A "trading
day" is any day on which the New York Stock Exchange, Inc. (the "NYSE") is
open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Other Requirements. Notwithstanding any provision hereof, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) certificates for (or a timely
Book-Entry Confirmation with respect to) such Shares and, if the Distribution
Date occurs, certificates for (or a timely Book-Entry Confirmation, if
available, with respect to) the associated Rights, unless Merger Sub elects to
make payment for such Shares of Common Stock pending receipt of the certificates
for, or a Book-Entry Confirmation with respect to, such Rights as described
above, (b) a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal),
and (c) any other documents required by the Letter of Transmittal. Accordingly,
tendering stockholders may be paid at different times depending upon when
certificates for Shares (or Rights, if applicable) or Book-Entry Confirmations
with respect to Shares (or Rights, if available) are actually received by the
Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE OF THE
SHARES BE PAID BY MERGER SUB, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
Tender Constitutes an Agreement. The valid tender of Shares and, if
applicable, Rights pursuant to one of the procedures described above will
constitute a binding agreement between the tendering stockholder and Merger Sub
on the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder irrevocably appoints designees of Merger Sub as such
stockholder's proxies, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by Merger Sub and with respect to any and
all cash dividends, distributions, rights, other Shares or other securities
issued or issuable in respect of such Shares on or after the date of this Offer
to Purchase. All such proxies will be considered coupled with an interest in the
tendered Shares, including the associated Rights. Such appointment is effective
when, and only to the extent that, Merger Sub deposits the payment for such
Shares with the Depositary. Upon the effectiveness of such appointment, all
prior powers of attorney, proxies and consents given by such stockholder will be
revoked, and no subsequent powers of attorney, proxies and consents may be given
(and, if given, will not be deemed
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<PAGE> 11
effective). Merger Sub's designees will, with respect to the Shares for which
the appointment is effective, be empowered to exercise all voting and other
rights of such stockholder as they, in their sole discretion, may deem proper at
any annual, special or adjourned meeting of the stockholders of the Company, by
written consent in lieu of any such meeting or otherwise. Merger Sub reserves
the right to require that, in order for Shares to be deemed validly tendered,
immediately upon Merger Sub's payment for such Shares, Merger Sub must be able
to exercise full voting rights with respect to such Shares.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
or Rights will be determined by Merger Sub in its sole discretion, which
determination will be final and binding. Merger Sub reserves the absolute right
to reject any and all tenders determined by it not to be in proper form or the
acceptance for payment of or payment for which may, in the opinion of Merger
Sub's counsel, be unlawful. Merger Sub also reserves the absolute right to waive
any defect or irregularity in the tender of any Shares or Rights of any
particular stockholder whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares or Rights will be
deemed to have been validly made until all defects and irregularities relating
thereto have been cured or waived. None of Merger Sub, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. Merger Sub's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and
Instructions thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such stockholder and payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proved in
a manner satisfactory to Merger Sub and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Non-corporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
4. RIGHTS OF WITHDRAWAL.
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Merger Sub
pursuant to the Offer, may also be withdrawn at any time after August 15, 1999.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
having tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the names in which the certificate(s) evidencing the Shares to be withdrawn
are registered, if different from that of the person who tendered such Shares.
The signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of any
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry tender as set forth in Section 3, any notice of withdrawal must
specify the name and number of the account at the Depository Institution to be
credited with the withdrawn Shares. If certificates for Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then prior to the
physical release of such certificates, the name of the registered holder and the
serial numbers shown on such certificates must also be furnished to the
Depositary as aforesaid prior to the physical release of such certificates. All
questions as to the form and validity (including time of receipt) of any notice
of
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<PAGE> 12
withdrawal will be determined by Merger Sub, in its sole discretion, which
determination shall be final and binding. None of the Purchaser, Merger Sub, the
Depositary, the Information Agent, or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give such notification. Withdrawals of
tenders of Shares may not be rescinded, and any Shares properly withdrawn will
be deemed not to have been validly tendered for purposes of the Offer. However,
withdrawn Shares may be retendered by following one of the procedures described
in Section 3 at any time prior to the Expiration Date.
If Merger Sub extends the Offer, is delayed in its acceptance for payment
of Shares, or is unable to accept for payment Shares pursuant to the Offer, for
any reason, then, without prejudice to Merger Sub's rights under this Offer, the
Depositary may, nevertheless, on behalf of Merger Sub, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER.
Sales of Shares pursuant to the Offer and the exchange of Shares for cash
pursuant to the Merger will be taxable transactions for Federal income tax
purposes and may also be taxable under applicable state, local and other tax
laws. For Federal income tax purposes, a stockholder whose Shares are purchased
pursuant to the Offer or who receives cash as a result of the Merger will
realize gain or loss equal to the difference between the adjusted basis of the
Shares sold or exchanged and the amount of cash received therefor. Such gain or
loss will be capital gain or loss if the Shares are held as capital assets by
the stockholder and generally will be long-term capital gain or loss for stock
held for more than one year.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL SITUATIONS
SUCH AS STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE OF EMPLOYEE
STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE NOT UNITED
STATES PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER, INCLUDING
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are traded on the Nasdaq Stock Market's National Market System
(the "Nasdaq National Market") under the symbol UMED. The following table sets
forth, based upon public sources, for the calendar quarters indicated, the high
and low bid quotations for the Shares on the Nasdaq National Market (no cash
dividends were paid during such quarters):
<TABLE>
<CAPTION>
BID QUOTES
SHARES
--------------------
HIGH LOW
-------- --------
<S> <C> <C>
CALENDAR YEAR
1997:
First Quarter............................................. $8.12500 $4.87500
Second Quarter............................................ 5.75000 4.50000
Third Quarter............................................. 6.75000 4.25000
Fourth Quarter............................................ 8.75000 5.37500
1998:
First Quarter............................................. 8.34375 6.37500
Second Quarter............................................ 8.25000 4.62500
Third Quarter............................................. 6.12500 1.75000
Fourth Quarter............................................ 4.50000 2.37500
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
BID QUOTES
SHARES
--------------------
HIGH LOW
-------- --------
<S> <C> <C>
1999:
First Quarter............................................. 6.25000 3.75000
Second Quarter (through June 16, 1999).................... 11.68750 4.56250
</TABLE>
The Rights trade together with the Common Stock. On June 10, 1999, the last
full trading day prior to the public announcement of the terms of the Offer and
the Merger, the quoted closing bid price on the Nasdaq National Market was
$10.125 per Share. On June 16, 1999, the last full trading day prior to
commencement of the Offer, the quoted closing bid price on the Nasdaq National
Market was $11.500 per Share. Stockholders are urged to obtain a current market
quotation for the Shares.
7. EFFECT OF THE OFFER ON MARKET FOR THE SHARES, STOCK EXCHANGE LISTING, AND
EXCHANGE ACT REGISTRATION.
Market for Shares. The purchase of Shares by Merger Sub pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
may reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Stock Quotation. The Shares are quoted on the Nasdaq National Market.
According to published guidelines of the Nasdaq National Market, the Shares
would no longer be quoted on the Nasdaq National Market if, among other things,
the number of publicly held Shares (excluding Shares held directly or indirectly
by officers, directors and any person who is a beneficial owner of more than 10%
of the Shares) were less than 500,000, the aggregate market value of publicly
held Shares were less than $1,000,000 or there were fewer than 300 holders of
the Shares in round lots. If these standards were not met, quotations might
continue to be published in the over-the-counter "additional list" or one of the
"local lists" unless, as set forth in published guidelines of the Nasdaq
National Market, the number of publicly held Shares was less than 100,000, or
there were fewer than 300 holders in total. According to information furnished
to Purchaser by the Company, as of the close of business on June 16, 1999, there
were 965 holders of record of shares of Common Stock not including beneficial
holders of Common Stock held in street name, and there were 9,191,538 Shares
outstanding. If the Common Stock were to cease to be quoted on the Nasdaq
National Market, the associated Rights would be delisted as well.
If the Shares were to cease to be quoted on the Nasdaq National Market, the
market for the Shares could therefore be adversely affected. It is possible that
the Shares would be traded or quoted on other securities exchanges or in the
over-the-counter market, and that price quotations would be reported by such
exchanges, or other sources. The extent of the public market for the shares of
Common Stock and associated Rights and the availability of such quotations
would, however, depend upon the number of stockholders and/or the aggregate
market value of the shares of Common Stock and associated Rights remaining at
such time, the interest in maintaining a market in the shares of Common Stock
and associated Rights on the part of securities firms, the possible termination
of registration of the Shares under the Exchange Act and other factors.
Margin Regulations. The shares of Common Stock are presently "margin
securities" under the regulations of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among other
things, of allowing brokers to extend credit on the collateral of such shares of
Common Stock. Depending upon factors similar to those described above regarding
listing and market quotations, the shares of Common Stock might no longer
constitute "margin securities" for the purposes of the Federal Reserve Board's
margin regulations in which event the shares of Common Stock would be ineligible
as collateral for margin loans made by brokers.
Exchange Act Registration. The shares of Common Stock and associated
Rights are currently registered under the Exchange Act. Such registration may be
terminated by the Company upon application to the SEC if the outstanding shares
of Common Stock and associated Rights are not listed on a national securities
exchange and if there are fewer than 300 holders of record of shares of Common
Stock and associated Rights. Termination of registration of the shares of Common
Stock and associated Rights under the
10
<PAGE> 14
Exchange Act would reduce the information required to be furnished by the
Company to its stockholders and to the SEC and would make certain provisions of
the Exchange Act, such as the short-swing profit recovery provisions of Section
16(b) and the requirement of furnishing a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a) and the related requirement of
furnishing an annual report to stockholders, no longer applicable with respect
to the shares of Common Stock and Rights. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 under the Securities
Act of 1933, as amended, may be impaired or eliminated. If registration of the
shares of Common Stock under the Exchange Act were terminated, the shares of
Common Stock would no longer be eligible for quotation on the Nasdaq National
Market or for continued inclusion on the Federal Reserve Board's list of "margin
securities." Merger Sub intends to seek to cause the Company to apply for
termination of registration of the shares of Common Stock and associated Rights
as soon as possible after consummation of the Offer if the requirements for
termination of registration are met.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive offices
located at 2150 East Lake Cook Road, Buffalo Grove, Illinois 60089; telephone
number (847) 541-2525. The Company has described its business in publicly
available information in the manner set forth in the next paragraph below.
The Company develops and markets prescription pharmaceutical products. The
Company's strategy is to establish a leading position within specialty
pharmaceutical markets. The Company expects to build a diversified portfolio of
products in several therapeutic areas including HIV and other infectious
diseases, endocrinology, hematology, oncology and urology. Currently, the
Company promotes three approved drugs for these markets: Marinol(R)
(dronabinol), an appetite stimulant and antiemetic drug, Maxaquin(R)
(lomefloxacin), a fluoroquinolone anti-infective used in the urology and
infectious disease markets, and Anadrol(R) (oxymetholone), an orally active
anabolic androgenic steroid used to treat various anemias. The Company is
concentrating on markets in which relatively few specialized physicians treat
patients suffering primarily from chronic diseases. During 1998, the Company
expanded its sales and marketing organization and expects to further expand this
function as new products are acquired and/or developed. The Company's products
and clinical supplies are manufactured through contractors, although certain
specialized equipment is owned and maintained by the Company.
Set forth below is certain summary consolidated financial information for
each of the Company's last three fiscal years, as contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the
"Company's Form 10-K"), and for the three months ended March 31, 1999 and 1998,
as contained in the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1999 (together, the "Reports"). More comprehensive financial
information is included in the Reports (including management's discussion and
analysis of financial condition and results of operation) and other documents
filed by the Company with the SEC, and the following summary is qualified in its
entirety by reference to the Reports and other documents and all of the
financial information and notes contained therein. Copies of the Reports and
other documents may be examined at or obtained from the SEC or from NASDAQ in
the manner set forth below.
11
<PAGE> 15
THE COMPANY
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 FISCAL YEAR ENDED
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales....................... $ 5,720,588 $ 4,013,622 $15,869,082 $ 8,918,424 $ 7,648,599
Cost of sales................... 1,263,718 905,921 4,055,759 2,997,030 3,086,713
----------- ----------- ----------- ----------- -----------
Gross profit.................. 4,456,870 3,107,701 11,813,323 5,921,394 4,561,886
Total expenses.................. 5,114,749 4,982,543 22,181,399 15,366,321 4,589,772
----------- ----------- ----------- ----------- -----------
Loss from operations.......... (657,879) (1,874,842) (10,368,076) (9,444,927) (27,886)
Loss before income taxes........ (386,411) (1,706,921) (8,939,393) (8,209,488) 1,522,143
Income tax provision............ 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Net loss...................... $ (386,411) $(1,706,921) $(8,939,393) $(8,209,488) $ 1,522,143
=========== =========== =========== =========== ===========
Net loss per share:
Basic......................... $ (0.04) $ (0.19) $ (.99) $ (0.93) $ 0.18
=========== =========== =========== =========== ===========
Diluted....................... $ (0.04) $ (0.19) $ (.99) $ (0.93) $ 0.17
=========== =========== =========== =========== ===========
Weighted average number of
common and common equivalent
shares outstanding:
Basic......................... 9,011,327 8,937,294 8,985,150 8,862,000 8,365,785
=========== =========== =========== =========== ===========
Diluted....................... 9,011,327 8,937,294 8,985,150 8,862,000 8,898,430
=========== =========== =========== =========== ===========
BALANCE SHEET DATA:
Current assets.................. $16,017,054 $19,921,276 $15,130,765 $21,359,735 $27,078,014
Total assets.................. 18,710,255 22,618,274 17,914,715 24,089,724 30,746,875
=========== =========== =========== =========== ===========
Current liabilities............. 12,287,426 9,552,345 11,362,218 8,150,218 8,177,113
Long-term obligation............ 520,426 0 486,488 1,213,000 0
Total liabilities............. $12,807,852 $ 9,552,345 $11,848,706 $ 9,363,218 $ 8,177,113
=========== =========== =========== =========== ===========
Stockholders' equity............ 5,902,403 13,065,929 6,066,009 14,726,506 22,569,762
Total liabilities and
stockholders' equity....... $18,710,255 $22,618,274 $17,914,715 $24,089,724 $30,746,875
=========== =========== =========== =========== ===========
</TABLE>
During the course of discussions between Purchaser and the Company that led
to the execution and delivery of the Merger Agreement (See Section 11), the
Company provided Parent with certain information relating to the Company which
Purchaser believes is not publicly available. This information was set forth in
a five year strategic plan for the Company which included the following
projected financial data for the Company.
(ALL DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------
1999 2000 2001 2002 2003
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales............................................ $28.0 $45.3 $75.0 $100.1 $135.0
Operating expenses................................... 24.3 36.7 46.6 51.9 67.6
Operating income (loss).............................. (0.4) 2.4 13.7 28.8 41.2
Net income........................................... -- 2.8 14.1 29.6 42.7
</TABLE>
12
<PAGE> 16
The foregoing information has been excerpted from the materials presented to
Purchaser and does not assume consummation of the Offer and the Merger.
The foregoing estimates constitute forward-looking statements that involve
risks and uncertainties, including, but not limited to, risks associated with
fluctuations in quarterly results, new product introductions, dependence upon
suppliers, competition and other factors. These risks and uncertainties are
discussed in greater detail in the Company's periodic filings with the SEC.
The Company does not as a matter of course make public any estimates as to
future performance or earnings, and the estimates set forth above are included
in this Offer to Purchase only because the information was made available to
Purchaser by the Company. The Company has informed Purchaser that the estimates
were not prepared with a view to public disclosure or compliance with the
published guidelines of the SEC or the guidelines established by the American
Institute of Certified Public Accountants regarding estimates or forecasts. The
Company has also informed Purchaser that its internal financial forecasts (upon
which the estimates provided to Purchaser were based in part) are, in general,
prepared solely for internal use and capital budgeting and other management
decision-making purposes and are subjective in many respects and thus
susceptible to various interpretations and periodic revision based on actual
experience and business developments. Projected information of this type is
based on estimates and assumptions that are inherently subject to significant
economic and competitive uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the control of the Company.
Many of the assumptions upon which the estimates were based, none of which were
approved by Parent, Solvay America, Purchaser or Merger Sub, are dependent upon
forecasting (both general and specific to the Company's business), which is
inherently uncertain and subjective. The inclusion of the foregoing estimates
should not be regarded as an indication that the Company, Parent, Solvay
America, Purchaser or Merger Sub or any other person who received such
information considers it an accurate prediction of future events, and neither
Parent, Solvay America, Purchaser or Merger Sub has relied on them as such. None
of Parent, Solvay America, Purchaser or Merger Sub assumes any responsibility
for the accuracy or validity of any of the estimates.
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase has been taken from or based upon
publicly available documents and records on file with the SEC and other public
sources and is qualified in its entirety by reference thereto. Although Parent,
Solvay America, Purchaser and Merger Sub have no knowledge that would indicate
that any statements contained herein based on such documents and records are
untrue, Parent, Solvay America, Purchaser and Merger Sub cannot take
responsibility for the accuracy or completeness of the information contained in
such documents and records, or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Parent, Solvay America, Purchaser or Merger
Sub.
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports and other
information with the SEC relating to its business, financial condition and other
matters. Information, as of particular dates, concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's stockholders and filed with the
SEC. Such reports, proxy statements and other information should be available
for inspection at the public reference room at the SEC's offices at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and also should be
available for inspection and copying at the regional offices of the SEC located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies may
be obtained, by mail, upon payment of the SEC's customary charges, by writing to
its principal office at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and can be obtained electronically on the SEC's Website at
http://www.sec.gov. Such material should also be available for inspection at the
offices of NASDAQ Operations, 1735 K Street, N.W., Washington, DC 20006.
13
<PAGE> 17
9. CERTAIN INFORMATION CONCERNING AND MERGER SUB, PURCHASER AND PARENT.
Merger Sub is a Delaware corporation and to date has engaged in no
activities other than those incident to its formation and the commencement of
the Offer. Merger Sub is a direct wholly owned subsidiary of Purchaser. The
principal executive offices of Merger Sub are located at 901 Sawyer Road,
Marietta, Georgia 30062.
Purchaser is a Georgia corporation, a direct wholly owned subsidiary of
Solvay America, Inc., and an indirect wholly owned subsidiary of Parent.
Purchaser's principal executive offices are located at 901 Sawyer Road,
Marietta, Georgia 30062. Purchaser manufactures and sells pharmaceuticals.
Solvay America, Inc. ("Solvay America") is a Delaware corporation and a
direct wholly owned subsidiary of Parent. Solvay America's principal executive
offices are located at 3333 Richmond Avenue, Houston, Texas 77098. Solvay
America manufactures and sells chemicals and pharmaceuticals.
Parent is a Belgian societe anonyme and is the parent company of the Solvay
group. Parent's principal executive offices are located at rue due Prince
Albert, 33, B-1050, Brussels, Belgium. Parent manufactures and sells chemicals
and pharmaceuticals.
None of Parent, Solvay America, Purchaser nor Merger Sub is subject to the
informational filing requirements of the Exchange Act. Solvay America, Purchaser
and Merger Sub do not file reports or other information with the SEC relating to
their respective businesses, financial condition or other matters. Parent files
certain reports (including its annual report) and information pursuant to Rule
12g3-2(b)(1) under the Exchange Act, which may be inspected and copies obtained
at the offices of the SEC as set forth in Section 8 (except that they will not
be available at the regional offices of the SEC). In addition, stockholders of
the Company may also obtain copies of Parent's 1997 Annual Report and 1998
Annual Report by contacting the chief financial officer of Solvay America at
Solvay America's principal executive offices set forth above. Copies of such
documents may also be obtained electronically from Parent's website at
http://www.solvay.com.
Set forth below is certain summary consolidated financial information with
respect to Parent. The summary below is qualified in its entirety by reference
to Parent financial information contained in Parent's 1997 Annual Report and
1998 Annual Report, which financial information has been filed as an exhibit to
the Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which
may be inspected and copies obtained at the offices of the SEC as set forth in
Section 8 (except that they will not be available at the regional offices of the
SEC), and such financial information and related notes are incorporated herein
by reference.
14
<PAGE> 18
SOLVAY S.A.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS OF EURO'S, EXCEPT PER SHARE DATA)
Note: Financials have been converted from BEF to EURO's at a rate of 40.3399 BEF
per EURO
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Net sales................................................... 7,451 7,709 6,990
Net earnings before extraordinary items and minority
interests.............................................. 377 327 286
Solvay's share in net income.............................. 375 330 330
BALANCE SHEET INFORMATION:
Working Capital (including cash and cash equivalents)..... 1,214 1,500 1,361
Total assets (Fixed assets + Working Capital)............. 5,754 6,056 5,384
Total Indebtedness........................................ 840 1,185 1,106
Shareholders' equity...................................... 3,047 2,969 2,693
PER COMMON SHARE INFORMATION (*):
Net earnings before extraordinary items................... 4.38 3.79 3.32
Net extraordinary items................................... 0.07 0.15 0.62
Net income per common share............................... 4.45 3.94 3.94
Net income per common share on a fully diluted basis
(**)................................................... 4.45 3.94 3.94
Average number of shares of common stock outstanding during
each period was (in thousands)............................ 84,032 83,803 83,544
</TABLE>
- ---------------
(*) adjusted to give effect to 10 for 1 stock split decided at the Annual
General Meeting of 5 June 1997
(**) Because the only stock option program involves only a limited number of top
managers in the Group, the number of additional shares issued has no
material impact on the computation of net income per common share
Parent's consolidated financial statements are prepared in accordance with
generally accepted accounting principles in Belgium ("Belgian GAAP"), which
differ from generally accepted accounting principles in the United States ("U.S.
GAAP"). These differences involve both methods for measuring the amounts shown
in the financial statements, as well as certain additional disclosures that are
required by U.S. GAAP. While the following is not a comprehensive summary of all
the differences between Belgian GAAP and U.S. GAAP, other differences are
unlikely to have a significant effect on the consolidated income or
shareholders' funds of Parent, Solvay America or Purchaser.
- - Deferred tax assets and liabilities are recognized in full under U.S. GAAP,
subject to valuation allowances, while under Belgian GAAP deferred taxes are
not fully recognized.
- - Belgian GAAP allows capitalization of start up cost while U.S. GAAP requires
such cost to be expensed.
- - U.S. GAAP requires separate income statement presentation of discontinued
operations and places strict limitations on extraordinary item treatment. For
Belgian GAAP, discontinued operations are presented as extraordinary and
restrictions for extraordinary treatment are less stringent.
- - U.S. GAAP requires inclusion of salary and inflation projections in
determining defined benefit pension plan obligations while Belgian GAAP does
not.
Although Belgian GAAP differs in certain respects from U.S. GAAP, Parent
believes that the differences are not material to a decision by a holder of
Shares whether to sell, tender or hold any Shares because any such differences
would not effect the ability of Merger Sub to obtain sufficient funds to pay for
the Shares to be purchased pursuant to the Offer.
15
<PAGE> 19
The name, citizenship, business address, present principal occupation, and
material positions held during the past five years of each of the directors and
executive officers of Parent, Solvay America, Purchaser and Merger Sub are set
forth in Schedule A to this Offer to Purchase.
Except as set forth in Sections 10 and 11, none of Parent, Solvay America,
Purchaser or Merger Sub, or, to the best of their knowledge, any of the persons
listed in Schedule A hereto nor any associate or majority-owned subsidiary of
any of the foregoing, beneficially owns or has a right to acquire any equity
securities of the Company. None of Parent, Solvay America, Purchaser or Merger
Sub, or, to the best of their knowledge, any of the persons or entities referred
to above, nor any director, executive officer or subsidiary of any of the
foregoing, has effected any transaction in such equity securities during the
past 60 days.
Except as set forth in Sections 10 and 11, none of Parent, Solvay America,
Purchaser or Merger Sub, or, to the best of their knowledge, any of the persons
listed in Schedule A hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in Sections 10 and 11, there have been no contacts, negotiations or
transactions since January 1, 1996 between Parent, Solvay America, Purchaser or
Merger Sub, or, to the best of their knowledge, any of the persons listed in
Schedule A hereto, on the one hand, and the Company or its affiliates, on the
other hand, concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets. Except as described in Sections 10 and
11, none of Parent, Solvay America, Purchaser or Merger Sub, or, to the best of
their knowledge, any of the persons listed in Schedule A hereto, has since
January 1, 1996 had any transaction with the Company or any of its executive
officers, directors or affiliates that would require disclosure under the rules
and regulations of the SEC applicable to the Offer.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
In October 1998, Dr. John N. Kapoor, Chairman of the Board of Directors of
the Company, discussed with Dr. Ronald L. Goode, the then President and Chief
Executive Officer of the Company, a possible combination among the Company and
two other companies of which Dr. Kapoor is also the Chairman of the Board of
Directors and the single greatest stockholder (individually, a "Kapoor
Affiliate" and collectively, the "Kapoor Affiliates"). In an informal telephonic
meeting of the Board members, on October 9, 1998, Dr. Kapoor raised the
possibility of a business combination among the Company and the Kapoor
Affiliates. On December 16, 1998, Dr. Kapoor proposed that the Company explore a
business combination among the Company and the Kapoor Affiliates. The goal of
the business combination proposed by Dr. Kapoor was to increase the market
capitalization of the combined enterprises, attract institutional investors,
enhance a pipeline of products and cash, and improve liquidity for shareholders
in all of the Kapoor Affiliates, including the Company. Dr. Kapoor noted his
affiliation with these companies and accordingly, the Board established a
Special Committee of independent directors for the purpose of making a report
and recommendation to the Board of Directors on Dr. Kapoor's proposal. Directors
Roland Weiser, James J. Lempenau and Gilbert F. Dwyer were elected to serve as
members of the Special Committee, with Mr. Weiser designated as the Chairman of
the Special Committee. The Board also named the Chief Executive Officer an
ex-officio member of the Special Committee.
In January 1999, the Special Committee engaged Duff & Phelps, LLC ("Duff &
Phelps") to act as a consultant to the Special Committee in its review of the
proposed business combination among the Company and the Kapoor Affiliates. On
February 3, 1999, the Board of Directors met to receive a report of the Special
Committee. Based on the preliminary conclusions of Duff & Phelps, the Special
Committee determined that the proposed business combination could be of benefit
to the Company and should be further explored. Duff & Phelps also presented
preliminary valuations of the Company and the Kapoor Affiliates. Counsel for the
Company reviewed the various legal responsibilities associated with considering
a business combination and specifically reviewed the fiduciary duties of the
directors in connection with consideration of a business combination. The Board
also discussed the possibility of alternative transactions being presented to
the Company. The Board authorized the Special Committee to consider the proposed
business combination
16
<PAGE> 20
among the Company and the Kapoor Affiliates and any other alternative
transactions that may be presented to the Company and to make definitive
recommendations with respect to such transactions to the Board of Directors. The
Board also authorized the Chief Executive Officer of the Company to represent
the Company in connection with any business combination, including the proposed
transaction among the Company and the Kapoor Affiliates.
On February 4, 1999, Dr. Dudley was appointed to the position of President
and Chief Executive Officer of the Company and elected to the Board of Directors
of the Company.
On February 16, 1999, David A. Dodd, President and Chief Executive Officer
of Purchaser, met with Dr. Dudley and Mr. David E. Riggs, Senior Vice President
and Chief Financial Officer of the Company. Mr. Dodd presented an overview of
Solvay and stated that Purchaser was interested in acquiring the Company. Mr.
Dodd explained Purchaser's desire to acquire a company with an existing sales
and marketing force to introduce new products of Solvay. Mr. Dodd stated that
Solvay wanted to further develop existing Company products, develop and market
new products, retain the Company as an independent subsidiary in its present
location, retain existing management, and market the Company's products in
Europe through Parent. Dr. Dudley reported to the Special Committee concerning
the meeting.
On February 23, 1999, the members of the Special Committee, along with Dr.
Dudley, met with representatives of Purchaser. The representatives of Purchaser
stated that they were in the process of performing an evaluation of the Company
and identified several appealing features of the Company, including the
infrastructure, the strategic advantage of having a separate entity, existing
management, existing sales and marketing capability and existing products in
late-stage clinical development. Immediately following the meeting, Dr. Dudley,
and the Special Committee, met with counsel and a representative of Duff &
Phelps to consider the viability of Purchaser's overture. The Special Committee
then instructed Dr. Dudley to advise Purchaser that the Company was interested
in pursuing further discussions regarding the proposed transaction. On February
26, 1999, Dr. Kapoor was contacted by another third party which expressed a
serious interest in merging with theCompany. Although Dr. Dudley followed up
promptly by speaking with the President of such third party, ultimately the
third party declined to pursue the proposed transaction with the Company.
On March 4, 1999, the Company, acting through the Special Committee,
expanded the engagement of Duff & Phelps to include an evaluation of alternative
transactions, in addition to the proposed combination among the Company and the
Kapoor Affiliates. On March 5, 1999, Dr. Dudley received a telephone call from
Robert A. Solheim, Vice President, Finance & Administration of Purchaser stating
that Solvay was seriously interested in pursuing a transaction to purchase the
Company and that Purchaser had arrived at an initial valuation of the Company of
$10.00 to $12.00 per Share, on a fully diluted basis. Mr. Solheim noted that
this proposal was subject to further due diligence on the Company.
On March 7, 1999, the Special Committee, along with Dr. Dudley, met and
agreed to evaluate all strategic alternatives on a parallel basis. Toward that
end, Dr. Dudley make many attempts during this time to elicit information from
the Kapoor Affiliates regarding their proposal to merge with the Company. On
March 12, 1999, representatives of Purchaser began their due diligence review of
the Company. On March 14, 1999, the Special Committee was advised by Dr. Dudley
that representatives of Purchaser were continuing their review of the Company
and continued to be interested in a transaction with the Company.
On March 15, 1999, the president of a Kapoor Affiliate (the "Affiliate
President") called Dr. Dudley to discuss the proposed business combination among
the Company and the Kapoor Affiliates. Affiliate President explained that in the
proposed transaction, the Kapoor Affiliates would contribute cash, early
pipeline products and manufacturing capabilities and the Company would
contribute its existing sales, marketing and clinical development
infrastructure. Affiliate President stated that the interests of the
stockholders of the Company and the Kapoor Affiliates in the combined entity
would be based on the market capitalizations of the three companies at some
specified point in time. Accordingly, no premium would be paid to the
stockholders of the Company or the Kapoor Affiliates and the proportionate
interest of the Company's stockholders in the combined entity would be
approximately 20%. Affiliate President also suggested that the board of
directors of the combined entity would be composed of individuals from the
boards of each of the Company and the Kapoor Affiliates.
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<PAGE> 21
At a meeting of the Board of Directors of the Company on March 16, 1999,
Dr. Kapoor explained his reasons for proposing a business combination among the
Company and the Kapoor Affiliates. The directors agreed that the Special
Committee, together with its independent consultants and counsel, would consider
the proposal for a business combination with the Kapoor Affiliates and any other
alternatives that may properly come before the Special Committee. The Special
Committee would then make a definitive recommendation with respect to
alternative transactions to the Board of Directors.
March 19, 1999, Mr. Dodd spoke with Dr. Dudley and expressed Purchaser's
continued interest in pursuing a business transaction with the Company. Mr. Dodd
stated that Purchaser's was to submit a proposal to Parent on March 23, 1999,
and Purchaser made such presentation.
On March 26, 1999, Affiliate President submitted a proposal to the Company
regarding a proposed business combination among the Company and the Kapoor
Affiliates. The proposal provided for a merger or consolidation of the Company
with the Kapoor Affiliates. The proposal provided that the purchase price would
be based on the relative market value of the outstanding common stock of each of
the combining companies, which relative market value would be determined by the
average of such values for some period of time prior to consummation of the
merger or consolidation. The purchase price would be paid in shares of the
surviving company's common stock. The proposal also stated that the initial
board of directors of the surviving corporation would be composed of an equal
number of members designated by each of the constituent corporations. The
proposal was subject to completion of due diligence and certain other
conditions. Affiliate President also requested that the Company enter into a
forty-five day exclusive period during which the Company would not discuss or
negotiate any other potential business combination. In a letter dated March 26,
1999, Dr. Dudley responded that the Company was interested in continuing its
evaluation of the merits of a potential transaction among the Company and the
Kapoor Affiliates. However, Dr. Dudley advised Affiliate President that the
Company would not enter into an exclusivity agreement with respect to
discussions and negotiations regarding potential business combinations.
On April 1, 1999, Mr. Dodd wrote to Dr. Dudley stating that Purchaser was
prepared to make a cash offer for the outstanding Shares at a price of $9.50 per
Share. Mr. Dodd's letter also stated that such proposal contemplated the absence
of any financing condition. Additionally, Mr. Dodd's letter stated that Solvay
viewed the Company's personnel as key to the success of any transaction and
would endeavor to keep them with the Company following any acquisition. Mr. Dodd
also contacted Dr. Dudley by telephone to explain the basis for the Offer.
On April 5, 1999, Affiliate President and Dr. Dudley spoke by telephone.
Affiliate President again stated his interest in a business combination
involving the Company and the Kapoor Affiliated. Dr. Dudley met with Affiliate
President on April 7, 1999, and explained that the concept of putting the
Company and the Kapoor Affiliates together based on their current valuation was
not acceptable to the Company. Dr. Dudley also advised Affiliate President that
the Company had received a cash offer at a level representing a substantial
premium to its current market valuation. Dr. Dudley advised Affiliate President
that a merger among the companies at no premium to current value was not
competitive.
On April 12, 1999, Dr. Dudley and a representative of Duff & Phelps met at
Solvay's headquarters with Mr. Dodd, Mr. Solheim and Dr. Harold Shevlin, Mr.
Jeff Linton and Mr. Joseph Feldhouse of Purchaser, and Mr. Phil Uhrhar, chief
financial officer of Solvay America. Dr. Dudley explained the basis for a
significantly higher valuation of the Company than the price offered by
Purchaser and advised representatives that the Company had been presented with a
serious alternative proposal.
Dr. Dudley and Affiliate President spoke on April 13, 1999, regarding the
proposed combination among the Company and the Kapoor Affiliates and discussed
the possibility of offering a premium above the Company's current per Share
price.
On April 13, 1999, Mr. Jurgen Ernst, General Manager of the Pharmaceutical
Sector of Parent, and Mr. Jacques Levy Morelle, Corporate Secretary of Parent,
met with Mr. Dodd, Dr. Shevlin, Mr. Solheim, Mr. Linton and Mr. Feldhouse at
Purchaser's headquarters. Mr. Dodd outlined the status of the discussions to
date and the anticipated next steps.
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<PAGE> 22
On April 14, 1999, Purchaser's board of directors conducted a regularly
scheduled meeting. Mr. Solheim briefed the board of directors on the status of
discussion. The board of directors advised management to continue its activities
toward reaching an agreement to acquire the Company.
On April 15, 1999, Mr. Solheim called Dr. Dudley to provide an update
regarding Purchaser's internal discussions regarding an acquisition of the
Company. Mr. Solheim assured Dr. Dudley that there continued to be great
enthusiasm about the proposed acquisition of the Company and that Purchaser's
senior management and parent company in Belgium were supportive of the
transaction. Mr. Solheim informed Dr. Dudley that a new proposal would be
forthcoming.On April 16, 1999, the investment bankers representing one of the
Kapoor Affiliates orally presented an offer to the Company of stock in the
combined corporation representing a premium of approximately 30% above the
closing price of the Shares on April 15, 1999 (which would be approximately
$7.50 per Share). On April 19, 1999, Affiliate President spoke with Dr. Dudley
regarding the oral offer presented by the Kapoor Affiliate's investment bankers.
Affiliate President asked Dr. Dudley to seriously consider the offer and to
respond to the offer by Friday, April 23, 1999. Representatives of Duff & Phelps
contacted Affiliate President and requested a written proposal from the Kapoor
Affiliates based on the offer presented on April 16, 1999 and asked for
clarification as to whether or not both Kapoor Affiliates had agreed to be a
part of the proposed business combination. However, on April 20, 1999, Affiliate
President wrote to Dr. Dudley stating that the Kapoor Affiliate had decided not
to move forward with the proposal previously provided to the Company and that
such proposal was withdrawn. On April 20, 1999, Dr. Kapoor advised Dr. Dudley of
his great disappointment that a business combination with the Kapoor Affiliates
could not be consummated. On April 21, 1999, Affiliate President talked with Dr.
Dudley and explained why the Kapoor Affiliate had withdrawn the offer. Affiliate
President stated that apparently the timing was not favorable for the proposed
deal and that it appeared that the deal was too complex and would take too long
for all three parties to reach consensus. Affiliate President also stated that
it was the feeling of the Board of the Kapoor Affiliate that there was no reason
for any premium to be paid beyond the written offer made on March 26, 1999.
On April 23, 1999, Mr. Dodd wrote to Dr. Dudley to update him on
Purchaser's interest in acquiring the Company and to amend the prior Offer.
Based on the additional information presented to Purchaser and further analysis
of the Company, Mr. Dodd's letter stated that Purchaser was prepared to make a
cash offer at $11.25 per Share. On April 24, 1999, the Special Committee held a
telephonic meeting for the purpose of considering Purchaser's offer. Dr. Dudley
described in detail the terms and conditions of the offer and briefly outlined
the background that led to Purchaser's offer. A representative of Duff & Phelps
then discussed the valuation of the offer, noting the offer represented a
significant premium to the market value of the Shares and that the multiples
represented by the offer exceeded industry median multiples. The strategic fit
of the Company with Purchaser was also noted. The Special Committee then engaged
in discussions regarding Purchaser's offer. The Special Committee acknowledged
the significant premium offered by Purchaser, the strategic motivation of
Purchaser and the expressed desire of Purchaser to continue to operate the
Company as a separate subsidiary. The meeting was then adjourned and reconvened
by telephone on April 26, 1999 in order to continue discussions regarding the
offer. The Special Committee also discussed the fiduciary duties of the Board in
connection with considering the offer. Finally, the Special Committee determined
to recommend to the Board of Directors that the Company negotiate a definitive
agreement with Purchaser for the sale of all of the Shares at a price of $11.25
or higher in cash.
On April 28 and 29, 1999, the Board of Directors of the Company met to
consider Purchaser's offer. Mr. Weiser, as Chairman of the Special Committee,
reviewed the offer and reported on the proceedings of the Special Committee. Mr.
Weiser reported the recommendation of the Special Committee to negotiate an
agreement for the sale of all of the Shares at $11.25 or higher. Mr. Weiser also
described the significant premium offered, the strategic motivation of Purchaser
and the expressed desire of Purchaser to continue to operate the Company as a
separate subsidiary. Dr. Kapoor then expressed his disappointment that the
proposed business combination between the Company and the Kapoor Affiliates had
been withdrawn. A representative of Duff & Phelps then made a financial
presentation to the Board regarding Purchaser's offer. Counsel to the Company
advised the members of the Board of their fiduciary obligations in considering a
potential business combination transaction. The Board then discussed Solvay's
offer of $11.25 per Share.
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<PAGE> 23
Dr. Kapoor suggested that the Board established a process for the Company
to solicit and consider alternatives to Purchaser's offer. The Board then
discussed engaging an investment banker with particular expertise in the
pharmaceutical industry to assist the Company in considering alternatives to
Purchaser's offer. A motion was then made that the Company negotiate a
definitive agreement at a price of $11.25 per Share or higher with Purchaser and
that concurrently the Company engage an investment banker to assist the Company
in identifying and considering alternative transactions. Initially the
resolution passed with Drs. Dudley and Goode and Messrs. Dwyer, Lempenau and
Weiser voting for the resolution and Drs. Kapoor and Shah voting against the
resolution. The meeting was then recessed. On April 29, 1999, the Board meeting
was reconvened. Dr. Dudley presented the history of the discussions with
Purchaser and the members of the Board continued to discuss Purchaser's offer.
The Board also further considered the engagement of an investment banking firm
to assist the Company by conducting a market check and bringing to the Board
alternative opportunities should such opportunities occur as a result of the
market check. Following those discussions, the Board of Directors reconsidered
the resolution presented the night before and unanimously resolved to negotiate
a definitive agreement with Purchaser at a price of $11.25 per Share or higher
and to engage an investment banking firm to assist the Company in considering
alternative opportunities. A new special committee comprising Dr. Dudley, Mr.
Dwyer and Dr. Shah was impaneled to interview and recommend an investment banker
for the Company.
The Board of Directors met again on May 6, 1999 to authorize the Company to
engage Hambrecht & Quist LLC ("Hambrecht & Quist") to assist the Board in
conducting a market check and to consider potential transactions as an
alternative to Purchaser's offer should such alternatives arise. During the next
several days, telephone conversations took place between Dr. Dudley and
representatives of Purchaser in which Purchaser continued to express interest in
acquiring the Company. Purchaser also dispatched a team to the Company's offices
to continue its due diligence review of the Company. During this period, Dr.
Dudley, along with representatives of Hambrecht and Quist, met with other
parties that expressed interest in discussing a potential business combination
with the Company.
On May 25, 1999, Mr. Ernst presented the status of the discussions to Baron
Daniel Jansen, chairman of the board of directors of Parent and Alois
Michielson, chief executive officer of Parent. Both individuals advised Mr.
Ernst to direct Purchaser to continue to proceed with the proposed transaction
subject to negotiation of an acceptable merger agreement and securing a
commitment from Dr. Kapoor that, subject to his fiduciary duties, he would
tender his Shares at $12.00 per Share. On May 25, 1999, Purchaser provided the
Company with an initial draft of an agreement and plan of merger.
On May 26, 1999, Mr. Ernst presented the proposed transaction to Parent's
executive committee which recommended that the transaction be pursued. Also on
May 26th, Dr. Dudley received a letter from Mr. Dodd stating Purchaser's
continued interest in acquiring the Company and that Purchaser was prepared to
make a cash offer for the outstanding Shares at a price of $12.00 per Share. Mr.
Dodd's letter stated that this would be the final indication of interest from
Purchaser. Mr. Dodd also requested that the Company not engage in discussions
with other entities regarding a possible combination. Mr. Dodd's letter further
stated that a response from the Company was required by May 28, 1999.
On May 28, 1999, the Board of Directors met to consider the revised and
final offer by Purchaser. A representative of Hambrecht & Quist stated that
approximately 15 selected companies had been contacted to discern their level of
interest in pursuing a transaction with the Company. Two companies expressed
serious interest, but were unwilling to provide the Company with any written
proposal. It was also noted that these companies would need to conduct further
due diligence on the Company before a definitive written proposal could be
submitted to the Company. The representative of Hambrecht & Quist also presented
avaluation analysis of the Company, including trading multiples, merger and
acquisition premiums, comparable transactions and product acquisition multiples.
The Board discussed Purchaser's offer. After extensive consideration, the Board
unanimously decided to accept Purchaser's offer for the acquisition of all of
the outstanding Shares of the Company at a price of $12.00 per Share, subject to
the negotiation and execution of a definitive merger agreement. On May 28, 1999,
Dr. Dudley wrote to Mr. Dodd advising him that the Board of Directors had
unanimously authorized the acceptance of the offer and the negotiation of a
definitive merger agreement. In Dr. Dudley's letter, he also agreed not to
engage in discussions with other entities regarding
20
<PAGE> 24
possible combinations until June 7, 1999. As a result of unexplained increased
trading volume in its Shares, on May 28, 1999, the Company announced that it was
actively engaged in negotiations with an unnamed third party for the sale of all
of the outstanding Shares.
On June 3, 1999, the executive committee of Parent met and discussed the
proposed acquisition. The executive committee agreed to proceed with the
proposed transaction subject to the conditions discussed in the May 25, 1999
meeting among Messrs. Ernst and Michielson. Later on June 3, 1999, the board of
directors of Parent held a regularly scheduled meeting. The board of directors
approved the proposed acquisition of the Company at $12.00 per Share, subject to
such conditions.
During the next week, representatives of the Company and Purchaser and
their counsel negotiated the terms of the Merger Agreement. On June 4, 1999, the
Board of Directors of the Company again met to discuss Purchaser's offer. Dr.
Dudley reviewed the status of negotiations with Purchaser. Counsel to the
Company advised the Board that Purchaser and its parent company in Belgium had
approved the proposed business combination. Counsel to the Company also
discussed the timing of the offer. A representative of Hambrecht & Quist then
made a financial presentation and delivered to the Board its oral opinion as to
the fairness, from a financial point of view, of the $12.00 per Share cash
consideration to be received in the Offer and the Merger by holders of Shares
(other than Purchaser and its affiliates). The representative of Hambrecht &
Quist also stated that since the Company's press release on May 28, 1999, no
further expressions of interest regarding possible transactions with the Company
had been received. The Company's counsel reviewed the terms of the Merger
Agreement and the conditions to Purchaser's obligation to complete the
acquisition. Counsel to the Company also reminded the Board members of their
fiduciary duties as previously described in prior meetings. The Board then asked
senior management and the advisors a number of questions regarding the terms,
conditions and timing of the proposed transaction. After a discussion, the Board
of Directors unanimously approved, among other things, the Merger Agreement and
the transactions contemplated thereby. The Board of Directors also adopted a
resolution stating that all directors of the Company intend to tender pursuant
to the Offer at a price of $12.00 per Share in cash all of the Shares that they
own of record or beneficially.
During the course of the following week, representatives of the Company and
Purchaser and their counsel finalized the Merger Agreement. Additionally, on
June 8, 1999, Dr. Kapoor delivered a letter to Mr. Dodd confirming the Dr.
Kapoor will, subject to his fiduciary duties as a trustee of certain trusts
holding Shares, tender all Shares that he owns either directly or beneficially
at a price of $12.00 per Share on the announcement of the Offer. Furthermore, on
June 8, 1999, the Board of Directors adopted certain resolutions amending the
Rights Agreement to which the Company is a party in order to clarify that the
provisions of the Rights Agreement do not apply to the Offer.
The board of directors and sole stockholder of Merger Sub approved the
Merger Agreement on June 11, 1999. The Merger Agreement was then executed and
publicly announced, pursuant to a press release, a copy of which is attached as
an exhibit to the Schedule 14D-1 filed in respect of the Offer. The Merger
Agreement is also attached as an exhibit to such Schedule 14D-1.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER.
Purpose. The purpose of the Offer is to acquire for cash as many
outstanding Shares as possible as a first step in acquiring the entire equity
interest in the Company.
If Merger Sub acquires pursuant to the Offer one Share more than 50% of the
outstanding Shares, it will have the vote necessary under the DGCL to approve
the Merger. Under the DGCL, if Merger Sub owns at least 90% of the outstanding
Shares, the Merger may be effected without the vote of the Company's
stockholders. Therefore, if 8,272,385 Shares (or such greater number as may be
necessary if options or warrants are exercised) are acquired pursuant to the
Offer or otherwise, Merger Sub will be able to and intends to effect the Merger
without a meeting of holders of Shares. The Merger Agreement provides that,
promptly after expiration of the Offer and receipt of any required approval by
the Company's stockholders of the Merger Agreement and the satisfaction or
waiver of certain other conditions, Merger Sub will be merged into the Company.
At the Effective Time (as defined in the Merger Agreement), each Share issued
and
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outstanding immediately prior to the Effective Time (other than Shares owned by
Purchaser, Merger Sub or any other Purchaser Company or Shares that are held by
Dissenting Stockholders exercising appraisal rights pursuant to Section 262 of
the DGCL) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive, without interest,
the Merger Consideration or such greater amount per Share as may be paid
pursuant to the Offer.
The respective obligations of the Company, the Purchaser and Merger Sub to
consummate the Merger are subject to the fulfillment of certain conditions set
forth in the Merger Agreement, any or all of which may be waived in whole or in
part by Purchaser or Merger Sub, as the case may be, to the extent permitted by
applicable law, including (i) if required by the DGCL, the approval of the
Merger Agreement by the holders of a majority of the Shares in accordance with
applicable law and the certificate of incorporation and bylaws of the Company,
(ii) the purchase by Merger Sub (or one of the Purchaser Companies) of Shares
pursuant to the Offer, (iii) there being no statute, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
enacted, issued, promulgated, enforced or entered by any United States or state
court or other Governmental Entity (as defined in the Merger Agreement) of
competent jurisdiction in effect that prohibits consummation of the transactions
contemplated by the Merger Agreement or imposes material restrictions on
Purchaser or the Company in connection with consummation of the Merger or with
respect to their respective business operations, either prior to or subsequent
to the Merger (collectively, an "Order"), (iv) the Company delivering to
Purchaser and Merger Sub a written statement, dated not more than 30 days prior
to the Effective Time (as defined in the Merger Agreement) of the Merger,
certifying that the Shares are not a U.S. real property interest within the
meaning of Section 897(c) of the Code, and (v) the Company's representations and
warranties concerning the Rights Amendment and state antitakeover statutes and
regulations remaining true and correct and the Company having performed its
obligations set forth in the Merger Agreement concerning, among other things,
taking action to provide for the cash-out at the Effective Time of employee
stock options outstanding under the Stock Plans (as defined in the Merger
Agreement).
Termination Provisions. According to its terms, the Merger Agreement may
be terminated and the transactions contemplated thereby abandoned at any time
prior to the Effective Time, whether before or after approval by holders of
Shares (a) by the mutual consent of Purchaser and the Company, by action of
their respective Boards of Directors; or (b) by action of the Board of Directors
of either Purchaser or the Company if (i) Merger Sub or any Purchaser Company
shall have terminated the Offer without purchasing any Shares pursuant thereto;
or (ii) the Merger shall not have been consummated by December 1, 1999, whether
or not such date is before or after the approval by holders of Shares; or (iii)
if required, following the purchase of Shares in the Offer, the stockholders of
the Company shall not have approved the Merger Agreement at a meeting duly
convened therefor; or (iv) any court of competent jurisdiction or other
governmental body located or having jurisdiction within the United States or any
country or economic region in which either the Company, any of its subsidiaries
or Purchaser, directly or indirectly, has material assets or operations, shall
have issued a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the Offer or the Merger and such
order, decree, ruling or other action is or shall have become final and
nonappealable; provided, however, that the right to terminate the Merger
Agreement pursuant to clauses (b)(i), (b)(ii) or (b)(iii) above shall not be
available to any party whose failure to perform any obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of Merger Sub to
purchase Shares pursuant to the Offer on or prior to such date; or (c) by action
of the Board of Directors of Purchaser if: (i) the Company shall have breached
or failed to perform in any material respect any of the covenants or agreements
contained in the Merger Agreement to be complied with or performed by the
Company at or prior to the Effective Time or any representation or warranty of
the Company set forth in the Merger Agreement shall have been inaccurate or
incomplete when made; or (ii) the Board of Directors of the Company (or a
committee thereof) shall have amended, modified or withdrawn in a manner adverse
to Purchaser or Merger Sub its approval or recommendation of the Offer, the
Merger Agreement or the Merger or the Board of Directors of the Company, upon
request by Purchaser, shall have failed to publicly reaffirm such approval or
recommendation within ten business days of such request by Purchaser or shall
have endorsed, approved or recommended any other Acquisition Proposal (as
defined in "-- Acquisition Proposals" below) without terminating the Merger
Agreement as described in clause (d)(i) below or shall have resolved to do any
of the foregoing things specified in this clause (b); or (iii) the Company shall
have entered into any
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<PAGE> 26
agreement, letter of intent or agreement in principle with respect to any other
Acquisition Proposal and shall have theretofore failed to terminate the Merger
Agreement pursuant to the provisions of the Merger Agreement described in clause
(d)(i) below; or (iv) the Company, any of its subsidiaries or any of the other
persons or entities described in "-- Acquisition Proposals" below as officers,
directors, employees, representatives or agents of the Company or of any of its
subsidiaries shall take any of the actions that would be proscribed under the
provision of the Merger Agreement described in "-- Acquisition Proposals" below
but for the exception described therein allowing certain actions to be taken
pursuant to the proviso of the second sentence thereof or (d) by action of the
Board of Directors of the Company if: (i)(A) the Company is not in material
breach of any of the terms of the Merger Agreement, (B) the Board of Directors
of the Company authorizes the Company, subject to complying with the terms of
the Merger Agreement, to enter into a binding written agreement concerning a
Superior Proposal (as defined in "-- Acquisition Proposals" below) and the
Company notifies Purchaser in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement to such notice
and (C) Purchaser does not make, within five calendar days of receipt of the
Company's written notification of its intention to enter into such an agreement,
an offer to acquire the Shares or the Company for consideration equal to or
greater than the fair market value (based, if applicable, on market prices on
the business day prior to such offer) of the consideration per Share payable
pursuant to such Superior Proposal; or (ii) Purchaser shall have breached or
failed to perform in any material respect any of the covenants or agreements
contained in the Merger Agreement to be complied with or performed by Purchaser
at or prior to the second business day prior to the expiration of the Offer, or
any representation or warranty of Purchaser set forth in the Merger Agreement
shall have been inaccurate or incomplete when made; or (iii) Merger Sub shall
have failed to commence the Offer within five business days of the date of the
public announcement by Purchaser of the Merger Agreement. The Company has agreed
(x) that it will not enter into a binding agreement referred to in clause
(d)(i)(B) of the previous sentence until at least the sixth calendar day after
it has provided the written notice to Purchaser required thereby and (y) to
notify Purchaser promptly if its intention to enter into a written agreement
referred to in such notice shall change at any time after giving such
notification.
The Merger Agreement provides that if (i)(x) the Offer shall have remained
open for a minimum of at least 20 business days, (y) after the date of the
Merger Agreement any corporation, partnership, person or other entity or group
(as described in Section 13(d)(3) of the Exchange Act) other than Purchaser and
Merger Sub, any affiliate or associate of Purchaser and Merger Sub or any
designees of Purchaser and Merger Sub shall have become the beneficial owner of
9.9% or more of the outstanding Shares or shall have publicly announced a
proposal or intention to make an Acquisition Proposal or shall have commenced,
or shall have publicly announced an intention to commence, a tender offer or
exchange offer for 9.9% or more of the outstanding Shares, and (z) the Minimum
Condition (as defined in Annex A to the Merger Agreement) shall not have been
satisfied and the Offer is terminated without the purchase of any Shares
thereunder or pursuant to the provision of the Merger Agreement summarized in
clause (b)(iii) of the immediately preceding paragraph, or (ii) the Merger
Agreement is terminated by Purchaser pursuant to clause (c) of the immediately
preceding paragraph, or (iii) the Merger Agreement is terminated by the Company
pursuant to clause (d)(i) of the immediately preceding paragraph, then the
Company (p) shall promptly, but in no event later than two days after the date
of such termination, pay Purchaser a termination fee of $4,000,000, and (q)
shall promptly, but in no event later than two calendar days after being
notified of such by Purchaser, pay all of the charges and expenses incurred by
Purchaser or Merger Sub in connection with the Merger Agreement and the
transactions contemplated thereby, up to a maximum of $1,000,000; provided,
however, that no termination fee shall be payable to Purchaser by reason of the
provision of the Merger Agreement summarized in clause (i) of this paragraph or
a termination of this Agreement pursuant to clause (c)(iv) or clause (d)(i) of
the immediately preceding paragraph unless and until (I) any person or entity
(other than Purchaser) (an "Acquiring Party") has acquired, by purchase, merger,
consolidation, sale, assignment, lease, transfer or otherwise, in one
transaction or any related series of transactions within 24 months of such
termination, a majority of the voting power of the outstanding securities of the
Company or all or substantially all of the assets of the Company or (II) there
has been consummated a merger, consolidation or similar business combination
between the Company and an Acquiring Party or an affiliate thereof. The Company
has acknowledged that the agreements described in this paragraph are an integral
part of the transactions
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<PAGE> 27
contemplated by the Merger Agreement, and that, without such agreements,
Purchaser and Merger Sub would not enter into the Merger Agreement; accordingly,
if the Company fails to promptly pay the amount due as described in this
paragraph, and, in order to obtain such payment, Purchaser or Merger Sub
commences a suit that results in a judgment against the Company for the fee
described in this paragraph, the Company shall pay to Purchaser or Merger Sub
its costs and expenses (including reasonable attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
Adjustments to Prevent Dilution. The Merger Agreement provides that in the
event that on or after the date of the Merger Agreement and prior to the
Effective Time the Company changes the number of Shares or securities
convertible or exchangeable into or exercisable for Shares, then the Merger
Consideration shall be proportionately adjusted.
Amendment. Subject to the applicable provisions of the DGCL, at any time
prior to the Effective Time, the parties to the Merger Agreement may modify or
amend the Merger Agreement by written agreement executed and delivered by duly
authorized officers of the respective parties.
Treatment of Options. The Merger Agreement provides that prior to the
Effective Time the Company shall take such actions as may be necessary such that
at the Effective Time each stock option outstanding pursuant to the Company's
Stock Plans (as defined in the Merger Agreement) (each, an "Option"), whether or
not then exercisable, shall be canceled and only entitle the holder thereof,
upon surrender thereof, to receive an amount in cash equal to the difference
between the Merger Consideration and the exercise price per Share of such Option
multiplied by the number of Shares previously subject to such Option (the
"Option Consideration"); provided, however, that each Option outstanding as of
the date of the Merger Agreement held by any member of the Company's Board of
Directors who resigns upon Purchaser's request pursuant to the provision
described in "-- Composition of the Board of Directors" below shall be deemed to
be outstanding at the Effective Time and shall be entitled to be exchanged for
the Option Consideration whether or not such Option has terminated as a result
of such resignation unless such Option has been exercised or has otherwise
expired pursuant to the terms of the Option grant prior thereto. The Merger
Agreement also provides that the Surviving Corporation (as defined in the Merger
Agreement) shall pay as soon as practicable following the Effective Time the
Option Consideration, but in any event within five days following the Effective
Time. Pursuant to the Merger Agreement, the cancelation of an Option in exchange
for the Option Consideration shall be deemed a release of any and all rights the
holder had or may have had in respect of such Option, and any required consents
received from Option holders shall so provide. Pursuant to the cancelation of
options, based upon the options outstanding at June 16, 1999 and a $12.00 offer
price, a total of approximately $10,913,465 would be paid to optionees,
including $3,669,250 to executive officers and $2,496,913 to non-employee
directors of the Company.
Warrants. The Merger Agreement provides that as of the Effective Time,
each Warrant that is outstanding at the Effective Time will be exchanged for,
and the holders of each such Warrant will be entitled to receive at the Closing
(as defined in the Merger Agreement), or thereafter, if necessary, upon
surrender of such Warrant for cancelation, cash equal to (a) the product of (i)
the excess, if any, of the Merger Consideration over the exercise price of each
such Warrant, multiplied by (ii) the number of Shares covered by such Warrant.
Purchaser and the Company have agreed to take all action necessary to give
effect to the provisions described in this paragraph.
Indemnification of Officers and Directors. The Merger Agreement provides
that the Company's Restated Certificate of Incorporation (the "Certificate")
shall contain the provisions with respect to indemnification set forth in
Article X of the Certificate on the date of the Merger Agreement and shall not
be amended, repealed or otherwise modified for a period of six years after the
Effective Time. The Merger Agreement also provides that, from and after the
Effective Time, Purchaser will, to the fullest extent that the Company would
have been permitted under Delaware law (and Purchaser shall also advance
expenses as incurred to the fullest extent permitted under applicable law) and
the Certificate in effect on the date of the Merger Agreement to indemnify such
person, to indemnify and hold harmless the individual (the "Individual") named
by the Company in a disclosure schedule to the Merger Agreement and each present
and former
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director and officer of the Company, determined as of the Effective Time,
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, solely by reason of the fact
that such person is or was a director or officer of the Company, as the case may
be, arising out of matters existing or occurring at or prior to the Effective
Time, including the transactions contemplated by the Merger Agreement (and, in
the case of the Individual, without regard to whether the Individual is or was a
director or officer of the Company but only in respect of any Costs incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative arising out of the transactions
contemplated by the Merger Agreement), whether asserted or claimed prior to, at
or after the Effective Time. The Merger Agreement also provides that, prior to
the Effective Time, Purchaser shall cause the Company to purchase tail insurance
coverage extending the Company's existing officers' and directors' liability
insurance for a period of six years after the Effective Time for a premium not
to exceed $250,000 in the aggregate.
Treatment of Employees. The Merger Agreement provides that during the
period commencing at the Effective Time and ending on the first anniversary
thereof, the employees of the Company will continue to be provided with benefits
under employee benefit plans (other than plans involving the potential issuance
of securities of the Company, any of its subsidiaries or of any of the Purchaser
Companies) that in the aggregate are substantially comparable to those currently
provided by the Company to such employees, provided that employees covered by
collective bargaining agreements need not be provided such benefits. The Merger
Agreement also provides that, following the Effective Time, Purchaser will cause
service by employees of the Company to be taken into account for purposes of
eligibility to participate and vesting under any benefit plans of Purchaser or
its subsidiaries (including the Surviving Corporation) which cover such
employees, to the same extent such service was counted under a similar plan of
the Company and that, from and after the Effective Time, Purchaser will (i)
cause to be waived any pre-existing condition limitations under benefit plans of
Purchaser or its subsidiaries in which employees of the Company participate, to
the same extent waived under the Company's benefit plans and (ii) cause to be
credited any deductibles and out-of-pocket expenses incurred by such employees
and their beneficiaries and dependents under the Company's benefit plans during
the portion of the calendar year prior to their participation in the benefit
plans provided by Purchaser and its subsidiaries. Purchaser will cause the
Surviving Corporation to honor all employee benefit obligations to current and
former employees of the Company and its subsidiaries under the Compensation and
Benefit Plans (as defined in the Merger Agreement) accrued as of the Effective
Time and all employee severance plans and all employment or severance agreements
set forth by the Company in a disclosure schedule to the Merger Agreement.
Composition of the Board of Directors. The Merger Agreement provides that,
if requested by Purchaser, the Company will, subject to compliance with
applicable law and promptly following the purchase by Merger Sub of such number
of Shares pursuant to the Offer as satisfies the Minimum Condition, take all
actions necessary to cause persons designated by Purchaser to become directors
of the Company so that the total number of such persons equals not less than the
product of the total number of directors on the Board (giving effect to the
directors elected pursuant to the provision of the Merger Agreement described by
this sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Merger Sub or any affiliate of Merger Sub bears to the
total number of Shares then outstanding. In furtherance thereof, the Company has
agreed to increase the size of its Board of Directors, or use its reasonable
efforts to secure the resignation of directors, or both, as is necessary to
permit Purchaser's designees to be elected to the Company's Board of Directors,
provided that at all times prior to the Effective Time, the Company's Board of
Directors shall consist of at least two members who are neither officers nor
employees of Purchaser. The Company's obligations to appoint designees to the
Company's Board of Directors are subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder.
Acquisition Proposals. Pursuant to the Merger Agreement, the Company
agreed that it, its subsidiaries and its and their respective officers,
directors, employees, representatives and agents (including, without limitation,
any investment banker, attorney or accountant retained by the Company or any of
its subsidiaries) would immediately cease any existing discussions or
negotiations, if any, with any parties conducted
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theretofore with respect to any acquisition or exchange of all or any material
portion of the assets of, or more than 9.9% of the equity interest in, the
Company or any of its subsidiaries (by direct purchase from the Company, tender
or exchange offer or otherwise) or any business combination, merger or similar
transaction (including an exchange of stock or assets) with or involving the
Company or any of its subsidiaries or any division of the Company or any of its
subsidiaries (an "Acquisition Transaction"). The Merger Agreement provides that,
except as set forth therein, neither the Company nor any of its subsidiaries,
nor any of its or their respective officers, directors, employees,
representatives or agents, will, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information or data to, or have any discussions with, any corporation,
partnership, person or other entity or group (as described in Section 13(d)(3)
of the Exchange Act) other than Purchaser and Merger Sub, any affiliate or
associate of Purchaser and Merger Sub or any designees of Purchaser and Merger
Sub with respect to any inquiries or the making of any offer or proposal
(including, without limitation, any offer or proposal to the stockholders of the
Company) concerning an Acquisition Transaction (an "Acquisition Proposal") or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; provided, however, that nothing contained in the Merger Agreement will
prevent either the Company or any of its representatives or the Board of
Directors of the Company from (A) complying with Rule 14e-2 promulgated under
the Exchange Act with respect to a bona fide written Acquisition Proposal
received by the Company on or following the date of the Merger Agreement; (B)
providing information in response to a written request therefor by a person or
entity which has made a bona fide written Acquisition Proposal received by the
Company on or following the date of the Merger Agreement that was not solicited
by the Company or any of its officers, directors, employees, representatives and
agents (including, without limitation, any investment banker, attorney or
accountant retained by the Company); or (C) engaging in any negotiations or
discussions with any person or entity that has made such an Acquisition Proposal
concerning such Acquisition Proposal; or (D) subject to complying with the
provisions described above in clause (d)(i) of "-- Termination Provisions"
above, authorizing the Company, subject to complying with the terms of the
Merger Agreement, to enter into a binding written agreement concerning a
Superior Proposal (as defined below), if, and only to the extent that, (I) in
each such case referred to in clause (B), (C) or (D) above, the Board of
Directors of the Company determines (x) based upon the written, reasoned advice
of outside legal counsel to the Company to such effect, that the failure to take
such action is likely to constitute a breach of the Company's directors'
fiduciary duties under applicable law, and (y) based upon the written advice of
financial advisors to the Company to the effect that the person or entity making
such Acquisition Proposal has the financial ability to consummate such
Acquisition Proposal and such Acquisition Proposal would, if consummated, result
in a transaction more favorable to the Company's stockholders from a financial
point of view than the transaction contemplated by the Merger Agreement (any
such Acquisition Proposal as to which both of the determinations referred to in
subclauses (x) and (y) of this clause (I) have been made being referred to in
the Merger Agreement as a "Superior Proposal"), and (II) the Board of Directors
of the Company receives from the person or entity making such bona fide written
Acquisition Proposal an executed confidentiality agreement the terms of which
are (without regard to the terms of such Acquisition Proposal) (A) no less
favorable to the Company, and (B) no less restrictive to the person or entity
making such bona fide written Acquisition Proposal than those contained in the
Mutual Confidentiality Agreement, effective as of March 4, 1999, between the
Company and Purchaser. Notwithstanding the proviso to the immediately preceding
sentence, (i) no Acquisition Proposal received by the Company on or prior to the
date of the Merger Agreement shall be deemed a Superior Proposal unless the
purchase price for the Shares to be paid pursuant to any such Acquisition
Proposal has been increased by more than a de minimis amount after the date of
the Merger Agreement, and (ii) no Acquisition Proposal received by the Company
following the date of the Merger Agreement shall be deemed to have been
solicited by the Company or any of its officers, directors, employees,
representatives and agents (including, without limitation, any investment
banker, attorney or accountant retained by the Company) solely by virtue of
either or both of the facts that the person or entity making such Acquisition
Proposal made an Acquisition Proposal prior to the date of the Merger Agreement
or the Company or any of its officers, directors, employees, representatives and
agents (including, without limitation, any investment banker or attorney
retained by the Company) solicited such Acquisition Proposal prior to the date
of the Merger Agreement. The Merger Agreement provides that the Company will
notify Purchaser within 48 hours if any such inquiries or proposals are received
by, any such information is requested from, or any such negotiations or
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discussions are sought to be initiated with, the Company and shall in such
notice indicate the identity of the offeror and the terms and conditions of any
such proposal and thereafter shall keep Purchaser informed, on a current basis,
of the status and terms of such proposals, providing copies to Purchaser of any
Acquisition Proposals made in writing. The Company has agreed not to release any
third party from, or waive any provisions of, any confidentiality or standstill
agreement to which the Company is a party and which relates to an Acquisition
Proposal or potential Acquisition Proposal. The Company has agreed to take the
necessary steps to inform the individuals or entities referred to in the first
sentence of this paragraph of the obligations described in this paragraph. The
Company has also agreed that it will promptly request each person or entity that
has executed a confidentiality agreement prior to the date of the Merger
Agreement in connection with an Acquisition Proposal or potential Acquisition
Proposal to return all confidential information furnished to such person or
entity prior to the date of the Merger Agreement by or on behalf of the Company
or any of its subsidiaries.
Covenants. The Merger Agreement also contains certain other restrictions
as to the conduct of business of the Company pending the Merger, as well as
representations and warranties of each of the parties customary in transactions
of this kind.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, each stockholder of the Company
who has neither voted in favor of the Merger nor consented thereto in writing
will be entitled to any appraisal by the Delaware Court of Chancery of the fair
value of his Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid. In determining such fair value, the Court may
consider all relevant factors. The value so determined could be more or less
than the consideration to be paid in the Offer and the Merger. Any judicial
determination of the fair value could be based upon considerations other than or
in addition to the market value of the Shares, including, among other things,
assets values and earning capacity.
Rule 13e-3. Rule 13e-3 under the Exchange Act, which Purchaser does not
believe would be applicable to the Merger, would require, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of the proposed transaction and the
consideration offered to stockholders of the Company therein, be filed with the
SEC and disclosed to stockholders of the Company prior to consummation of the
transaction.
Rights Agreement. Set forth below is an excerpt from the summary
description of the Rights as filed with the Company's Registration Statement on
Form 8-A, dated June 20, 1997 (the "Form 8-A"), relating to the Rights. Pursuant
to the Rights Agreement, the Company's Board of Directors has declared a
dividend of one Right to purchase one share of Common Stock for each outstanding
share of Common Stock. The dividend was payable on June 24, 1997 to stockholders
of record as of the close of business on June 20, 1997 (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company one share of
Common Stock at an exercise price of $50.00 (the "Purchase Price"), subject to
adjustment. The following summary of the principal terms of the Rights Agreement
is a general description only and is subject to the detailed terms and
conditions of the Rights Agreement, which is incorporated herein by reference.
The Rights will not be exercisable until the Distribution Date (as defined
below). Certificates for the Rights ("Rights Certificates") are not sent to
stockholders and the Rights attach to and trade only together with the Common
Stock. Accordingly, Common Stock certificates outstanding on the Record Date
evidenced the Rights related thereto, and Common Stock certificates issued after
the Record Date contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender or transfer of any certificates for Common Stock,
outstanding as of the Record Date, even without notation or a copy of the
Summary of Rights (as described below) being attached thereto, constitutes the
transfer of the Rights associated with the Common Stock represented by such
certificate.
The Rights will separate from the Common Stock, Rights Certificates will be
issued, and the Rights will become exercisable upon the earlier of: (i) 10
business days following the first date of public announcement (the "Stock
Acquisition Date") that a person or group of affiliated or associated persons
has acquired, or
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obtained the right to acquire, after the Record Date beneficial ownership of 15%
or more of the outstanding Common Stock in a transaction not approved by the
Board of Directors (an "Acquiring Person"), or (ii) 10 business days following
the commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Stock in
a transaction not approved by the Board of Directors. The earlier of such dates
is referred to as the Distribution Date. Pursuant to the Rights Amendment, none
of Merger Sub, Purchaser or any of their Affiliates (as defined in the Rights
Agreement) will become an Acquiring Person as a result of the transactions
contemplated by the Merger Agreement, nor will a Distribution Date occur as a
result of such transactions.
As soon as practicable following the Distribution Date, separate Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will evidence the Rights from and after the Distribution Date. All Common
Stock issued prior to the Distribution date will be issued with Rights. Common
Stock issued after the Distribution Date may be issued with Rights if such
shares are issued (i) upon the conversion of any convertible securities issued
after the adoption of the Rights Agreement, or (ii) pursuant to the exercise of
stock options or under employee benefit plans or arrangements unless such
issuance would result in (or create a risk that) such options, plans or
arrangements would not qualify for otherwise available special tax treatment.
Except as otherwise determined by the Board of Directors, no other Common Stock
issued after the Distribution Date will be issued with Rights. The Rights will
expire on the earliest of (i) June 16, 2007 (the "Final Expiration Date"), (ii)
redemption or exchange of the Rights as described below, or (iii) consummation
of an acquisition of the Company satisfying certain conditions by a person who
acquired stock pursuant to a transaction approved by the Board of Directors as
described below.
Following the Distribution Date, and until one of the further events
described below, holders of the Rights will be entitled to receive, upon
exercise and the payment of $50.00 per Right, one share of Common Stock. In the
event that the Company does not have sufficient Common Stock available for all
Rights to be exercised, or the Board decides that such action is necessary and
not contrary to the interest of Rights holders, the Company may instead
substitute cash, assets, or other securities for the Common Stock for which the
Rights would have been exercisable under this provision or as described below.
Unless the Rights are earlier redeemed, in the event that an Acquiring
Person becomes the beneficial owner of 15% or more of the Common Stock then
outstanding (other than pursuant to a transaction approved by the Board of
Directors), then proper provision will be made so that each holder of a Right
which has not theretofore been exercised (other than Rights beneficially owned
by the Acquiring Person, which will thereafter be void) will thereafter have the
right to receive, upon exercise, Common Stock (or, in certain circumstances as
determined by the Board of Directors, cash, other property or other securities)
having a value equal to two times the Purchase Price. Rights are not exercisable
following the occurrence of an event described above until such time as the
Rights are no longer redeemable by the Company as set forth below.
Similarly, unless the Rights are earlier redeemed, in the event that, after
the Stock Acquisition Date, (i) the Company is acquired in a merger or other
business combination transaction, or (ii) 50% or more of the Company's assets or
earning power are sold (other than in transactions in the ordinary course of
business), proper provision must be made so that each holder of a Right which
has not theretofore been exercised (other than Rights beneficially owned by the
Acquiring Person, which will thereafter be void) will thereafter have the right
to receive, upon exercise, shares of common stock of the acquiring company
having a value equal to two times the Purchase Price.
At any time after any Person becomes an Acquiring Person, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by the
Acquiring Person), in whole or in part, at an exchange ratio of one share of
Common Stock per Right.
At any time on or prior to the close of business on the earlier of (i) the
10th business day following the Stock Acquisition Date, or (ii) the Final
Expiration Date, the Company may redeem the Rights in whole, but not in part, at
a price of $0.01 per Right. Notwithstanding the foregoing, the Company may not
redeem the
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Rights within 90 days after the date of election of any new directors to the
Company's Board when new directors shall comprise the majority of members
thereof.
The Purchase Price payable, the number of Rights, and the number of shares
of Common Stock or other securities issuable upon exercise of the Rights are
subject to adjustment from time to time in connection with dilutive issuances by
the Company as set forth in the Rights Agreement.
No fractional shares of Common Stock will be issued upon exercise of a
Right and in lieu thereof, an adjustment in cash will be made based on the
market price of the Common Stock on the last trading date prior to the date of
exercise.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company (other than any rights resulting from
such holder's ownership of Common Stock), including, without limitation, the
right to vote or to receive dividends.
The provisions of the Rights Agreement may be supplemented or amended by
the Board of Directors in any manner prior to the close of business on the
Distribution Date without the approval of Rights holders. After the Distribution
Date, the provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, defect or inconsistency, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemptions shall be made at such time as the Rights are not
redeemable.
The Rights may be redeemed by the Company at $0.01 per Right within 10
business days (or such later date as may be determined by a majority of the
Board of Directors) after the accumulation of 15% or more of the Company's stock
by a single acquirer or group.
One June 11, 1999, the Company executed the Rights Agreement, which
provides that (x) the announcement, commencement or consummation of the Offer or
the execution, delivery or performance of the Merger Agreement (or any amendment
thereto in accordance with the terms thereof) or the consummation of the
transactions contemplated thereby (including, without limitation, the Offer and
the Merger) will not cause (i) Merger Sub, Purchaser or any Affiliate (as
defined in the Rights Agreement) of Merger Sub or Purchaser to be or become an
Acquiring Person (as defined in the Rights Agreement), (ii) a Distribution Date,
a Stock Acquisition Date or a Triggering Event (as such terms are defined in the
Rights Agreement) to occur or (iii) the provisions of Section 11 or Section 13
of the Rights Agreement to be applicable or triggered.
A copy of the original Rights Agreement, dated as of June 16, 1997,
including the form of Rights Certificate and the Summary of Rights, attached
thereto as Exhibits A and B, respectively, is filed as an Exhibit to the Form
8-A and is incorporated herein by reference. A copy of the Rights Amendment is
filed as an exhibit to the Schedule 14D-1. A copy of the Rights Agreement is
available to stockholders free of charge from the Company.
12. SOURCE AND AMOUNT OF FUNDS.
Merger Sub estimates that the total amount of funds required to purchase
all of the outstanding Shares pursuant to the Offer and the Merger and to pay
related fees and expenses will be approximately $128,000,000. Merger Sub expects
to obtain these funds from a combination of capital contributions or advances
made directly or indirectly by Solvay Pharmaceuticals, Solvay America, Parent or
other subsidiaries of Parent from the working capital of such entities and
advances to be made to Merger Sub by Solvay Finance (America), Inc., a Delaware
corporation ("Solvay Finance") which is a wholly owned subsidiary of Solvay
America. It is anticipated that Solvay Finance will obtain the funds for such
advances from the issuance of commercial paper notes (the "Commercial Paper
Notes") prior to the expiration of the Offer and that the Commercial Paper Notes
will bear interest at a market rate of interest for commercial paper having
maturities similar to those of the Commercial Paper Notes issued by issuers
whose commercial paper carries ratings similar to the Commercial Paper Notes. As
of June 17, 1999, Solvay Finance's commercial paper was rated P-1 by Moody's
Investors Service, Inc. and A-1 by Standard & Poor's Ratings Group, and Solvay
Finance had the ability to issue up to approximately $287,000,000 under its
existing commercial paper program. The Commercial Paper
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Notes will mature up to 270 days from the date of issuance. The Commercial Paper
Notes will be unsecured obligations and will rank pari passu with other
unsecured obligations of Solvay Finance. The Commercial Paper Notes will be
guaranteed by Parent.
It is anticipated that the indebtedness represented by the Commercial Paper
Notes will be repaid from advances to be made to Solvay Finance by Parent or
other subsidiaries of Parent from funds generated internally, from advances to
be made to Solvay Finance by Parent or other subsidiaries of Parent from the
proceeds of borrowings, from the proceeds of additional issuances of commercial
paper, or from two or more such sources. No final decisions have been made,
however, concerning the method or methods that Solvay Finance might employ to
repay the Commercial Paper Notes. Such decisions, when made, will be based on
Parent's review from time to time of the advisability of particular actions, as
well as on prevailing interest rates and financial and other economic
conditions.
13. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, Merger Sub shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Merger Sub's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, or may delay the acceptance
for payment of, any tendered Shares, or may, in its sole discretion, subject to
the Merger Agreement, terminate or amend the Offer as to any Shares not then
paid for if, (i) prior to the expiration of the Offer, (x) a number of Shares
which, together with any Shares owned by Purchaser, Merger Sub and the Purchaser
Companies, constitutes more than 50% of the voting power (determined on a
fully-diluted basis) of all the securities of the Company entitled to vote
generally in the election of directors or in connection with a merger shall not
have been validly tendered and not withdrawn prior to the expiration of the
Offer (the "Minimum Condition") or (y) any waiting periods under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall not have
expired or been terminated, or any material approval, permit, authorization or
consent of any Governmental Entity shall not have been obtained on terms
satisfactory to the Purchaser in its reasonable discretion, or (ii) on or after
June 11, 1999, and at or before the time of acceptance for payment for any of
such Shares, any of the following events shall occur:
(a) there shall have occurred and be continuing (i) any general
suspension of, or limitation on prices for, trading in securities on the
New York Stock Exchange, Inc. or the Nasdaq Stock Market's National Market
System or in the over-the-counter market, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iii) a commencement or escalation of a war, armed hostilities or
other international or national calamity directly or indirectly involving
the United States (other than any declaration of war resulting from the
current conflict in Yugoslavia), (iv) any limitation (whether or not
mandatory) by any Governmental Entity, on, or any other event which might
affect, the extension of credit by banks or other lending institutions, or
(v) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(b) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements contained
in the Merger Agreement, or any representation or warranty of the Company
set forth in the Merger Agreement shall have been inaccurate or incomplete
in any material respect when made or thereafter shall become inaccurate or
incomplete in any material respect;
(c) there shall have been threatened or instituted or be pending any
action, litigation, proceeding, investigation or other application
(hereinafter, an "Action") before any court or other Governmental Entity by
any Governmental Entity or by any other Person, domestic or foreign: (i)
challenging the acquisition by Purchaser or Merger Sub of Shares, seeking
to restrain or prohibit the consummation of the transactions contemplated
by the Offer or the Merger or other subsequent business combination,
seeking to obtain any material damages or otherwise directly or indirectly
relating to the transactions contemplated by the Offer or the Merger or
other subsequent business combination; (ii) seeking to
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prohibit, or impose any material limitations on, Purchaser's or Merger
Sub's ownership or operation of all or any portion of their or the
Company's business or assets (including the business or assets of their
respective affiliates), or to compel Purchaser or Merger Sub to dispose of
or hold separate all or any portion of Purchaser's or Merger Sub's or the
Company's business or assets (including the business or assets of their
respective affiliates) as a result of the transactions contemplated by the
Offer or the Merger or other subsequent business combination; (iii) seeking
to make the acceptance for payment, purchase of, or payment for, some or
all of the Shares illegal or render Merger Sub unable to, or result in a
delay in, or restrict, the ability of Merger Sub to, accept for payment,
purchase or pay for some or all of the Shares; (iv) seeking to impose
material limitations on the ability of Purchaser or Merger Sub effectively
to acquire or hold or to exercise full rights of ownership of the Shares
including, without limitation, the right to vote the Shares purchased by
them on an equal basis with all other Shares on all matters properly
presented to the stockholders; (v) seeking to impose material restrictions
on Purchaser or the Company in connection with consummation of the Merger
or with respect to their business operations, either prior to or subsequent
to the Merger; (vi) in connection with which there is filed on or
subsequent to the date of the Merger Agreement any motion, order to show
cause or other request for relief seeking to impose, create, place or
construe any lien, claim, charge, security interest, constructive trust,
restriction, covenant or other encumbrance of any kind on, or with respect
to, a material number of Shares or any securities of the Surviving
Corporation, or in connection with which Purchaser, Merger Sub, the Company
or any of their respective affiliates (other than nonemployee directors of
the Company) shall have received a notice, claim or demand on or subsequent
to the date of the Merger Agreement; or (vii) that, in any event, in the
sole judgment of Purchaser, is reasonably likely to have a Material Adverse
Effect or a material adverse effect on the business, properties, results of
operation or financial condition of Purchaser (or any of its affiliates);
(d) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed by a Governmental Entity
or become applicable to the Offer or the Merger or other subsequent
business combination, or any Action shall be instituted or pending brought
by any person or entity not on behalf of a Governmental Entity, or any
other action shall have been taken, proposed or threatened, by any court or
other Governmental Entity other than the application to the Offer or the
Merger or other subsequent business combination of waiting periods under
the HSR Act, that, in the sole judgment of Purchaser, is reasonably likely,
directly or indirectly, to result in any of the effects of, or have any of
the consequences sought to be obtained or achieved in, any Action referred
to in clauses (i) through (vii) of paragraph (c) above;
(e) a tender or exchange offer for some portion or all of the Shares
shall have been commenced or publicly proposed to be made by another
corporation, partnership, person, other entity or group (as described in
Section 13(d)(3) of the Exchange Act) other than Purchaser or Merger Sub or
any of their respective subsidiaries or affiliates (collectively, a
"Person"), including the Company and its subsidiaries, or it shall have
been publicly disclosed or the Purchaser shall have learned that (i) any
Person (including the Company and its subsidiaries) shall have become the
beneficial owner (as defined in Section 13(d) of the Exchange Act and the
rules promulgated thereunder) of more than 9.9% of any class or series of
capital stock of the Company (including the Shares); or (ii) any Person
shall have entered into a definitive agreement or an agreement in principle
or made a proposal with respect to a tender offer or exchange offer for
9.9% or more of the outstanding Shares or a merger, consolidation or other
business combination with or involving the Company;
(f) there shall have occurred a material adverse effect on the
business, properties, results of operation or financial condition of the
Company and its subsidiaries, taken as a whole (a "Material Adverse
Effect") or any event or occurrence, or series of events or occurrences
that, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect;
(g) the board of directors of the Company (or any committee thereof)
shall have amended, modified or withdrawn in a manner adverse to Purchaser
or Merger Sub its approval or recommendation of the Offer, the Merger
Agreement or the Merger, or, upon request by Purchaser or Merger Sub, shall
have failed to publicly reaffirm such approval or recommendation within ten
business days of such request
31
<PAGE> 35
by Purchaser or Merger Sub, or shall have endorsed, approved or recommended
any other Acquisition Proposal, or shall have resolved to do any of the
foregoing;
(h) all Shares of which any member of the Company's board of
directors, or any trust with which any such member or such member's spouse
is affiliated, is a record holder or beneficial owner (as defined in Rule
13d-3 under the Exchange Act) as of June 4, 1999 shall not have been
validly tendered into the Offer prior to July 13, 1999, or any such Shares
shall have been withdrawn from the Offer; or
(i) the Merger Agreement shall have been terminated by the Company or
Purchaser or Merger Sub in accordance with its terms or Purchaser or Merger
Sub shall have reached an agreement or understanding in writing with the
Company providing for termination or amendment of the Offer or delay in
payment for the Shares
which, in the sole judgment of Purchaser and Merger Sub, in any such case, and
regardless of the circumstances (including any action or inaction by Purchaser
or Merger Sub) giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions other than the Minimum Condition are for the sole
benefit of Purchaser and Merger Sub and may be asserted by Purchaser or Merger
Sub regardless of the circumstances (including any action or inaction by
Purchaser or Merger Sub not in violation of the Merger Agreement) giving rise to
such condition or may be waived (other than the Minimum Condition) by Purchaser
or Merger Sub, by express and specific action to that effect, in whole or in
part at any time and from time to time in their sole discretion. The failure by
Merger Sub at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
A public announcement shall be made of a material change in, or waiver of,
such conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change of waiver.
14. DIVIDENDS AND DISTRIBUTIONS.
If, on or after June 11, 1999, the Company should split, combine or
otherwise change the Shares or its capitalization, or shall disclose that it has
taken any such action, then Merger Sub, in its discretion, may, among other
things, without prejudice to Purchaser's and Merger Sub's other rights under the
Merger Agreement, make such adjustments in the Offer consideration and other
terms of the Offer as it deems appropriate to reflect such split, combination or
other change.
If, on or after June 11, 1999, the Company should declare or pay any cash
or stock dividend or other distribution on or issue any rights with respect to
the shares of Common Stock, payable or distributable to stockholders of record
on a date occurring on or after June 11, 1999 and prior to the transfer to the
name of Merger Sub or its nominees or transferees on the Company's stock
transfer records of the shares of Common Stock purchased pursuant to the Offer,
then, without prejudice to Purchaser's and Merger Sub's other rights under the
Merger Agreement, (i) the price payable by Merger Sub pursuant to the Offer will
be reduced by the amount of any such cash dividend or distribution and (ii) the
whole of any non-cash dividend or distribution (including additional shares of
Common Stock or rights as aforesaid) received by a tendering stockholder shall
be required to be promptly remitted and transferred by the tendering stockholder
to the Depositary for the account of Merger Sub, accompanied by appropriate
documentation of transfer. Pending such remittance or appropriate assurance
thereof, Merger Sub will be, subject to applicable law, entitled to all rights
and privileges as owner of any such non-cash dividend, distribution or right and
may withhold the entire purchase price or deduct from the purchase price the
amount or value thereof, as determined by Merger Sub in its sole discretion.
32
<PAGE> 36
15. CERTAIN LEGAL MATTERS.
General. Except as otherwise disclosed herein, based upon an examination
of publicly available filings with respect to the Company, Purchaser and Merger
Sub are not aware of any licenses or other regulatory permits which appear to be
material to the business of the Company and which might be adversely affected by
the acquisition of Shares by Merger Sub pursuant to the Offer or of any approval
or other action by any governmental, administrative or regulatory agency or
authority which would be required for the acquisition or ownership of Shares by
Merger Sub pursuant to the Offer. Should any such approval or other action be
required, it is currently contemplated that such approval or action would be
sought or taken. There can be no assurance that any such approval or action, if
needed, would be obtained or, if obtained, that it will be obtained without
substantial conditions or that adverse consequences might not result to the
Company's or Purchaser's business or that certain parts of the Company's or
Purchaser's business might not have to be disposed of in the event that such
approvals were not obtained or such other actions were not taken, any of which
could cause Merger Sub to elect to terminate the Offer without the purchase of
the Shares thereunder. Merger Sub's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See Section 13.
Antitrust Compliance. Under the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Justice Department (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares by Merger Sub is subject to these
requirements. See Section 2 of this Offer to Purchase as to the effect of the
HSR Act on the timing of Merger Sub's obligation to accept Shares for payment.
Purchaser intends, on or as soon as reasonably practicable following the
date hereof, to file with the FTC and the Antitrust Division a Premerger
Notification and Report Form in connection with the purchase of Shares pursuant
to the Offer. Under the provisions of the HSR Act applicable to the purchase of
Shares pursuant to the Offer, such purchases may not be made until the
expiration of a 15-calendar day waiting period following the filing by
Purchaser. Pursuant to the HSR Act, Purchaser intends to request early
termination of the waiting period applicable to the Offer. There can be no
assurances given, however, that the 15-day HSR Act waiting period will be
terminated early. If either the FTC or the Antitrust Division were to request
additional information or documentary material from Purchaser, the waiting
period would expire at 11:59 p.m., New York City time, on the tenth calendar day
after the date of substantial compliance by Purchaser with such request.
Thereafter, the waiting period could be extended only by agreement or by court
order. If the acquisition of Shares is delayed pursuant to a request by the FTC
or the Antitrust Division for additional information or documentary material
pursuant to the HSR Act, the purchase of and payment for Shares will be deferred
until 10 days after the request is substantially complied with unless the
waiting period is sooner terminated by the FTC or the Antitrust Division. See
Section 2. Only one extension of such waiting period pursuant to a request for
additional information is authorized by the rules promulgated under the HSR Act,
except by agreement or by court order. Any such extension of the waiting period
will not give rise to any withdrawal rights not otherwise provided for by
applicable law. See Section 4. Although the Company is required to file certain
information and documentary material with the Antitrust Division and the FTC in
connection with the Offer, neither the Company's failure to make such filings
nor a request from the Antitrust Division or the FTC for additional information
or documentary material made to the Company will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Merger Sub pursuant to the Offer. At any time before or after Merger Sub's
purchase of Shares, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or seeking divestiture of Shares acquired by Merger Sub or the divestiture
of substantial assets of Purchaser, the Company or any of their respective
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made or, if a challenge is made, what
33
<PAGE> 37
the result will be. See Section 13 of this Offer to Purchase for certain
conditions to the Offer that could become applicable in the event of such a
challenge.
Exon-Florio. Under Section 721 of Title VII of the United States Defense
Production Act of 1950, as amended by Section 5021 of the Omnibus Trade and
Competitiveness Act of 1988 ("Exon-Florio"), the President of the United States
is authorized to prohibit or suspend acquisitions, mergers or takeovers by
foreign persons of persons engaged in interstate commerce in the United States
if the President determines, after investigation, that such foreign persons in
exercising control of such acquired persons might take action that threatens to
impair the national security of the United States and that other provisions of
existing law do not provide adequate authority to protect national security.
Pursuant to Exon-Florio, notice of an acquisition by a foreign person is to be
made to the Committee on Foreign Investment in the United States ("CFIUS"),
which is comprised of representatives of the Department of the Treasury, State,
Commerce, Defense and Justice, the Office of Management and Budget, the United
States Trade Representative's Office and the Council of Economic Advisors and
which has been selected by the President to administer Exon-Florio, either
voluntarily by the parties to such proposed acquisition, merger or takeover or
by any member of CFIUS.
A determination that an investigation is called for must be made within 30
days after notification of a proposed acquisition, merger or takeover is first
filed with CFIUS. Any such investigation must be competed within 45 days of such
determination. Any decision by the President to take action must be announced
within 15 days of the completion of the investigation. Although Exon-Florio does
not require the filing of a notification, nor does it prohibit the consummation
of an acquisition, merger or takeover if notification is not made, such an
acquisition, merger or takeover thereafter remains indefinitely subject to
divestment should the President subsequently determine that the national
security of the United States has been threatened or impaired. Parent, Solvay
America, Purchaser and Merger Sub do not believe that the Offer or the Merger
threatens to impair the national security of the United States and do not intend
to notify CFIUS of the proposed transaction.
State Takeover Laws. A number of states have adopted laws and regulations
applicable to offers to acquire securities of corporations which are
incorporated in such states and/or which have substantial assets, stockholders,
principal executive offices or principal places of business therein. In Edgar v.
MITE Corporation, the Supreme Court of the United States held that the Illinois
Business Takeover Statute, which made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was therefore
unconstitutional. In CTS Corporation v. Dynamics Corporation of America, the
Supreme Court held that as a matter of corporate law, and in particular, those
laws concerning corporate governance, a state may constitutionally disqualify an
acquiror of "Control Shares" (ones representing ownership in excess of certain
voting power thresholds, e.g. 20%, 33 1/3% or 50%) of a corporation incorporated
in its state and meeting certain other jurisdictional requirements from
exercising voting power with respect to those shares without the approval of a
majority of the disinterested stockholders.
Merger Sub does not believe that any state takeover laws apply to the Offer
and it has not complied with any state takeover laws. See Section 11. Should any
government official or third party seek to apply any state takeover law to the
Offer, Merger Sub will take such action as then appears desirable.
If it is asserted that one or more state takeover laws applies to the Offer
and it is not determined by an appropriate court that such act or acts do not
apply or are invalid as applied to the Offer, Merger Sub might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Merger Sub might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in consummating
the Offer. In such case, Merger Sub may not be obligated to accept for payment
any Shares tendered. See Section 13.
16. FEES AND EXPENSES.
The Purchaser has also retained MacKenzie Partners, Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telex, telegraph and personal
interviews and may request brokers, dealers and other nominee stockholders to
forward materials relating to the Offer to beneficial owners of Shares. The
Information Agent will receive $5,500 for such
34
<PAGE> 38
services, plus reimbursement of out-of-pocket expenses and Merger Sub will
indemnify the Information Agent against certain liabilities and expenses in
connection with the Offer, including liabilities under the federal securities
laws.
Merger Sub will pay the Depositary reasonable and customary compensation
for its services in connection with the Offer, plus reimbursement for
out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including liabilities under
the federal securities laws. Brokers, dealers, commercial banks and trust
companies will be reimbursed by Merger Sub for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, Merger Sub may, in its sole discretion, take such action
as it may deem necessary to make the Offer in any such jurisdiction and extend
the Offer to holders of Shares in such jurisdiction.
Neither the Purchaser nor Merger Sub is aware of any jurisdiction in which
the making of the Offer or the acceptance of Shares in connection therewith
would not be in compliance with the laws of such jurisdiction.
The Purchaser and Merger Sub have filed with the SEC a Statement on
Schedule l4D-1 pursuant to Rule l4d-3 of the General Rules and Regulations under
the Exchange Act, furnishing certain additional information with respect to the
Offer, and may file amendments thereto. Such Statement and any amendments
thereto, including exhibits, may be examined and copies may be obtained from the
principal office of the Commission in Washington, D.C. and NASDAQ in the manner
set forth in Section 8.
No person has been authorized to give any information or make any
representation on behalf of Purchaser or Merger Sub not contained in this Offer
to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been authorized.
UTAH ACQUISITION CORPORATION
June 17, 1999
35
<PAGE> 39
SCHEDULE A
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF PARENT, SOLVAY AMERICA, PURCHASER AND MERGER SUB
The following tables set forth the name, business address, present
principal occupation and material positions held within the past five years of
each director and executive officer of Parent, Solvay America, Purchaser and
Merger Sub. Unless otherwise specified, each person listed below is a citizen of
Belgium and has his or her principal business address at rue du Prince Albert,
33, B-1050, Brussels, Belgium.
PARENT
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND CITIZENSHIP
- ------------------------- ------------------------------------------------------------------
<S> <C>
Baron Daniel Janssen Chairman of Parent's Board of Directors since June 1998. Prior
thereto, Chairman of the Executive Committee of Parent from 1986
to 1998. Prior thereto, Member of the Executive Committee of
Parent from 1984 to 1986. Director of Solvay America since June
1986. Since 1984, Vice Chairman of Board of Directors and Vice
Chairman of the Executive Committee of UCB SA. Since 1973,
Director of Schroeder's Bank, London. Since 1998 Director of
Fortis.
Alois Michielsen Director of Parent since 1990. Chairman of the Executive Committee
of Parent since 1998. Prior thereto, Vice-Chairman of the
Executive Committee of Parent from 1994 to 1998. Director of
Solvay America since October 1995. Director of Purchaser since
April 1990 and current Chairman of the Board of Directors of
Purchaser. Director of Miko Group since 1998.
Rene H. Degreve Director of Parent since 1998. Member of the Executive Committee
of Parent since 1994 and General Manager, Finance and Corporate
Planning of Parent since 1993. Director of Solvay America since
June 1998.
Jurgen Ernst Director of Parent since 1998. Member of the Executive Committee
of Parent since 1995. General Manager of Pharmaceutical Sector of
Parent since 1994. Director of Purchaser since April 1986. Citizen
of Germany.
Jean-Jacques Van de Berg Director of Parent since 1982. Member of the Executive Committee
of Parent from 1982 to June 1998. Director of Solvay America from
June 1990 to June 1998.
Pierre Casimir-Lambert Director of Parent since 1971.
101 Route de la Capite
1223 Cologny (Geneva)
Switzerland
Baron Hubert de Wangen Director of Parent since 1981. Owner and General Manager of Kowasa
Kowales SL since 1986. Director of Jotace since 1983. Citizen of France.
Av. Diagonal 439
08036 Barcelona, Spain
Viscount Etienne Davignon Director of Parent since 1985 and Chairman of the Board of
Societe Generale De Belgique Directors of Societe Generale de Belgique (Director since 1985).
30 Rue Royale Director of Gilead Sciences, BASF, Sofina, Fortis and Suez
1000 Brussels, Belgium Lyonnais des Eaux since 1990, 1993, 1985, 1989 and 1989,
respectively.
Hilmar Kopper Director of Parent since 1986. Chairman of the Supervisory Board
Deutsche Bank AG of Deutsche Bank since 1997. Chairman of the Supervisory Board of
Taunusanlage 12 Daimler Chrysler Ag. Citizen of Germany.
60325 Frankfurt
</TABLE>
A-1
<PAGE> 40
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND CITIZENSHIP
- ------------------------- ------------------------------------------------------------------
<S> <C>
Baron Jose del Marmol Director of Parent since 1990.
36 rue des Fonds
6280 Gougnies, Belgium
Jean-Marie Solvay Director of Parent since 1991. President of Winco Inc. since 1996
Winco Inc. and Director of Winco since 1992.
32299 S. Goodtime Road
Molalla, Oregon 97038
Guy de Selliers de Moranville Director of Parent since 1993. Chairman of the Investment Banking
Robert Fleming & Co. Ltd. Eastern Group of Robert Fleming & Co. Ltd. since April 1998. Prior
25 Copthall Avenue, thereto, President and Chief Executive Officer of MC-BBL from
London EC2R 7DR (GB) December 1997 to March 1998. Prior thereto, Deputy Vice President
of European Bank for Reconstruction and Development from July 1990
to December 1997.
Edouard de Royere Director of Parent since 1996. Director of Air Liquide, Danone,
4 Rue de Chanaleilles L'Oreal and Sodexho since 1971, 1988, 1995 and 1996, respectively.
Paris 7507 France Citizen of France.
Kenneth J. Minton Director of Parent since 1996. Chairman of the Board of Directors
7 Midway of Arjo Wiggins Appleton plc since 1997. Chairman of the Board of
St. Albans Directors of SGB Group plc since 1997. Prior thereto, Chairman of
Hertfordshire AL3 4BD the Board of Directors of John Mowlen & Company PLC from 1995 to
United Kingdom 1998, director of Caradon plc. from 1991 to May 1999, director of
Jeyes Group plc. from 1989 to 1998 and Managing Director and Chief
Executive Officer of Laporte plc. from 1979 to 1995. Citizen of
Britain.
Denis Solvay Director of Parent since 1997. Chief Executive Officer of Abelag
Abelag Aviation Aviation since 1995. Prior thereto, Deputy Business Manager,
Rue De Livourne, 66 Automotive of Parent from 1992 to 1995.
B 1000 Brussels, Belgium
Nicolas Boel Director of Parent since 1998. Marketing Manager of Hoogovens
Hoogovens Aluminum Aluminum Corporation USA since 1998.
Corporation USA
101 Venture Way
Secaucus, New Jersey 07096
Jean Christiaens General Manager of the Chemicals Sector of Parent since 1989 and
Member of the Executive Committee since 1995.
Henri Lefebvre Member of the Executive Committee and General Manager of the
Plastics Sector of Parent since 1996. Chief Executive Officer of
Solvay Deutschland from 1991 to 1995.
Jacques Levy Morelle Corporate Secretary of Parent since 1989. Director of Solvay
America since May 1989.
Bernard de Laguiche Director of Corporate Planning of Parent since 1995. Member of
Executive Committee of Parent since 1998. Citizen of France.
Christian Jourquin Member of the Executive Committee of Parent since 1996. General
Manager of the Processing Sector of Parent since 1997. Prior
thereto, General Manager, Peroxygens Sector of Parent from 1996 to
1997 and General Manager, Spain and Portugal Regions of Parent
from 1990 to 1995.
Luigi Belli Member of the Executive Committee of Parent since 1998 and General
Manager of Technology and Research of Parent since 1990. Citizen
of Italy.
</TABLE>
A-2
<PAGE> 41
SOLVAY AMERICA
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND CITIZENSHIP
- ------------------------- ------------------------------------------------------------------
<S> <C>
Baron Daniel Janssen Chairman of Parent's Board of Directors since June 1998. Prior
thereto, Chairman of the Executive Committee of Parent from 1986
to 1998. Prior thereto, Member of the Executive Committee of
Parent from 1984 to 1986. Director of Solvay America since June
1986. Since 1984, Vice Chairman of Board of Directors and Vice
Chairman of the Executive Committee of UCB 5A since 1973, Director
of Schroeder's Bank, London. Since 1998 Director of Fortis.
Alois Michielsen Director of Parent since 1990. Chairman of the Executive Committee
of Parent since 1998. Prior thereto, Vice-Chairman of the
Executive Committee of Parent from 1994 to 1998. Director of
Solvay America since October 1995. Director of Purchaser since
April 1990 and current Chairman of the Board of Directors of
Purchaser. Director of Miko Group since 1998.
Rene H. Degreve Director of Parent since 1998. Member of the Executive Committee
of Parent since 1994 and General Manager, Finance and Corporate
Planning of Parent since 1993. Director of Solvay America since
June 1998.
Jacques Levy Morelle Corporate Secretary of Parent since 1989. Director of Solvay
America since May 1989.
M. Whitson Sadler Director, President and Chief Executive Officer of Solvay America
3333 Richmond Avenue since November 1984. Director of Purchaser since April 1986.
Houston, Texas 77098 Director of Southdown, Inc. since May 1996. Citizen of the United
States.
Philip M. Uhrhan Vice President, Finance of Solvay America since June 1996.
3333 Richmond Avenue Director of Purchaser since July 1996. Prior thereto, Audit
Houston, Texas 77098 Partner of Ernst & Young LLP from October 1983 to May 1996.
Citizen of the United States.
E.J. Buckingham, III Vice President, General Counsel and Secretary of Solvay America
3333 Richmond Avenue since November 1984 . Director of Purchaser since March 1994.
Houston, Texas 77098 Citizen of the United States.
Edgar H. Case Treasurer of Solvay America since October 1993. Citizen of the
3333 Richmond Avenue United States.
Houston, Texas 77098
Carolyn S. Egbert Vice President, Human Resources of Solvay America since January
3333 Richmond Avenue 1994. Citizen of the United States.
Houston, Texas 77098
C.E. Jewett Vice President, Operational Services of Solvay America since
3333 Richmond Avenue October 1986. Citizen of the United States.
Houston, Texas 77098
</TABLE>
A-3
<PAGE> 42
PURCHASER
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND CITIZENSHIP
- ------------------------- ------------------------------------------------------------------
<S> <C>
Alois Michielsen Director of Parent since 1990. Chairman of the Executive Committee
of Parent since 1998. Prior thereto, Vice-Chairman of the
Executive Committee of Parent from 1994 to 1998. Director of
Solvay America since October 1995. Director of Purchaser since
April 1990 and current Chairman of the Board of Directors of
Purchaser. Director of Miko Group since 1998.
Jurgen Ernst Director of Parent since 1998. Member of the Executive Committee
of Parent since 1995. General Manager of Pharmaceutical Sector of
Parent since 1994. Director of Purchaser since April 1986. Citizen
of Germany.
David A. Dodd Director, President and Chief Executive Officer of Purchaser since
901 Sawyer Road August 1995. Prior thereto, Senior Vice President, Pharmaceuticals
Marietta, Georgia 30062 of Wyeth-Ayerst Laboratories from February 1991 to August 1995.
Citizen of the United States.
M. Whitson Sadler Director, President and Chief Executive Officer of Solvay America
3333 Richmond Avenue since November 1984. Director of Purchaser since April 1986.
Houston, Texas 77098 Director of Southdown, Inc. since May 1996. Citizen of the United
States.
E.J. Buckingham, III Vice President, General Counsel and Secretary of Solvay America
3333 Richmond Avenue since November 1984 . Director of Purchaser since March 1994.
Houston, Texas 77098 Citizen of the United States.
Philip M. Uhrhan Vice President, Finance of Solvay America since June 1996.
3333 Richmond Avenue Director of Purchaser since July 1996. Prior thereto, Audit
Houston, Texas 77098 Partner of Ernst & Young LLP from October 1983 to May 1996.
Citizen of the United States.
Harold H. Shlevin Senior Vice President, Business Development & Scientific Affairs
901 Sawyer Road of Purchaser since April 1998. Director of CareLine Corporation
Marietta, Georgia 30062 and of Scientific and Member of Scientific and Corporate Advisory
Board of H.G. Pars, Inc. since April 1998. Chairman of the Board
of Directors and President of Merger Sub since June 11, 1999.
Prior thereto, Vice President, Research & Development and
Corporate Officer of Bausch & Lomb Pharmaceuticals from November
1996 to April 1998. Prior thereto, Vice President, Scientific and
Technical Affairs of Ciba Vision Ophthalmics from 1991 to 1996.
Citizen of the United States.
Jeffrey D. Linton Vice President, Law, Government and Public Affairs of Purchaser
901 Sawyer Road since March 1999. Director and Vice President, Secretary and
Marietta, Georgia 30062 Assistant Treasurer of Merger Sub since June 11, 1999. Prior
thereto, Vice President, Human Resources of Solvay Automotive,
Inc. from November 1996 to March 1999. Prior thereto, attorney for
Solvay America, Inc. from June 1993 to October 1996. Citizen of
the United States.
Robert A. Solheim Vice President, Finance and Administration of Purchaser. Director
901 Sawyer Road and Vice President, Treasurer and Assistant Secretary of Merger
Marietta, Georgia 30062 Sub since June 11, 1999. Citizen of the United States.
Michael I. Levitt Vice President, Manufacturing Operations of Purchaser since May
901 Sawyer Road 1999. Prior thereto, Vice President, Operations of VIVUS, Inc.
Marietta, Georgia 30062 from December 1997 to May 1999. Prior thereto, Vice President,
Operations of Collagen Corporation from August 1994 to November
1997. Citizen of the United States.
</TABLE>
A-4
<PAGE> 43
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND CITIZENSHIP
- ------------------------- ------------------------------------------------------------------
<S> <C>
Gail N. Auerbach Vice President, Human Resources of Purchaser since April 1996.
901 Sawyer Road Prior thereto, Vice President, Human Resources of Oral Care
Marietta, Georgia 30062 Division of Bausch & Lomb from 1992 to 1996. Citizen of the United
States.
Christopher D. Offen Senior Vice President, Commercial Operations of Purchaser since
901 Sawyer Road 1998. Prior thereto, Vice President, New Business Development of
Marietta, Georgia 30062 Purchaser from 1994 to 1998. Citizen of the United States.
J. Gregory Perkins Senior Vice President, Regulatory and Quality Systems of Purchaser
901 Sawyer Road since December 1996. Prior thereto, Vice President, Regulatory
Marietta, Georgia 30062 Affairs from July 1994 to December 1996. Citizen of the United
States.
</TABLE>
A-5
<PAGE> 44
MERGER SUB
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND CITIZENSHIP
- ------------------------- ------------------------------------------------------------------
<S> <C>
Harold H. Shlevin Senior Vice President, Business Development & Scientific Affairs
901 Sawyer Road of Purchaser since April 1998. Director of CareLinc Corporation
Marietta, Georgia 30062 and Member of Scientific and Corporate Advisory Board of H.G.
Pars, Inc. since April 1998. Chairman of the Board of Directors
and President of Merger Sub since June 11, 1999. Prior thereto,
Vice President, Research & Development and Corporate Officer of
Bausch & Lomb Pharmaceuticals from November 1996 to April 1998.
Prior thereto, Vice President, Scientific and Technical Affairs of
Ciba Vision Ophthalmics from 1991 to 1996. Citizen of the United
States.
Jeffrey D. Linton Vice President, Law, Government and Public Affairs of Purchaser
901 Sawyer Road since March 1999. Director and Vice President, Secretary and
Marietta, Georgia 30062 Assistant Treasurer of Merger Sub since June 11, 1999. Prior
thereto, Vice President, Human Resources of Solvay Automotive,
Inc. from November 1996 to March 1999. Prior thereto, attorney for
Solvay America, Inc. from June 1993 to October 1996. Citizen of
the United States.
Robert A. Solheim Vice President, Finance and Administration of Purchaser. Director
901 Sawyer Road and Vice President, Treasurer and Assistant Secretary of Merger
Marietta, Georgia 30062 Sub since June 11, 1999. Citizen of the United States.
</TABLE>
A-6
<PAGE> 45
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for the Shares and any other required documents
should be sent by each stockholder of the Company or his broker-dealer,
commercial bank, trust company or other nominee to the Depositary as follows:
The Depositary is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
By Mail: By Hand/Overnight Delivery:
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, NY 10268-1023 88 Pine Street, 19th Floor
New York, NY 10005
</TABLE>
By Facsimile Transmissions:
(for Eligible Institutions only)
(212) 701-7636
For Information (call collect):
(212) 701-7624
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and locations
listed below. You may also contact your broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
(800) 322-2885 (call toll-free)
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
UNIMED PHARMACEUTICALS, INC.
AT
$12.00 NET PER SHARE
BY
UTAH ACQUISITION CORPORATION
A DIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY PHARMACEUTICALS, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON THURSDAY, JULY 15, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmissions: By Hand/Overnight Delivery:
Wall Street Station (for Eligible Institutions Receive Window
P.O. Box 1023 only) Wall Street Plaza
New York, NY 10268-1023 (212) 701-7636 88 Pine Street, 19th Floor
For Information (call collect): New York, NY 10005
(212) 701-7624
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in Section 3 of the Offer to Purchase (as defined below)) is
utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by the Depositary at the Depository Institution, as defined
in and pursuant to the procedures set forth in Section 3 of the Offer to
Purchase. Stockholders who deliver Shares by book-entry transfer are referred to
herein as "Book-Entry Stockholders" and other stockholders are referred to
herein as "Certificate Stockholders." Stockholders whose certificates for Shares
are not immediately available or who cannot comply with the procedure for
book-entry transfer on a timely basis, or who cannot deliver all required
documents to the Depositary prior to the Expiration Date (as defined in Section
1 of the Offer to Purchase), may tender their Shares in accordance with the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
See Instruction 2. DELIVERY OF DOCUMENTS TO THE DEPOSITORY INSTITUTION IN
ACCORDANCE WITH THE DEPOSITORY INSTITUTION'S PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
SHARES TENDERED (PLEASE FILL IN IF BLANK, EXACTLY AS NAME(S)
(ATTACH ADDITIONAL LIST IF NECESSARY) APPEAR(S) ON CERTIFICATE(S))
- -------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
<C> <C> <C> <S>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described above are being tendered. See Instruction 4.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE DEPOSITORY
INSTITUTION AND COMPLETE THE FOLLOWING (ONLY FINANCIAL INSTITUTIONS THAT ARE
PARTICIPANTS IN THE SYSTEM OF THE DEPOSITORY INSTITUTION MAY DELIVER SHARES
BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
The Depository Trust
Company Account Number
Transaction Code Number
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
If delivered by book-entry transfer, complete:
The Depository Trust
Company Account Number
Transaction Code Number
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Utah Acquisition Corporation, a Delaware
corporation ("Merger Sub") which is a direct wholly owned subsidiary of Solvay
Pharmaceuticals, Inc., a Georgia corporation ("Purchaser") and an indirect
wholly owned subsidiary of Solvay S.A., a Belgian societe anonyme, the
above-described shares, par value $.25 per share (the "Common Stock"), including
the associated rights (the "Rights" and, together with the Common Stock, the
"Shares"), of Unimed Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), pursuant to the Offer to Purchase, dated June 17, 1999 (the "Offer
to Purchase"), all of the outstanding Shares at a price of $12.00 per Share, net
to the seller in cash (but subject to any applicable tax withholdings), upon the
terms and subject to the conditions set forth in the Offer to Purchase, receipt
of which is hereby acknowledged, and in this Letter of Transmittal (which,
together with the Offer to Purchase, constitute the "Offer"). The undersigned
understands that Merger Sub reserves the right to transfer or assign, from time
to time, in whole or in part, to one or more of its direct or indirect wholly
owned subsidiaries, the right to purchase the Shares tendered herewith.
On the terms and subject to the conditions of the Offer (including the
Offer Conditions and together with, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), subject to, and effective
upon, acceptance for payment of, and payment for, the Shares tendered herewith
in accordance with the terms of the Offer, the undersigned hereby sells, assigns
and transfers to, or upon the order of, Merger Sub, all right, title and
interest in and to all of the Shares being tendered hereby and any and all cash
dividends, distributions, rights, other Shares or other securities issued or
issuable in respect of such Shares on or after June 17, 1999 (collectively,
"Distributions"), and appoints Harris Trust Company of New York (the
"Depositary") the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares (and any Distributions) with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to the fullest extent of such stockholder's rights
with respect to such Shares (and any Distributions) (a) to deliver such Share
Certificates (as defined herein) (and any Distributions) or transfer ownership
of such Shares (and any Distributions) on the account books maintained by The
Depository Trust Company (the "Depository Institution"), together in either such
case with all accompanying evidences of transfer and authenticity, to or upon
the order of Merger Sub, (b) to present such Shares (and any Distributions) for
transfer on the books of the Company and (c) to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
Distributions), all in accordance with the terms and the conditions of the
Offer.
The undersigned hereby irrevocably appoints the designees of Merger Sub,
and each of them, the attorneys-in-fact and proxies of the undersigned, each
with full power of substitution, to the full extent of such stockholder's rights
with respect to the Shares tendered hereby which have been accepted for payment
and with respect to any Distributions. The designees of Merger Sub will, with
respect to the Shares (and any associated Distributions) for which the
appointment is effective, be empowered to exercise all voting and any other
rights of such stockholder, as they, in their sole discretion, may deem proper
at any annual, special or adjourned meeting of the Company's stockholders, by
written consent in lieu of any such meeting or otherwise. This proxy and power
of attorney shall be irrevocable and coupled with an interest in the tendered
Shares. Such appointment is effective when, and only to the extent that, Merger
Sub deposits the payment for such Shares with the Depositary. Upon the
effectiveness of such appointment, without further action, all prior powers of
attorney, proxies and consents given by the undersigned with respect to such
Shares (and any associated Distributions) will be revoked, and no subsequent
powers of attorney, proxies, consents or revocations may be given (and, if
given, will not be deemed effective). Merger Sub reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon Merger
Sub's acceptance for payment of such Shares, Merger Sub must be able to exercise
full voting rights with respect to such Shares (and any associated
Distributions), including voting at any meeting of stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distributions) tendered hereby and, when the same are accepted for payment
by Merger Sub, Merger Sub will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances,
and the same will not be subject to any adverse claim. The undersigned will,
upon request, execute and deliver any additional documents deemed by the
Depositary or Merger Sub to be necessary or desirable to complete the sale,
assignment and transfer of the Shares (and any Distributions) tendered hereby.
In
<PAGE> 4
addition, the undersigned shall promptly remit and transfer to the Depositary
for the account of Merger Sub any and all Distributions in respect of the Shares
tendered hereby, accompanied by appropriate documentation of transfer; and,
pending such remittance or appropriate assurance thereof, Merger Sub shall be
entitled to all rights and privileges as owner of any such Distributions and may
withhold the entire purchase price or deduct from the purchase price the amount
or value thereof, as determined by Merger Sub in its sole discretion.
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the heirs, personal representatives, successors and
assigns of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to one
of the procedures described In Section 3 of the Offer to Purchase will
constitute a binding agreement between the undersigned and Merger Sub upon the
terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment in the name(s) of the registered
owner(s) appearing under "Description of Shares Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the check
for the purchase price and/or return any certificates for Shares not tendered or
accepted for payment (and accompanying documents, as appropriate) to the
address(es) of the registered owner(s) appearing under "Description of Shares
Tendered." In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or issue any certificates for Shares not tendered or accepted
for payment (and any accompanying documents, as appropriate) in the name of, and
deliver such check and/or return such certificates (and any accompanying
documents, as appropriate) to, the person or persons so indicated. The
undersigned recognizes that Merger Sub has no obligation pursuant to the Special
Payment Instructions to transfer any Shares from the name of the registered
owner thereof if Merger Sub does not accept for payment any of the Shares so
tendered.
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be issued in the name of someone other than
the undersigned.
Issue: [ ] Check [ ] Certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be sent to someone other than the undersigned,
or to the undersigned at an address other than that shown above.
Mail: [ ] Check [ ] Certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
----------------------------------------------------
-----------------------------------------------------
(INCLUDE ZIP CODE)
- -------------------------------------------------------
<PAGE> 5
IMPORTANT
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
(Signature(s) of Holder(s))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
- ------------------------, 1999
(Must be signed by registered owner(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered owner(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5.)
Name(s)
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
<TABLE>
<S> <C>
- -------------------------------------------------------- --------------------------------------------------------
AREA CODE AND TELEPHONE NO. TAX IDENTIFICATION OR SOCIAL SECURITY NO.
</TABLE>
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Name of Firm
- --------------------------------------------------------------------------------
Dated:
- ------------------------, 1999
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed (a) if this
Letter of Transmittal is signed by the registered owners (which term, for
purposes of this document, includes any participant in any of the Book-Entry
Transfer Facilities' systems whose name appears on a security position listing
as the owner of the Shares) of Shares tendered herewith and such registered
owner has not completed the box entitled "Special Payment Instructions" or the
box entitled "Special Delivery Instructions" on this Letter of Transmittal or
(b) if such Shares are tendered for the account of an Eligible Institution. See
Instruction 5 of this Letter of Transmittal.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES OR BOOK-ENTRY
CONFIRMATIONS. This Letter of Transmittal is to be used either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Certificates for all physically tendered Shares ("Share
Certificates"), or confirmation of any book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility of Shares tendered by book-entry
transfer, as well as this Letter of Transmittal properly completed and duly
executed with any required signature guarantees, or an Agent's Message (in the
case of a book-entry transfer) and any other documents required by this Letter
of Transmittal, must be received by the Depositary at one of its addresses set
forth herein on or prior to the Expiration Date (as defined in the Offer to
Purchase).
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver all other required documents to the Depositary on or prior to
the Expiration Date or who cannot comply with the procedures for book-entry
transfer on a timely basis may nevertheless tender their Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Purchaser must be
received by the Depositary prior to the Expiration Date; and (iii) Share
Certificates or confirmation of any book-entry transfer into the Depositary's
account at the Depository Institution of Shares tendered by book-entry transfer,
as well as a Letter of Transmittal, properly completed and duly executed with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and all other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery.
If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal must accompany each
such delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE DEPOSITORY INSTITUTION, IS AT THE
ELECTION AND RISK OF THE TENDERING STOCKHOLDER. THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A
BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF SUCH DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If
fewer than all the Shares evidenced by any certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered." In such cases, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered owner, unless otherwise provided in the appropriate box
on this Letter of
<PAGE> 7
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered owners of the Shares
tendered hereby, the signature must correspond with the names as written on the
face of the certificates without alteration, enlargement or any other change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or accepted for payment are to be issued in
the name of, a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner of the certificates(s) listed, the certificate(s) must be
endorsed or accompanied by the appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or holders appears on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Merger Sub will pay any stock transfer taxes
with respect to the transfer and sale of Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or (in
the circumstances permitted hereby) if certificates for Shares not tendered or
accepted for payment are to be registered in the name of, any person other than
the registered owner, or if tendered certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered owner or
such person) payable on account of the transfer to such person will be deducted
from the purchase price if satisfactory evidence of the payment of such taxes,
or exemption therefrom, is not submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for Shares not tendered or accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be mailed to
a person other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to the Information Agent at its address set forth
below or from your broker, dealer, commercial bank or trust company. Additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and other tender offer materials may be obtained from the
Information Agent.
9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the stockholder's social security or federal employer identification number, on
Substitute Form W-9 below. Failure to provide the information on the form may
subject the tendering stockholder to 31% federal income tax backup withholding
on the payment of the purchase price. The box in Part 3 of the form may be
checked if the tendering stockholder has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part 3
is checked and the Depositary is not provided with a TIN within 60 days, the
Depositary will withhold 31% of all payments of the purchase price thereafter
until a TIN is provided to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH SHARE CERTIFICATES OR
CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE
EXPIRATION DATE.
<PAGE> 8
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for purchase is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below and to certify
that such TIN is correct (or that such stockholder is awaiting a TIN) or
otherwise establish a basis for exemption from backup withholding. If such
stockholder is an individual, the TIN is his or her social security number. If a
stockholder fails to provide a TIN to the Depositary, such stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31% (see below).
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must generally submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder or payee. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certification of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding. If a
stockholder's TIN is provided to the Depositary within 60 days of the date of
the Substitute Form W-9, payment will be made to such stockholder without the
imposition of backup withholding. If a stockholder's TIN is not provided to the
Depositary within such 60-day period, the Depositary will make such payment,
subject to backup withholding.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a stockholder whose
tendered Shares are accepted for purchase, the stockholder is required to notify
the Depositary of its correct TIN by completing Substitute Form W-9 certifying
that the TIN provided on such Form is correct (or that such stockholder is
awaiting a TIN, in which case the stockholder should check the box in Part 3 of
the Substitute Form W-9) and that (A) such stockholder is exempt from backup
withholding, (B) such stockholder has not been notified by the Internal Revenue
Service that such stockholder is subject to backup withholding as a result of
failure to report all interest or dividends or (C) the Internal Revenue Service
has notified the stockholder that the stockholder is no longer subject to backup
withholding. The stockholder must sign and date the Substitute Form W-9 where
indicated, certifying that the information on such Form is correct.
Alternatively, a stockholder that qualifies as an exempt recipient (other
than a stockholder required to complete Form W-8 as described above) should
write "Exempt" in Part 1 of the Substitute Form W-9, enter its correct TIN and
sign and date such Form where indicated.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares or of
the last transferee appearing on the transfers attached to, or endorsed on, the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report.
<PAGE> 9
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
PAYER: HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX Social security number OR
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING Employer identification number
BELOW. ------------------------------------
----------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
INTERNAL REVENUE SERVICE (1) The number shown on this form is my correct Taxpayer Identification Number (or I
am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because (i) I am exempt from backup
withholding, (ii) I have not been notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (iii) the IRS has notified me that I am no longer subject to
backup withholding.
</TABLE>
<TABLE>
<C> <S> <C> <C>
----------------------------------------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER Certification Instructions -- You must cross out item (2)
IDENTIFICATION NUMBER (TIN) in Part 2 above if you have been notified by the IRS that
you are subject to backup withholding because of
under-reporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were
subject to backup withholding you received another
notification from the IRS stating that you are no longer PART 3 --
subject to backup withholding, do not cross out item (2). Awaiting
TIN [ ]
SIGNATURE ----------------------------------------------
DATE ------------------------------------------------------
NAME (Please Print) ---------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issue to me, and either (i) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (ii) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a taxpayer
identification number to the Depositary.
<TABLE>
<S> <C>
- ---------------------------------------------- ----------------------------------------------
Signature Date
- ----------------------------------------------
Name (Please Print)
</TABLE>
<PAGE> 10
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
(800) 322-2885 (call toll-free)
JUNE 17, 1999
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
UNIMED PHARMACEUTICALS, INC.
AT
$12.00 NET PER SHARE
BY
UTAH ACQUISITION CORPORATION
A DIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY PHARMACEUTICALS, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 15, 1999, UNLESS THE OFFER IS EXTENDED.
June 17, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by Utah Acquisition Corporation, a Delaware
corporation ("Merger Sub") which is a direct wholly owned subsidiary of Solvay
Pharmaceuticals, Inc., a Georgia corporation ("Purchaser") and an indirect
wholly owned subsidiary of Solvay S.A., a Belgian societe anonyme, to act as
Information Agent in connection with Merger Sub's offer to purchase all
outstanding shares of Common Stock, par value $.25 per share (the "Common
Stock"), including the associated rights (the "Rights" and, together with the
Common Stock, the "Shares"), of Unimed Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), at $12.00 per Share, net to the seller in cash (but
subject to any applicable tax withholdings) (the "Merger Consideration"), on the
terms and subject to the conditions set forth in the Offer to Purchase, dated
June 17, 1999, and the related Letter of Transmittal (which together constitute
the "Offer"). Please furnish copies of the enclosed materials to those of your
clients for whom you hold Shares registered in your name or in the name of your
nominee.
Enclosed herewith are the following documents:
1. Offer to Purchase, dated June 17, 1999;
2. Letter of Transmittal to be used by stockholders of the Company in
accepting the Offer;
3. Letter to Stockholders of the Company from the President and Chief
Executive Officer of the Company, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9;
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to Harris Trust Company of New York, the
Depositary.
<PAGE> 2
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES OWNED BY PURCHASER, MERGER SUB AND ANY
OTHER DIRECT OR INDIRECT SUBSIDIARY OF PURCHASER, CONSTITUTE MORE THAN 50% OF
THE VOTING POWER (DETERMINED ON A FULLY DILUTED BASIS) OF ALL THE SECURITIES OF
THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN
CONNECTION WITH A MERGER, (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER
APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING BEEN EXPIRED
OR TERMINATED, AND (3) ALL SHARES OF WHICH ANY MEMBER OF THE COMPANY'S BOARD OF
DIRECTORS, OR ANY TRUST WITH WHICH ANY SUCH MEMBER OR SUCH MEMBER'S SPOUSE IS
AFFILIATED, IS A RECORD HOLDER OR BENEFICIAL OWNER AS OF JUNE 4, 1999 BEING
VALIDLY TENDERED INTO THE OFFER PRIOR TO JULY 13, 1999 AND NO SUCH SHARES BEING
WITHDRAWN FROM THE OFFER. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
DESCRIBED IN SECTION 13 OF THE OFFER TO PURCHASE.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
THURSDAY, JULY 15, 1999 UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT (AS DEFINED BELOW), THE OFFER AND THE MERGER (AS DEFINED BELOW) AND
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF THE STOCKHOLDERS OF THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE OFFER AND IMMEDIATELY TENDER
THEIR SHARES PURSUANT TO THE OFFER. DR. JOHN N. KAPOOR, CHAIRMAN OF THE BOARD OF
DIRECTORS OF THE COMPANY AND THE SINGLE LARGEST HOLDER OF SHARES, HAS EXECUTED A
LETTER CONFIRMING THAT HE WILL, SUBJECT TO HIS FIDUCIARY DUTIES AS A TRUSTEE OF
CERTAIN TRUSTS HOLDING SHARES, TENDER ALL SHARES THAT HE OWNS EITHER DIRECTLY OR
BENEFICIALLY TO MERGER SUB. THE BOARD OF DIRECTORS OF THE COMPANY HAS RESOLVED
THAT ALL DIRECTORS INTEND TO TENDER THE SHARES THAT THEY OWN DIRECTLY OR
BENEFICIALLY TO MERGER SUB.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 11, 1999 (the "Merger Agreement"), among the Company, Purchaser and
Merger Sub, pursuant to which, after the completion of the Offer, Merger Sub
will be merged with and into the Company (the "Merger") and each Share (other
than Shares owned by Purchaser, Merger Sub or any other direct or indirect
subsidiary of Purchaser and Shares that are held by stockholders exercising
appraisal rights pursuant to Section 262 of the Delaware General Corporation
Law) shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive, without interest, the
Merger Consideration or such greater amount per Share as may be paid pursuant to
the Offer. As a result of the Merger, the Company will become a direct wholly
owned subsidiary of Purchaser and an indirect wholly owned subsidiary of Parent.
The Merger Agreement is more fully described in Section 11 of the Offer to
Purchase.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by Harris Trust Company of New York (the
"Depositary") of (i) certificates for such Shares or timely confirmation of the
book-entry transfer of such Shares into the Depositary's account at the
Depository Institution (as defined in the Offer to Purchase) pursuant to the
procedures set forth in Section 3 of the Offer to Purchase), (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase)) and (iii) any other
documents required by such Letter of Transmittal. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT PURSUANT TO THE OFFER.
Neither Purchaser nor Merger Sub will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent, as disclosed
in the Offer to Purchase) in connection with the solicitation of tenders of
Shares pursuant to the Offer. You will be reimbursed upon request for customary
mailing and handling expenses incurred by you in forwarding the enclosed
offering materials to your clients.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
UNIMED PHARMACEUTICALS, INC.
AT
$12.00 NET PER SHARE
BY
UTAH ACQUISITION CORPORATION
A DIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY PHARMACEUTICALS, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 15, 1999, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated June 17,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by Utah Acquisition
Corporation, a Delaware corporation ("Merger Sub") which is a direct wholly
owned subsidiary of Solvay Pharmaceuticals, Inc., a Georgia corporation
("Purchaser") and an indirect wholly owned subsidiary of Solvay S.A., a Belgian
societe anonyme ("Parent"), to purchase for cash, all of the outstanding shares
of Common Stock, par value $.25 per share (the "Common Stock"), including the
associated rights (the "Rights"), of Unimed Pharmaceuticals, Inc. a Delaware
corporation (the "Company") (the Common Stock and the Rights being together are
referred to herein as the "Shares"), on the terms and subject to the conditions
set forth in the Offer (together with, if the Offer is extended or amended, the
terms of such extension or amendment). Also enclosed is the letter to
stockholders of the Company from the President and Chief Executive Officer of
the Company accompanied by the Company's Solicitation/Recommendation Statement
on Schedule 14D-9.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to tender any of or all of
the Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The Offer price is $12.00 per Share, net to the Seller in cash (but
subject to any applicable tax withholdings) (the "Merger
Consideration"), without interest thereon, upon the terms and subject to
the conditions of the Offer.
2. The Offer is being made for all of the outstanding Shares.
<PAGE> 2
3. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT (AS DEFINED BELOW), THE OFFER AND THE MERGER (AS
DEFINED BELOW) AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY. THE BOARD
OF DIRECTORS OF THE COMPANY RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT
THE OFFER AND IMMEDIATELY TENDER THEIR SHARES PURSUANT TO THE OFFER. DR.
JOHN N. KAPOOR, CHAIRMAN OF THE BOARD OF DIRECTORS OF THE COMPANY AND
THE SINGLE LARGEST HOLDER OF SHARES, HAS EXECUTED A LETTER CONFIRMING
THAT HE WILL, SUBJECT TO HIS FIDUCIARY DUTIES AS A TRUSTEE OF CERTAIN
TRUSTS HOLDING SHARES, TENDER ALL SHARES THAT HE OWNS EITHER DIRECTLY OR
BENEFICIALLY TO MERGER SUB. THE BOARD OF DIRECTORS OF THE COMPANY HAS
RESOLVED THAT ALL DIRECTORS INTEND TO TENDER THE SHARES THAT THEY OWN
DIRECTLY OR BENEFICIALLY TO MERGER SUB.
4. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer a number
of Shares which, together with any Shares owned by Purchaser, Merger Sub
and any other direct or indirect subsidiary of Purchaser, constitute
more than 50% of the voting power (determined on a fully diluted basis)
of all the securities of the company entitled to vote generally in the
election of directors or in connection with a merger. The Offer is also
subject to certain other conditions described in Section 13 of the Offer
to Purchase.
5. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 15, 1999, UNLESS THE OFFER IS EXTENDED BY MERGER
SUB (THE "EXPIRATION DATE").
6. The Offer is being made pursuant to the Agreement and Plan of Merger,
dated as of June 11, 1999 (the "Merger Agreement"), among the Company,
Purchaser and Merger Sub, pursuant to which, after the completion of the
Offer, Merger Sub will be merged with and into the Company (the
"Merger") and each Share (other than Shares owned by Purchaser, Merger
Sub or any other direct or indirect subsidiary of Purchaser and Shares
that are held by stockholders exercising appraisal rights pursuant to
Section 262 of the Delaware General Corporation Law) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive, without interest, the Merger
Consideration or such greater amount as may be paid pursuant to the
Offer. As a result of the Merger, the Company will become a direct
wholly owned subsidiary of Purchaser and an indirect wholly owned
subsidiary of Parent. The Merger Agreement is more fully described in
Section 11 of the Offer to Purchase.
7. Any stock transfer taxes applicable to a sale of Shares to Merger Sub
will be borne by Merger Sub, except as otherwise provided in Instruction
6 of the Letter of Transmittal.
Your instructions to us should be forwarded promptly to permit us to submit
a tender on your behalf prior to the Expiration Date.
If you wish to have us tender any of or all of the Shares held by us for
your account, please so instruct us by completing, executing, detaching and
returning to us the instruction form on the detachable part hereof. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf prior to the Expiration Date.
Payment for Shares accepted for payment pursuant to the Offer will be in
all cases made only after timely receipt by Harris Trust Company of New York
(the "Depositary") of (a) certificates for (or a timely Book-Entry Confirmation
(as defined in the Offer to Purchase) with respect to) such Shares, (b) a Letter
of Transmittal, properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer effected pursuant
to the procedure set forth in Section 3 of the Offer to Purchase, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING PAYMENT PURSUANT TO THE OFFER.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where the securities or blue sky laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed
made on behalf of Merger Sub by one or more registered brokers or dealers that
are licensed under the laws of such jurisdiction. An envelope in which to return
your instructions to us is enclosed. If you authorize tender of your Shares, all
such Shares will be tendered unless otherwise indicated in such instruction
form. Please forward your instructions to us as soon as possible to allow us
ample time to tender Shares on your behalf prior to the expiration of the Offer.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
UNIMED PHARMACEUTICALS, INC.
The undersigned acknowledge(s) receipt of your letter, the Offer to
Purchase, dated June 17, 1999 (the "Offer to Purchase"), and the related Letter
of Transmittal relating to shares of Common Stock, par value $.25 per share (the
"Common Stock"), including the associated rights (the "Rights"), of Unimed
Pharmaceuticals, Inc., a Delaware corporation. The Common Stock and the Rights
together are referred to herein as the "Shares."
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, on the terms and subject to the
conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
<TABLE>
<S> <C>
Number of Shares to be Tendered:* SIGN HERE
__________ Shares --------------------------------------------------------
Daytime Area Code --------------------------------------------------------
and Telephone No. Signature(s)
- ---------------------------------- --------------------------------------------------------
Taxpayer Identification --------------------------------------------------------
No. or Social Security No. (Please print name(s) and address(es))
- --------------------------
Dated: , 1999
</TABLE>
- ---------------
* Unless otherwise indicated, it will be assumed that all your Shares are to be
tendered.
<PAGE> 1
[SOLVAY PHARMACEUTICALS LETTERHEAD]
SOLVAY GROUP ANNOUNCES AGREEMENT TO ACQUIRE UNIMED PHARMACEUTICALS, INC.
TO STRENGTHEN ITS MARKETING
PRESENCE AMONG U.S. PRIMARY CARE PHYSICIANS
Solvay Pharmaceuticals, Inc. of Marietta, Ga., jointly with Unimed
Pharmaceuticals, Inc. of Buffalo Grove, Ill. (Nasdaq: UMED) announced today that
they have entered into an agreement whereby Solvay Pharmaceuticals will acquire
all outstanding shares of Unimed Pharmaceuticals. The acquisition is part of the
Solvay Group's strategy to rapidly expand its pharmaceutical business in the
U.S.
The board of directors of Unimed has unanimously agreed that the proposed
acquisition by Solvay Pharmaceuticals is fair and in the best interest of the
Unimed stockholders. The directors have also stated their intent to tender their
shares upon the commencement of the tender offer.
Pursuant to a merger agreement entered into among Unimed, Solvay Pharmaceuticals
and a wholly owned subsidiary of Solvay Pharmaceuticals, the subsidiary will
commence a tender offer for all of the outstanding shares of Unimed common
stock, including the associated stock purchase rights, at a price of $12.00 per
share in cash. If the tender offer is successfully completed, the subsidiary
will merge with and into Unimed and each share of Unimed common stock not
purchased pursuant to the tender offer will be converted into the right to
receive $12.00 per share in cash. The net value of the planned transaction is
about $123 million.
Commenting on the acquisition, Alois Michielsen, CEO of Solvay Group said,
"Unimed Pharmaceuticals fits very well with the strategic objective of
broadening our presence in the U.S. pharmaceutical business. This acquisition
will contribute to our plan to rapidly increase the total number of our U.S.
sales representation from 450 at the end of 1998 to over 1,000 people in year
2000, selling existing drugs from Solvay
<PAGE> 2
Pharmaceuticals and Unimed Pharmaceuticals as well as products recently acquired
by Solvay Pharmaceuticals."
Jurgen Ernst, President of Solvay's world-wide Pharmaceuticals activities added,
"Indeed, in order to quickly and effectively maximize sales potential for both
ACEON(R) Tablets and TEVETEN(R) Tablets, the two anti-hypertensive drugs
acquired by Solvay in May 1999, Solvay Pharmaceuticals will sell ACEON(R)
Tablets through its own primary care sales force. However, TEVETEN(R) Tablets
will be sold by
Unimed Pharmaceuticals representatives, whose current number will be increased
very significantly. Unimed Pharmaceuticals also will strengthen Solvay
Pharmaceuticals' current portfolio of Hormone Replacement Therapies (HRT) by
including male HRT and providing an early entree into the emerging area of
andropause."
Solvay Pharmaceuticals, Inc. President and CEO David A. Dodd added, "We intend
to optimize marketing of Unimed Pharmaceuticals' portfolio of products as well
as some additional products that we've acquired or are developing. The current
employees of Unimed Pharmaceuticals will play a vital role in building this new
venture."
Unimed Pharmaceuticals Chairman Dr. John N. Kapoor stated, "Unimed
Pharmaceuticals has made significant progress since 1991 when I first became
involved with the company. It is time for Unimed Pharmaceuticals to become part
of a much larger organization so that the company and its employees can continue
to grow.
Robert E. Dudley, Unimed Pharmaceuticals' President and CEO added, "The
synergies that will be created by joining this global group of companies will
enable us to maximize the potential of our products."
Consummation of the tender offer and the merger is subject to the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended. Consummation of the tender offer
is also subject to the valid tender of more than 50 percent of the voting power
(determined on a fully diluted basis) of all the securities of Unimed entitled
to vote generally in the election of directors or in connection with a merger.
The closing of the merger is expected to occur as soon as possible after the
satisfaction of the conditions set forth in the merger agreement.
Unimed Pharmaceuticals is an emerging Chicago-area pharmaceutical company. The
company focuses on drugs that have multiple indications and fall within the
therapeutic areas of endocrinology, urology, HIV and other infectious diseases.
The Solvay Group is an international chemical and pharmaceutical group based in
Brussels, Belgium. Its members employ some 33,000 people in 46 countries. Its
1998 turnover worldwide was 7.5 billion EUR ($8.7 billion) from four operating
sectors: Chemicals, Plastics, Processing, and Pharmaceuticals. Solvay
Pharmaceuticals, Inc., a member of the Solvay Group, is a research-based
pharmaceutical company active in
<PAGE> 3
the therapeutic areas of cardiology, women's health, gastroenterology and mental
health.
To the extent any statements made in this release deal with information that is
not historical, these statements are necessarily forward-looking. As such, they
are subject to the occurrence of many events outside of Unimed Pharmaceuticals'
control and are subject to various risk factors that could cause Unimed
Pharmaceuticals' results to differ materially from those expressed in any
forward-looking statement. The risk factors include, without limitation, the
risk that holders of 50 percent of Unimed's voting securities will not tender
their shares of Unimed common stock into the tender offer, the ability of Unimed
Pharmaceuticals to obtain stockholder approval of the transaction and satisfy
other conditions for the acquisition, including obtaining regulatory approvals
(including the expiration or termination of the applicable waiting period under
federal antitrust approval). Additional risks include the inherent risk of
competition in the marketplace, clinical outcomes in drug development programs,
regulatory risks and risks related to proprietary rights and market acceptance
and other risk factors described in Unimed Pharmaceuticals' Form 10-K and 10-Q
as filed with the SEC.
<PAGE> 1
PRESS RELEASE
MARIETTA, GEORGIA, June 17, 1999 -- Utah Acquisition Corporation, a wholly
owned subsidiary of Solvay Pharmaceuticals, Inc. today commenced its
previously announced tender offer for all of the outstanding shares of Common
Stock of Unimed Pharmaceuticals, Inc. (NASDAQ: UMED) at a price of $12.00 per
share, net to the seller, in cash. The tender offer is scheduled to expire at
midnight Eastern time on Thursday, July 15, unless extended.
The complete terms and conditions of the offer are set forth in the Offer to
Purchase, copies of which are available by contacting the information agent,
MacKenzie Partners at (800) 322-2885.
Solvay Pharmaceuticals also said that it will file shortly a Premerger
Notification and Report Form with the Federal Trade Commission and the
Antitrust Division of the Department of Justice under the Hart-Scott-Rodino Act.
Unimed Pharmaceuticals is an emerging Chicago-area pharmaceutical company. The
company focuses on drugs that have multiple indications and fall within the
therapeutic areas of endocrinology, urology, HIV and other infectious diseases.
The Solvay Group is an international chemical and pharmaceutical group based in
Brussels, Belgium. Its members employ some 33,000 people in 46 countries. Its
1998 turnover worldwide was 7.5 billion EUR ($8.7 billion) from four operating
sectors: Chemicals, Plastics, Processing, and Pharmaceuticals. Solvay
Pharmaceuticals, Inc., a member of the Solvay Group, is a research-based
pharmaceutical company active in the therapeutic areas of cardiology, women's
health, gastroenterology and mental health.
<PAGE> 1
This announcement is neither an Offer to purchase nor a solicitation of an Offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase, dated June 17, 1999, and the related Letter of
Transmittal and any amendments or supplements thereto, and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to be made on behalf of Purchaser (as defined below) by one
or more registered brokers or dealers that are licensed under the laws of such
jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
UNIMED PHARMACEUTICALS, INC.
AT
$12.00 NET PER SHARE
BY
UTAH ACQUISITION CORPORATION
A DIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY PHARMACEUTICALS, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
SOLVAY S.A.
Utah Acquisition Corporation, a Delaware corporation ("Merger Sub") which
is a direct wholly owned subsidiary of Solvay Pharmaceuticals, Inc., a Georgia
corporation ("Purchaser") and an indirect wholly owned subsidiary of Solvay
S.A., a Belgian societe anonyme, is offering to purchase all of the outstanding
shares of Common Stock, par value $.25 per share (the "Common Stock"), of Unimed
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), including the
associated rights (the "Rights" and, together with the Common Stock, the
"Shares"), at $12.00 per Share, net to the seller in cash (but subject to any
applicable tax withholdings) (the "Merger Consideration") on the terms and
subject to the conditions set forth in the Offer to Purchase, dated June 17,
1999 (together with any amendments or supplements thereto, the "Offer to
Purchase"), and in the related Letter of Transmittal (which collectively,
together with any amendments or supplements thereto, constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by Merger Sub pursuant to the Offer. The
purpose of the Offer is to acquire for cash as many outstanding Shares as
possible as a first step in acquiring the entire equity interest in the
Company. Following the consummation of the Offer, Purchaser intends to effect
the Merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 15, 1999, UNLESS THE OFFER IS EXTENDED.
<PAGE> 2
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES OWNED BY PURCHASER, MERGER SUB AND ANY
OTHER DIRECT OR INDIRECT SUBSIDIARY OF PURCHASER, CONSTITUTES MORE THAN 50% OF
THE VOTING POWER (DETERMINED ON A FULLY DILUTED BASIS) OF ALL THE SECURITIES OF
THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN
CONNECTION WITH A MERGER. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
DESCRIBED IN SECTION 13 OF THE OFFER TO PURCHASE.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 11, 1999 (the "Merger Agreement") among the Company, Purchaser and
Merger Sub, pursuant to which, after the completion of the Offer, Merger Sub
will be merged with and into the Company (the "Merger") and each Share issued
and outstanding immediately prior to the Effective Time (as defined in the
Merger Agreement) (other than Shares owned by Purchaser, Merger Sub or any other
direct or indirect subsidiary of Purchaser or Shares that are held by
stockholders exercising appraisal rights pursuant to Section 262 of the Delaware
General Corporation Law) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the right to receive,
without interest, the Merger Consideration or such greater amount per Share as
may be paid pursuant to the Offer. The Merger Agreement is more fully described
in Section 11 of the Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AGREEMENT
AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
For purposes of the Offer, Merger Sub will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when Merger Sub
gives oral or written notice to Harris Trust Company of New York (the
"Depositary") of its acceptance for payment of such Shares pursuant to the
Offer. Payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for the tendering stockholders for the purpose of receiving
payments from Merger Sub and transmitting such payments to the tendering
stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares or a confirmation of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company pursuant to the procedures
set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message (as defined in Section 3 of the Offer to Purchase) in lieu of
the Letter of Transmittal), and (iii) any other documents required by the Letter
of Transmittal.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission, Merger Sub expressly
reserves the right, in its sole discretion, at any time or from time to time, to
extend the period of time during which the Offer is open by giving oral or
written notice of such extension to the Depositary. Any such extension will be
followed as promptly as practicable by public announcement thereof, such
announcement to be issued no later than 9:00 A.M., New York City time, on the
next business day after the previously scheduled expiration date of the Offer.
During any such extension, all Shares previously tendered and not withdrawn will
remain subject to the Offer, subject to the right of a tendering stockholder to
withdraw such stockholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
expiration date of the Offer and, unless theretofore accepted for payment by
Merger Sub pursuant to the Offer, may also be withdrawn at any time after August
15, 1999.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
having tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the names in which the certificate(s) evidencing the Shares to be withdrawn
are registered, if different from that of the person who tendered such Shares.
The signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in Section 3 of the Offer to Purchase), unless such
Shares have been tendered for the account of any Eligible Institution. If Shares
have been tendered pursuant to the procedures for book-entry tender as set forth
in Section 3 of the Offer to Purchase, any notice of withdrawal must specify the
name and
<PAGE> 3
number of the account at the Depository Institution (as defined in Section 2 of
the Offer to Purchase) to be credited with the withdrawn Shares. If certificates
for Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then prior to the physical release of such certificates, the name of
the registered holder and the serial numbers shown on such certificates must
also be furnished to the Depositary as aforesaid prior to the physical release
of such certificates. All questions as to the form and validity (including time
of receipt) of any notice of withdrawal will be determined by Merger Sub, in its
sole discretion, which determination shall be final and binding. None of Parent,
Purchaser, Merger Sub, the Depositary, the Information Agent, or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give such notification. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will be deemed not to have been validly
tendered for purposes of the Offer. However, withdrawn Shares may be retendered
by following one of the procedures described in Section 3 of the Offer to
Purchase at any time prior to the Expiration Date (as defined in Section 1 of
the Offer to Purchase).
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided Merger Sub with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the Letter of Transmittal and, if required,
other relevant materials, will be mailed by Merger Sub to record holders of
Shares and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the Company's stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of shares.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth below. Requests for
additional copies of the Offer to Purchase, the related Letter of Transmittal
and other tender Offer materials may be directed to the Information Agent or to
brokers, dealers, commercial banks or trust companies. Such additional copies
will be furnished at Merger Sub's expense. Merger Sub will not pay any fees or
commissions to any broker or dealer or any other person for soliciting tenders
of Shares pursuant to the Offer.
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
June 17, 1999
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
UNIMED PHARMACEUTICALS, INC.
As set forth in Section 3 of the Offer to Purchase (as defined below), this
form or one substantially equivalent may be used to accept the Offer (as defined
below) if certificates for shares of Common Stock, par value $.25 per share (the
"Common Stock"), including the associated rights (the "Rights" and, collectively
with the Common Stock, the "Shares"), of Unimed Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), are not immediately available, or if the
procedure for book-entry transfer cannot be complied with on a timely basis, or
all required documents cannot be delivered to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase). This form
may be delivered by hand to the Depositary or transmitted by telegram, facsimile
transmission or mail to the Depositary and must include a guarantee by an
Eligible Institution (as defined in Section 3 of the Offer to Purchase). See
Section 3 of the Offer to Purchase.
The Depositary:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmissions: By Hand/Overnight Delivery:
Wall Street Station (for Eligible Institutions Receive Window
P.O. Box 1023 only) Wall Street Plaza
New York, NY 10268-1023 (212) 701-7636 88 Pine Street, 19th Floor
For Information (call collect): New York, NY 10005
(212) 701-7624
</TABLE>
------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A
VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Utah Acquisition Corporation, a Delaware
corporation, on the terms and subject to the conditions set forth in the Offer
to Purchase, dated June 17, 1999 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together constitute the "Offer"), receipt of which
is hereby acknowledged, the number of Shares set forth below, all pursuant to
the guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase.
<TABLE>
<S> <C>
Number of Shares: Name(s) of Record Holder(s):
- -------------------------------------------------------- -------------------------------------------------
Certificate Nos. -------------------------------------------------
(if available): -------------------------------------------------
- -------------------------------------------------------- Please Print
- -------------------------------------------------------- Address(es):
- -------------------------------------------------------- -------------------------------------------------
(COMPLETE IF SHARES WILL -------------------------------------------------
BE TENDERED BY BOOK-ENTRY TRANSFER): Zip Code
The Depository Trust Daytime Area Code
Company Account Number: and Tel. No.:------------------------------------
---------------------------------------------
Dated: Signature(s):
- ------------------------------------------------------- -------------------------------------------------
-------------------------------------------------
</TABLE>
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, hereby guarantees to deliver to the
Depositary either the certificates representing the Shares tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation (as defined in the Offer
to Purchase) with respect to such Shares, in any such case together with a
properly completed and duly executed Letter of Transmittal, with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase), and any other required documents, within THREE trading days after the
date hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
Name of Firm:
- ------------------------------------------------------------
Address:
- ------------------------------------------------------------
Zip Code
- ------------------------------------------------------------
Area Code and Tel. No.:
- ---------------------------------
- ------------------------------------------------------------
Authorized Signature
Name:
- ------------------------------------------------------------
Please Print
Title:
- ------------------------------------------------------------
Dated:
- ------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER NAME AND IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer Identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the name and
number to give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT GIVE THE NAME AND
SOCIAL SECURITY
NUMBER OF--
- ---------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
5. Sole proprietorship account The owner(3)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
GIVE THE NAME AND
FOR THIS TYPE OF ACCOUNT EMPLOYER
IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------------
6. Sole proprietorship account The owner(3)
7. A valid trust, estate, or pension The legal entity(4)
trust
8. Corporate account The corporation
9. Association, club, religious, The organization
charitable, educational or other
tax-exempt organization account
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
- ---------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your Social Security Number or
Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees specifically exempted from backup withholding
depending upon the type of payment (see below):
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an IRA or a
custodial account under section 403(b) (7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
For interest and dividends, all listed payees are exempt except Item (9). For
broker transactions, payees listed in Items (1) through (13) and a person
registered under the Investment Advisers Act of 1940 who regularly acts as a
broker are exempt.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART I OF THE FORM, AND RETURN IT TO
THE PAYER. If you are a nonresident alien or a foreign entity not subject to
backup withholding, give the payer a completed Form W-8, Certificate of Foreign
Status.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish
your correct taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 1
EXHIBIT 9
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June 11,
1999, among UNIMED PHARMACEUTICALS, INC., a Delaware corporation (the
"Company"), SOLVAY PHARMACEUTICALS, INC., a Georgia corporation ("Purchaser"),
and Utah Acquisition Corporation, a Delaware corporation directly or indirectly
wholly owned by the Purchaser ("Merger Sub"), the Company and Merger Sub
sometimes being hereinafter collectively referred to as the "Constituent
Corporations."
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company each have
determined that it is in the best interests of their respective stockholders for
Purchaser to acquire the Company upon the terms and subject to the conditions
set forth herein; and
WHEREAS, the Company, Purchaser and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein the
parties hereto hereby agree as follows:
ARTICLE I
The Tender Offer
1.1. Tender Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Article IX hereof and none of the events set
forth in Annex A hereto shall have occurred or be existing and the other
conditions to the Offer specified in Annex A shall have been satisfied (such
conditions, together with the nonoccurrence of such events, the "Offer
Conditions"), within five business days after the public announcement by
Purchaser of this Agreement, Purchaser shall cause Merger Sub to commence a
tender offer (the "Offer") for all of the outstanding shares of Common Stock,
par value $.25 per
<PAGE> 2
share, of the Company, including the associated Rights (as defined in Section
6.1(b)) (together, the "Shares") at a price of $12.00 per Share in cash, net to
the seller (but subject to any applicable Tax (as defined in Section 6.1(o))
withholdings) (the "Merger Consideration"), subject only to the Offer
Conditions, and to comply with Rule 14e-1(c) under the Securities Exchange Act
of 1934, as amended (including the rules and regulations thereunder, the
"Exchange Act"). The initial expiration date of the Offer (the "Initial
Expiration Date") shall be the date that is twenty business days from the date
(the "Commencement Date") the Offer Documents (as hereinafter defined) are first
filed with the Securities and Exchange Commission (the "SEC"), including the
Commencement Date as the first business day of such period. Merger Sub shall
not, without the prior written consent of the Company, decrease the price per
Share offered in the Offer, change the form of consideration offered or payable
in the Offer, decrease the number of Shares sought in the Offer, change the
conditions to the Offer in any manner adverse to the holders of Shares, impose
conditions to the Offer in addition to the Offer Conditions, amend any term of
the Offer in any manner adverse to the holders of Shares or waive the Minimum
Condition (as defined in Annex A). Purchaser and Merger Sub expressly reserve
the right, in their sole discretion, to waive any condition (other than the
Minimum Condition, as defined in the Offer Conditions). It is agreed that the
terms and conditions set forth in the Offer, including but not limited to the
Offer Conditions, are for the benefit of Purchaser and Merger Sub and may be
asserted by Purchaser and Merger Sub regardless of the circumstances giving rise
to any such condition.
(b) The Company hereby approves of and consents to the Offer and
represents and warrants that: (i) its Board of Directors, at a meeting duly
called and held on June 4, 1999, has unanimously (A) determined that this
Agreement and the transactions contemplated by this Agreement, including each of
the Offer and the Merger (as defined in Section 2.1), are fair to and in the
best interests of the holders of Shares, (B) approved this Agreement and the
transactions contemplated hereby, including each of the Offer and the Merger,
and (C) resolved to recommend that the stockholders of the Company accept the
Offer, tender their Shares to Merger Sub thereunder and approve this Agreement
and the transactions contemplated hereby; and (ii) Hambrecht & Quist LLC and
Duff & Phelps, LLC (collectively, the "Financial Advisors") have delivered
-2-
<PAGE> 3
to the Board of Directors of the Company their respective written opinions that
the consideration to be received by holders of Shares, other than Purchaser and
Merger Sub, pursuant to each of the Offer and the Merger is fair to such holders
from a financial point of view. The Company hereby consents to the inclusion in
the Offer Documents (as defined in Section 1.1(c)) of the recommendations of the
Company's Board of Directors described herein.
(c) As soon as reasonably practicable on the date the Offer is
commenced, Purchaser shall file a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer with the SEC. The Schedule 14D-1
shall contain an Offer to Purchase and forms of the related letter of
transmittal and other related documents (which Schedule 14D-1, Offer to
Purchase, letter of transmittal and other related documents, together with any
supplements or amendments thereto, are referred to herein collectively as the
"Offer Documents"). The Company's Board of Directors shall recommend acceptance
of the Offer to its stockholders in a Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") to be filed by the Company with the SEC on
the date the Offer is commenced; provided, however, that if the Company's Board
of Directors determines consistent with its fiduciary duties to amend or
withdraw such recommendation, such amendment or withdrawal shall not constitute
a breach of this Agreement. Purchaser agrees, as to the Offer Documents, and the
Company agrees, as to the Schedule 14D-9, that such documents shall, in all
material respects, comply with the requirements of the Exchange Act and other
applicable laws. The Company and its counsel, as to the Offer Documents, and
Purchaser and its counsel, as to the Schedule 14D-9, shall be given an
opportunity to review such documents prior to their being filed with the SEC.
Purchaser, Merger Sub and the Company each agrees promptly to correct any
information provided by it for use in the Offer Documents or the Schedule 14D-9
that shall have become false or misleading in any material respect, and
Purchaser and Merger Sub, on the one hand, and the Company, on the other hand,
further agree to take all steps necessary to cause the Offer Documents and the
Schedule 14D-9, as the case may be, as so corrected to be filed with the SEC and
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws.
(d) In connection with the Offer, the Company will cause its transfer
agent to furnish to Merger Sub,
-3-
<PAGE> 4
promptly following the date of this Agreement, a list, as of a recent date, of
the record holders of Shares and their addresses, as well as mailing labels
containing the names and addresses of all record holders of Shares and lists of
security positions of Shares held in stock depositories. The Company will
furnish Merger Sub with such additional information (including, but not limited
to, updated lists of holders of Shares and their addresses, mailing labels and
lists of security positions) and such other assistance as Purchaser or Merger
Sub or their agents may reasonably request in communicating the Offer to the
record and beneficial holders of Shares.
ARTICLE II
The Merger; Closing; Effective Time
2.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 2.3) Merger Sub shall be
merged with and into the Company and the separate corporate existence of Merger
Sub shall thereupon cease (the "Merger"). The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, except as set forth in Section 3.1. The Merger shall have the
effects specified in the Delaware General Corporation Law (the "DGCL").
2.2. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York at 10:00 a.m. on the first business day on which the last to be fulfilled
or waived of the conditions set forth in Article VIII hereof shall be fulfilled
or waived in accordance with this Agreement, or (ii) at such other place and
time and/or on such other date as the Company and Purchaser may agree.
2.3. Effective Time. As soon as practicable following the Closing, and
provided that this Agreement has not been terminated or abandoned pursuant to
Article IX hereof, the Company and Purchaser will cause a Certificate of Merger
(the "Delaware Certificate of Merger") to be
-4-
<PAGE> 5
executed and filed with the Secretary of State of Delaware as provided in
Section 251 of the DGCL. The Merger shall become effective on the date on which
the Delaware Certificate of Merger has been duly filed with the Secretary of
State of Delaware, and such time is hereinafter referred to as the "Effective
Time."
ARTICLE III
Certificate of Incorporation and Bylaws
of the Surviving Corporation
3.1. The Certificate of Incorporation. The Restated Certificate of
Incorporation of the Company (the "Certificate") in effect at the Effective Time
shall be the certificate of incorporation of the Surviving Corporation, until
duly amended in accordance with the terms thereof and the DGCL, except that the
first sentence of Article Fourth of the Certificate shall be amended to read in
its entirety as follows:
"The aggregate number of shares which the
Corporation shall have the authority to issue is
1,000 shares of Common Stock, par value $.25 per
share."
3.2. The Bylaws. The bylaws of the Company in effect at the Effective
Time shall be the bylaws of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the DGCL.
ARTICLE IV
Officers and Directors
of the Surviving Corporation
4.1. Officers and Directors. The directors of Merger Sub and the
officers of the Company at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's certificate of incorporation and bylaws.
-5-
<PAGE> 6
4.2. Boards of Directors; Committees. If requested by Purchaser, the
Company will, subject to compliance with applicable law and promptly following
the purchase by Merger Sub of such number of Shares pursuant to the Offer as
satisfies the Minimum Condition, take all actions necessary to cause persons
designated by Purchaser to become directors of the Company so that the total
number of such persons equals not less than the product of the total number of
directors on the Board (giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Merger Sub or any affiliate of Merger Sub bears to the
total number of Shares then outstanding. In furtherance thereof, the Company
will increase the size of the Board, or use its reasonable efforts to secure the
resignation of directors, or both, as is necessary to permit Purchaser's
designees to be elected to the Company's Board of Directors; provided that at
all times prior to the Effective Time, the Company's Board of Directors shall
consist of at least two members who are neither officers nor employees of
Purchaser. At such time, the Company, if so requested, will use its reasonable
efforts to cause persons designated by Purchaser to constitute the same
percentage of each committee of such board, each board of directors of each
subsidiary of the Company and each committee of each such board (in each case,
to the extent of the Company's ability to elect such persons). The Company's
obligations to appoint designees to the Board of Directors shall be subject to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The
Company shall promptly take all actions required pursuant to such Section and
Rule in order to fulfill its obligations under this Section 4.2 and shall
include in the Schedule 14D-9, or in a separate Rule 14f-1 information statement
provided to stockholders, such information with respect to the Company and its
officers and directors as is required under Section 14(f) and Rule 14f-1 to
fulfill its obligations under this Section 4.2. Purchaser and Merger Sub will
supply to the Company and will be solely responsible for any information with
respect to either of them and their nominees, officers, directors and affiliates
required by Section 14(f) and Rule 14f-1.
4.3. Actions by Directors. Notwithstanding anything in this Agreement
to the contrary, in the event that Purchaser's designees are elected to the
Board of Directors of the Company after the acceptance for payment of Shares
pursuant to the Offer and prior to the Effective
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Time, the affirmative vote of at least a majority of the directors of the
Company who are neither officers nor employees of Purchaser shall be required to
(a) amend or terminate this Agreement by the Company, (b) exercise or waive any
of the Company's rights, benefits or remedies hereunder, (c) extend the time for
performance of Purchaser's and Merger Sub's respective obligations hereunder, or
(d) take any other action by the Company's Board of Directors under or in
connection with this Agreement that would adversely affect the ability of the
stockholders of the Company to receive the Merger Consideration.
ARTICLE V
Conversion or Cancellation of Shares in the Merger
5.1. Conversion or Cancellation of Shares. The manner of converting or
canceling shares of the Company and Merger Sub in the Merger shall be as
follows:
(a) At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Purchaser,
Merger Sub or any other direct or indirect subsidiary of Purchaser
(collectively, the "Purchaser Companies") or Shares that are held by stock-
holders ("Dissenting Stockholders") exercising appraisal rights pursuant to
Section 262 of the DGCL) (collectively, "Excluded Shares") shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive, without interest, the Merger Consideration,
or such greater amount per Share as may be paid pursuant to the Offer. At the
Effective Time, all Shares, by virtue of the Merger and without any action on
the part of the holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
formerly representing any such Shares (other than Excluded Shares) shall
thereafter cease to have any rights with respect to such Shares, except the
right to receive the Merger Consideration for such Shares upon the surrender of
such certificate in accordance with Section 5.2 or the right, if any, to receive
payment from the Surviving Corporation of the "fair value" of such Shares as
determined in accordance with Section 262 of the DGCL.
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<PAGE> 8
(b) At the Effective Time, each Share issued and outstanding at the
Effective Time and owned by any of the Purchaser Companies, and each Share
issued and held in the Company's treasury at the Effective Time, shall, by
virtue of the Merger and without any action on the part of the holder thereof,
cease to be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(c) At the Effective Time, each share of Common Stock, par value $.25
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Merger Sub or the holders of such shares, be converted into one share of
common stock of the Surviving Corporation.
5.2. Payment for Shares. Immediately prior to the Effective Time,
Purchaser shall provide or cause to be provided to the paying agent appointed by
Purchaser within 21 calendar days following the date of this Agreement with the
Company's prior approval, which approval shall not be unreasonably withheld or
delayed (the "Paying Agent"), for the benefit of the holders of Shares, amounts
in cash sufficient in the aggregate to provide all funds necessary for the
Paying Agent to make payments pursuant to Section 5.1(a) hereof (such cash being
referred to as the "Exchange Fund") to holders of Shares (other than Excluded
Shares) issued and outstanding immediately prior to the Effective Time. Promptly
after the Effective Time, the Surviving Corporation shall cause to be mailed to
each person who was, at the Effective Time, a holder of record (other than any
of the Purchaser Companies) of Shares a form of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any of such Shares in
exchange for payment therefor. Upon surrender to the Paying Agent of such
certificates, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the Surviving Corporation
shall promptly cause to be paid to the persons entitled thereto a check in an
amount equal to (after giving effect to any required tax withholdings) the
Merger Consideration multiplied by the number of Shares formerly represented by
such certificate. No interest will be paid or will accrue on the amount payable
upon the surrender of any such certificate. If payment is to be made to a person
other than the registered holder of the certificate surrendered,
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<PAGE> 9
it shall be a condition of such payment that the certificate so surrendered
shall be properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
certificate surrendered or establish to the satisfaction of the Surviving
Corporation or the Paying Agent that such tax has been paid or is not
applicable. Following the ninetieth calendar day following the Effective Time,
the Surviving Corporation shall be entitled to cause the Paying Agent to deliver
to it any portion of the Exchange Fund (including any interest received with
respect thereto) provided to the Paying Agent that has not been disbursed to
holders of certificates formerly representing Shares outstanding on the
Effective Time, and thereafter such holders shall be entitled to look to the
Surviving Corporation only as general creditors thereof for payment of the
Merger Consideration payable upon due surrender of their certificates.
Notwithstanding the foregoing, neither the Paying Agent nor any party hereto
shall be liable to any holder of certificates formerly representing Shares for
any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law. The Surviving Corporation shall pay all
charges and expenses, including those of the Paying Agent, in connection with
the exchange of cash for Shares and Purchaser shall reimburse the Surviving
Corporation for such charges and expenses.
5.3. Dissenters' Rights. Shares that immediately prior to the Effective
Time are held by Dissenting Stockholders who have properly exercised and
perfected appraisal rights under Section 262 of the DGCL (the "Dissenting
Shares") shall, if required by the DGCL, but only to the extent required
thereby, not be converted into the right to receive the Merger Consideration,
but such Dissenting Stockholders shall be entitled to receive such consideration
as shall be determined pursuant to Section 262 of the DGCL; provided, however,
that if any such Dissenting Stockholder shall have failed to perfect or shall
withdraw or lose his right to appraisal and payment under the DGCL, such
Dissenting Stockholder's Shares shall thereupon be deemed to have been converted
as of the Effective Time into the right to receive the Merger Consideration,
without any interest thereon, and such shares shall no longer be Dissenting
Shares. The Company shall give the Purchaser, Merger Sub and the Paying Agent
prompt notice of any claim by a Dissenting Stockholder for payment of fair value
for
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<PAGE> 10
Dissenting Shares as provided in Section 262 of the DGCL and shall permit
Purchaser to participate in all negotiations and proceedings with respect to any
such claims. Prior to the Effective Time, the Company will not, except with the
prior written consent of Purchaser and Merger Sub, make any payments with
respect to, or settle or offer to settle, any such demands.
5.4. Transfer of Shares After the Effective Time. No transfers of
Shares shall be made on the stock transfer books of the Company at or after the
Effective Time. From and after the Effective Time, the holders of certificates
evidencing ownership of Shares outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares except as
otherwise provided for herein or by applicable law.
5.5. Adjustments to Prevent Dilution. In the event that on or after the
date hereof and prior to the Effective Time the Company changes the number of
Shares or securities convertible or exchangeable into or exercisable for Shares,
then the Merger Consideration shall be proportionately adjusted.
5.6. Treatment of Warrants. The Warrants (as such term is defined in
Section 6.1(b)) shall be treated as set forth in Section 7.11.
ARTICLE VI
Representations and Warranties
6.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser and Merger Sub that:
(a) Corporate Organization and Qualification. Each of the Company and
its subsidiaries (as defined in Section 10.11) is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of organization, has all requisite corporate or similar power and
authority to carry on its business as presently conducted and is in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification, except for any
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<PAGE> 11
failure to be so organized, existing, in good standing or to have such power and
authority that, when taken together with all such other failures, is not
reasonably likely to impair the Company's or any such subsidiary's ability to
conduct its business substantially as heretofore conducted. The Company has made
available to Purchaser a complete and correct copy of the Certificate and the
Company's bylaws, each as currently in effect. The Certificate and bylaws so
delivered are in full force and effect. Except as set forth in Schedule 6.1(a),
the Company, directly or indirectly, has not previously had, does not currently
have, and prior to the Effective Time will not have, any subsidiaries and has
not previously owned, does not currently own, and prior to the Effective Time
will not own, an equity or other interest in any other person or entity. Except
as described in Schedule 6.1(a), neither the Company nor any of its subsidiaries
has any offices, owns or leases any property or conducts, directly or
indirectly, any business or operations outside the United States of America.
(b) Authorized Capital. The authorized capital stock of the Company
consists of 30,000,000 Shares, of which 9,191,538 Shares were outstanding on the
date of this Agreement. All of the outstanding Shares have been duly authorized
and are validly issued, fully paid and nonassessable. The Company has no shares
of capital stock reserved for issuance or subject to issuance, except that
1,100,144 Shares are reserved for issuance pursuant to the Company's 1991 Stock
Option Plan, as amended, and 358,500 Shares are reserved for issuance pursuant
to the Company's 1998 Long-Term Incentive Plan (together, the "Stock Plans"),
200,000 Shares are reserved for issuance pursuant to a letter agreement, dated
August 7, 1992, between the Company and Dr. John N. Kapoor, 72,550 Shares are
reserved for issuance pursuant to the Stock and Warrant Agreement, dated as of
August 11, 1995, between the Company and Laboratories Besins Iscovesco, S.A. and
the related Warrant, and 140,000 Shares are reserved for issuance pursuant to
the Share Purchase Warrant granted by the Company to Sunrise Securities Corp.,
dated as of February 29, 1996 (the warrants granted pursuant to such warrant
agreements being collectively referred to as the "Warrants"), and certain Shares
are reserved for issuance solely upon exercise of the rights (the "Rights")
pursuant to the Rights Agreement, dated as of June 16, 1997, between the Company
and Harris Trust and Savings Bank, as Rights Agent (the "Rights Agreement").
Each of the outstanding shares of capital stock of each of the Company's
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<PAGE> 12
subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and owned, either directly or indirectly, by the Company free and clear of all
liens, pledges, security interests, claims or other encumbrances. Except as set
forth above, there are no shares of capital stock of the Company authorized,
issued or outstanding and except as set forth above or in Schedule 6.1(b), there
are no preemptive rights nor any outstanding subscriptions, options, warrants,
rights, convertible securities or other agreements or commitments of any
character relating to the issued or unissued capital stock or other securities
of the Company or any of its subsidiaries. Immediately prior to the consummation
of each of the Offer and the Merger, no Shares or any other securities of the
Company will be subject to issuance pursuant to the Rights Agreement and neither
Purchaser nor Merger Sub will be deemed an Acquiring Person (as such term is
defined in the Rights Agreement) as a result of any of the transactions
contemplated by this Agreement, no Distribution Date, Stock Acquisition Date,
Triggering Event, Section 11(a)(ii) Event or Section 13 Event (as such terms are
defined in the Rights Agreement) shall have occurred as a result of any of the
transactions contemplated by this Agreement and, at or after the Effective Time,
neither the Surviving Corporation, Merger Sub nor the Purchaser will have any
obligation to issue, transfer or sell any Shares or common stock of the
Surviving Corporation or the Purchaser pursuant to any Compensation and Benefit
Plan referred to in Section 6.1(i).
(c) Corporate Authority. Subject only to approval of this Agreement by
the holders of a majority of the outstanding Shares, the Company has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is a valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights or to general equity principles.
(d) Governmental Filings; No Violations. (i) Other than the filings
required pursuant to Section 2.3, filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") and filings required under
the Exchange Act (collectively, the
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<PAGE> 13
"Regulatory Approvals"), no notices, reports or other filings are required to be
made by the Company or any of its subsidiaries with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
the Company or any of its subsidiaries from, any governmental or regulatory
authority, agency, commission or other entity, domestic or foreign
("Governmental Entity"), in connection with the execution and delivery of this
Agreement by the Company and the consummation of the transactions contemplated
hereby, the failure to make or obtain any or all of which is reasonably likely
to have a material adverse effect on the business, properties, results of
operations or financial condition of the Company and its subsidiaries, taken as
a whole (any such material adverse effect, a "Material Adverse Effect"), or is
reasonably likely to prevent, materially delay or materially burden the
transactions contemplated by this Agreement or impair the ability of Purchaser,
Merger Sub, the Company or any of their respective affiliates, following
consummation of the Offer or the Merger, to conduct any material business or
operations in any jurisdiction where they are now being conducted.
(ii) Except as set forth in Schedule 6.1(d)(ii), the execution and
delivery of this Agreement by the Company do not, and the consummation by the
Company of the transactions contemplated by this Agreement will not, constitute
or result in (A) a breach or violation of, or a default under, the Certificate
or the Company's bylaws, (B) a breach or violation of, a default under or the
triggering of any payment or other material obligations pursuant to, any of the
Company's existing Compensation and Benefit Plans (as defined in Section 6.1(i))
or any grant or award made under any of the foregoing, (C) a breach or violation
of, a default under, the acceleration of or the creation of a lien, pledge,
security interest or other encumbrance on assets (with or without the giving of
notice or the lapse of time) pursuant to, any provision of any agreement, lease,
permit, contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") of the Company or any of its subsidiaries or any law, rule,
ordinance or regulation or judgment, decree, order, award or governmental or
non-governmental permit or license to which the Company or any of its
subsidiaries is subject or (D) any change in the rights or obligations of any
party under any of the Contracts, except, in the case of clause (C) or (D)
above, for such breaches, violations, defaults, accelerations or
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<PAGE> 14
changes that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect and are not reasonably likely to prevent,
materially delay or materially burden the transactions contemplated by this
Agreement or impair the ability of Purchaser, Merger Sub, the Company or any of
their respective affiliates, following consummation of the Offer or the Merger,
to conduct any material business or operations in any jurisdiction where they
are now being conducted. Schedule 6.1(d)(ii) sets forth a list of each consent
required to be obtained prior to consummation of the transactions contemplated
by this Agreement pursuant to any material Contract of the Company or any of its
subsidiaries (whether or not subject to the exception set forth with respect to
clause (C) above). The Company will use its best efforts to obtain the consents
referred to in Schedule 6.1(d)(ii).
(iii) Except as set forth in Schedule 6.1(d)(iii), there are no
Contracts, arrangements or understandings between the Company or any subsidiary
of the Company, on the one hand, and any director, officer, affiliate of the
Company, subsidiary of the Company or any of their respective family members or
affiliates, on the other hand.
(e) Company Reports; Financial Statements. The Company has made all
filings required to be made with the SEC since January 1, 1995 (collectively,
including any such reports filed subsequent to the date hereof, the "Company
Reports") and the Company has delivered to Purchaser each registration
statement, schedule, report, proxy statement or information statement prepared
by it since December 31, 1998 (the "Audit Date"), including, without limitation,
(i) the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, (ii) the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1999, (iii) a Current Report on Form 8-K dated February 19, 1999, (iv)
a definitive proxy statement on Schedule 14A dated April 2, 1999 and (v) a
Registration Statement on Form S-8 dated June 1, 1999, each in the form
(including exhibits and any amendments thereto) filed with the SEC. As of their
respective dates, the Company Reports did not, and any Company Reports filed
with the SEC subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Each of the consolidated
balance sheets included
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<PAGE> 15
in or incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents, in all material respects, the consolidated
financial position of the Company and its subsidiaries as of its date and each
of the consolidated statements of operations, stockholders' equity, and cash
flows and of changes in financial position included in or incorporated by
reference into the Company Reports (including any related notes and schedules)
fairly presents, in all material respects, the results of operations, retained
earnings, stockholders' equity, cash flows and changes in financial position, as
the case may be, of the Company and its subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to the absence of notes
and normal year-end audit adjustments, which will not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
may be noted therein. Other than the Company Reports specifically recited above,
the Company has not, on or prior to the date hereof, filed any other definitive
reports or statements with the SEC since the Audit Date. The Company will, as
promptly as is practicable, provide Purchaser with current draft versions of any
filings to be made by the Company subsequent to the date hereof pursuant to the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
the Exchange Act, including any documents incorporated therein by reference,
promptly after preparation of such draft.
(f) Assets. Except as set forth in Schedule 6.1(f), and with such
exceptions as, individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect, each of the Company and its
subsidiaries has good and valid title to, or a valid lease interest or right to
use, all tangible and intangible property and assets used by it in the conduct
of its business (the "Assets"), in each case free and clear of all mortgages,
liens, security interests, charges, easements, leases, subleases, covenants,
rights of way, options, restrictions or encumbrances of any kind and there has
not previously been, does not currently exist, and prior or subsequent to the
Effective Time will not be, any impairment of any kind with respect to the
continued use and operation of the Assets in the conduct of the business of the
Company and its subsidiaries as presently conducted.
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<PAGE> 16
(g) Absence of Certain Changes. Except as disclosed in the Company
Reports filed with the SEC prior to the date hereof, since the Audit Date, the
Company and its subsidiaries have conducted their respective businesses only in,
and have not engaged in any material transaction other than according to, the
ordinary and usual course of such businesses and there has not been (i) any
material adverse change in the business, properties, results of operations or
financial condition of the Company and its subsidiaries, taken as a whole, or
any development or combination of developments that is reasonably likely to
result in any such change; (ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to the capital stock of the Company
or any of its subsidiaries; (iii) any change by the Company in accounting
principles, practices or methods that is not required by GAAP; or (iv) any
amendment, interpretation or announcement (whether or not written) relating to
any Compensation and Benefit Plan (as defined in Section 6.1(i)), or any change
in participation or coverage thereunder that would increase materially the
expense of maintaining such plan above the level of expense incurred in respect
thereof for the twelve months ended on the Audit Date. Since the Audit Date,
except as provided for herein or as disclosed in Schedule 6.1(g) or the Company
Reports filed with the SEC prior to the date hereof and other than in the
ordinary course, there has not been any increase in the compensation payable or
that could become payable by the Company or any of its subsidiaries to their
respective officers or employees, or any amendment of any Compensation and
Benefit Plans (as defined in Section 6.1 (i)). Since April 29, 1999, neither the
Company nor any of its subsidiaries has issued to any director, officer or
employee of the Company or any of its subsidiaries any options, warrants, rights
or convertible securities relating to the issued or unissued capital stock of
the Company.
(h) Litigation and Liabilities. Except as set forth in Schedule 6.1(h),
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings pending or, to the knowledge of the
Company's chief executive officer and the executive officers of the Company who
report, directly or indirectly, to the Company's chief executive officer (such
chief executive officer and such executive officers collectively, the "Executive
Officers"), threatened against the Company or any of its subsidiaries
(including, but not limited to,
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<PAGE> 17
actions, suits, claims, hearings, investigations or proceedings relating to
defects or alleged defects in the formulation or manufacture of products
manufactured, distributed or sold by the Company or any of its subsidiaries) or
(ii) except as set forth in the financial statements included in or incorporated
by reference into the Company Reports filed prior to the date hereof (including
the notes thereto), obligations or liabilities, whether or not accrued,
contingent or otherwise, including, without limitation, those relating to
matters involving any Environmental Law (as defined in Section 6.1(n)), or any
other facts or circumstances of which the Executive Officers are aware that
could result in any claims against or obligations or liabilities of the Company
or any of its subsidiaries (including, but not limited to, obligations or
liabilities relating to defects or alleged defects in the formulation or
manufacture of products manufactured, distributed or sold by the Company), that,
individually or in the aggregate, in the case of clause (i) or (ii) above, are
reasonably likely to have a Material Adverse Effect.
(i) Employee Benefits.
(i) Schedule 6.1(i)(i) sets forth all incentive, bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option and
other stock based plans, all employment or severance agreements, plans, policies
or arrangements, other employee benefit plans and any applicable "change of
control" or similar provisions in any plan, agreement, policy or arrangement
that covers current or former employees, officers or directors of the Company
and its subsidiaries (the "Compensation and Benefit Plans"). The Compensation
and Benefit Plans and all other benefit plans, agreements, policies or
arrangements covering current or former employees, officers or directors of the
Company and its subsidiaries (the "Employees"), including, but not limited to,
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), are listed in
Schedule 6.1(i)(i). True and complete copies of all Compensation and Benefit
Plans and such other benefit plans, agreements, policies or arrangements,
including, but not limited to, any trust instruments and/or insurance contracts,
if any, forming a part of any such plans and
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<PAGE> 18
agreements, and all amendments thereto have been provided or made available to
Purchaser.
(ii) All employee benefit plans, other than "multiemployer plans"
within the meaning of Sections 3(37) of ERISA, covering Employees and maintained
in the United States (the "Plans"), to the extent subject to ERISA, are in
substantial compliance with ERISA. Each Plan that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") and
that is intended to be qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), has received a favorable determination
letter from the Internal Revenue Service, and the Company is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter. There is no material pending or, to the knowledge of the Executive
Officers, threatened, litigation relating to the Plans. Neither the Company nor
any of its subsidiaries has engaged in a transaction with respect to any Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, could subject the Company or any of its subsidiaries to a tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an
amount which would be material.
(iii) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by the Company or any of its subsidiaries with
respect to any ongoing, frozen or terminated "single-employer plan", within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
of them, or the single-employer plan of any entity that is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the Code
(an "ERISA Affiliate"). The Company and its subsidiaries have not incurred and
do not expect to incur any withdrawal liability with respect to a multiemployer
plan under Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate). No notice of a "reportable event", within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any Pension Plan or by
any ERISA Affiliate within the 12-month period ending on the date hereof.
(iv) All contributions required to be made under the terms of any Plan
have been timely made or accrued on
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the Company's financial statements. Neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding
waiver. Neither the Company nor any of its subsidiaries has provided or is
required to provide security to any Pension Plan or to any single-employer plan
of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Under each Pension Plan that is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Plan, and there has
been no material change in the financial condition of such Plan since the last
day of the most recent plan year. The withdrawal liability of the Company and
its subsidiaries under each Compensation and Benefit Plan that is a
multiemployer plan to which the Company, its subsidiaries or an ERISA Affiliate
has contributed during the preceding 12 months, determined as if a "complete
withdrawal", within the meaning of Section 4203 of ERISA, had occurred as of the
date hereof, does not exceed $100,000.
(vi) Except as set forth in Schedule 6.1(i)(vi), neither the Company
nor any of its subsidiaries has any obligations for retiree health and life
benefits under any Plan. Except as set forth in Schedule 6.1(i)(vi), the Company
may amend or terminate any such Plan at any time without incurring any liability
thereunder.
(vii) Except as set forth in Schedule 6.1(i)(vii), the consummation of
the transactions contemplated by this Agreement will not (x) entitle any
Employees to severance pay, (y) accelerate the time of payment or vesting or
trigger any payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Compensation and Benefit Plans or
(z) result in payments under any of the Plans that would not be deductible under
Section 162(m) or Section 280G of the Code.
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(j) Compliance. Except as set forth in Schedule 6.1(j), neither the
Company nor any of its subsidiaries is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which its or any of
their respective properties is bound or affected, or (ii) any Contract to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or its or any of their respective properties is bound or
affected, except for any such conflicts, defaults or violations that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect and are not reasonably likely to prevent, materially delay or
materially burden the transactions contemplated by this Agreement or impair the
ability of Purchaser, Merger Sub, the Company or any of their respective
affiliates, following consummation of the Offer or the Merger, to conduct any
material business or operations in any jurisdiction where they are now being
conducted.
(k) Brokers and Finders. None of the Company, any of its subsidiaries,
or any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated herein, except
that the Company has employed the Financial Advisors as its financial advisors,
the arrangements with which have been disclosed in writing to Purchaser prior to
the date hereof.
(l) Other Actions. The Company has taken all necessary action to
provide that the execution of this Agreement and the consummation of the
transactions contemplated hereby will not cause (i) Merger Sub and/or the
Purchaser to become an Acquiring Person (as defined in the Rights Agreement) or
(ii) a Distribution Date, a Stock Acquisition Date, a Triggering Event, a
Section 11(a)(ii) Event or a Section 13 Event (as such terms are defined in the
Rights Agreement) to occur irrespective of the number of Shares acquired
pursuant to the Offer.
(m) Takeover Statutes. The Board of Directors of the Company has taken
all necessary action to approve the transactions contemplated by this Agreement
such that the restrictions under Section 203 of the DGCL shall not apply to such
transactions. No other "fair price", "moratorium",
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"control share acquisition" or other similar antitakeover statute or regulation
(each a "Takeover Statute") is applicable to the Company, the Shares, the Offer,
the Merger or the transactions contemplated thereby or hereby.
(n) Environmental Matters. Except as disclosed in the Company Reports
filed with the SEC prior to the date hereof or as would not be, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect: (i) the
Company and its subsidiaries have complied at all times with all applicable
Environmental Laws; (ii) to the knowledge of the Executive Officers, no property
currently or formerly owned or operated by the Company or any of its
subsidiaries (including soils, groundwater, surface water, buildings or other
structures) has been contaminated with any Hazardous Substance; (iii) neither
the Company nor any of its subsidiaries is subject to any liability for
Hazardous Substance disposal or contamination on any third party property; (iv)
neither the Company nor any of its subsidiaries is subject to liability for any
release or threat of release of any Hazardous Substance; (v) neither the Company
nor any of its subsidiaries has received any notice, demand, letter, claim or
request for information alleging that it may be in violation of or subject to
liability under any Environmental Law; (vi) neither the Company nor any of its
subsidiaries is subject to any order, decree, injunction or other arrangement
with any Governmental Entity or any indemnity or other agreement with any third
party relating to liability under any Environmental Law; (vii) to the knowledge
of the Executive Officers, none of the properties of the Company or any of its
subsidiaries contain any underground storage tanks, asbestos-containing
material, lead products, or polychlorinated biphenyls; (viii) there are no other
circumstances or conditions involving the Company or any of its subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of any
property in connection with any Environmental Law; and (ix) the Company has
delivered to Purchaser copies of all environmental reports, studies,
assessments, sampling data and other environmental information in its possession
relating to the Company or any of its subsidiaries or any of their current or
former properties or operations.
"Environmental Law" means any federal, state or local law, regulation,
order, decree, permit, authorization,
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common law or agency requirement relating to: (A) the protection, investigation
or restoration of the environment, health, safety, or natural resources, (B) the
handling, use, presence, disposal, release or threatened release of any
hazardous, toxic or harmful substance, pollutant, contaminant, waste or
petroleum compound or (C) noise, odor, indoor air, employee exposure, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property relating to any hazardous, toxic or harmful substance, pollutant,
contaminant, waste or petroleum compound. "Hazardous Substance" means any
substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which may be the
subject of regulatory action by any Governmental Entity in connection with any
Environmental Law.
(o) Tax Matters. The Company and each of its subsidiaries, and any
consolidated, combined or unitary group for tax purposes of which the Company or
any of its subsidiaries is or has been a member, has timely filed (giving effect
to any extensions) all Tax Returns required to be filed by it in the manner
provided by law. All such Tax Returns are true, correct and complete in all
material respects. The Company and each of its subsidiaries have paid all Taxes
due or required to be withheld from amounts owing to any employee, creditor or
third party or have provided adequate reserves in their financial statements for
any Taxes that have not been paid, whether or not shown as being due on any
returns. Except as has been disclosed to Purchaser in Schedule 6.1(o): (i) no
material claim for unpaid Taxes has become a lien or encumbrance of any kind
against the property of the Company or any of its subsidiaries or is being
asserted against the Company or any of its subsidiaries; (ii) no audit,
examination, investigation or other proceeding in respect of Taxes is pending
or, to the knowledge of the Executive Officers, threatened or being conducted by
a Tax authority; (iii) all United States federal income and employment Tax
Returns of the Company or any of its subsidiaries have been examined by the
Internal Revenue Service and no material issues have been raised by the relevant
Tax authority in connection with any examination of the Tax Returns filed by the
Company or any of its subsidiaries; (iv) no extension or waiver of the statute
of limitations on the assessment of any Taxes has
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<PAGE> 23
been granted by the Company or any of its subsidiaries and is currently in
effect; (v) neither the Company nor any of its subsidiaries is a party to, is
bound by, or has any obligation under, or potential liability with regards to,
any Tax sharing agreement, Tax indemnification agreement or similar contract or
arrangement; (vi) no power of attorney has been granted by or with respect to
the Company or any of its subsidiaries with respect to any matter relating to
Taxes; (vii) neither the Company nor any of its subsidiaries is a party to any
agreement, plan, contract or arrangement that would result, individually or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code; (viii) neither the Company nor any of its
subsidiaries has any deferred intercompany gain or loss arising as a result of a
deferred intercompany transaction within the meaning of Treasury Regulation
Section 1.1502-13 (or similar provision under state, local or foreign law) or
any excess loss accounts within the meaning of Treasury Regulation Section
1.1502-19; and (ix) the Company is not and has not been a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(ii) of the Code. As
used herein, "Taxes" shall mean any taxes of any kind, including but not limited
to those on or measured by or referred to as income, gross receipts, capital,
sales, use, ad valorem, franchise, profits, license, withholding, premium, value
added, property or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any
Governmental Entity. As used herein, "Tax Return" shall mean any return, report
or statement required to be filed with any Governmental Entity with respect to
Taxes.
(p) Certain Regulatory Matters. (i) Schedule 6.1(p) excludes items
relating to the product known as Cryptaz (nitazoxanide) but otherwise sets forth
a complete and accurate list for the last five years, of (A) all Regulatory
Letters (as defined below), Notices of Adverse Findings, Section 305 notices and
similar letters or notices issued by the Food and Drug Administration (the
"FDA") or any other Governmental Entity that is concerned with the safety,
efficacy, reliability, quality, identity, strength or purity or storage,
labelling, packaging or manufacturing of the pharmaceutical products sold or
developed by the Company or its subsidiaries (any such Governmental Entity, a
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"Pharmaceutical Regulatory Agency") to the Company or any of its subsidiaries;
(B) all United States Pharmacopoeia product problem reporting program complaints
or reports, MedWatch form FDA-3500A, form FDA-1639 or form CIOMS I filed by the
Company or any of its subsidiaries, which complaints or reports pertain to any
incident involving death or serious injury, and for which incident there has
been (I) a notice or follow-up inquiry to the Company or any of its subsidiaries
by the FDA, (II) a litigation or arbitration claim or cause of action commenced,
or (III) a notice to any insurance carrier of the Company or any of its
subsidiaries tendering the defense or giving any notice of a possible or actual
claim against the Company or any such subsidiary; (C) all product recalls and
safety alerts conducted by or issued to the Company or any of its subsidiaries
and any requests from the FDA or any other Pharmaceutical Regulatory Agency
requesting the Company or any of its subsidiaries to cease to investigate, test,
develop or market any product; (D) any civil penalty actions begun by the FDA or
any other Pharmaceutical Regulatory Agency against the Company or any of its
subsidiaries and all consent decrees and all documents relating to the
negotiation of and compliance with such consent decree issued with respect to
the Company or any of its subsidiaries; and (E) any other written communications
between the Company or any of its subsidiaries, on the one hand, and the FDA or
any other Pharmaceutical Regulatory Agency, on the other hand, that describe
matters that, individually or in the aggregate, are reasonably likely to have a
material adverse effect on the sales or revenues attributable to, or the
development of, any product or product line of the Company or any of its
subsidiaries, or discuss material issues concerning the quality, identity,
strength, purity, reliability, safety or efficacy of any such product or product
line. The Company has made available to Purchaser copies of all documents
referred to in Schedule 6.1(p) as well as copies of all complaints and other
information required to be maintained by the Company pursuant to the United
States Food, Drug and Cosmetic Act, Prescription Drug Marketing Act and
Comprehensive Drug Abuse Prevention and Control Act of 1970. For purposes of
this subparagraph (i), "Regulatory Letter" means a letter characterized by the
FDA as a warning letter, a notice of adverse finding or a similar letter or
report in which the FDA or any other Pharmaceutical Regulatory Agency expresses
the opinion that violations of law have occurred. To the knowledge of the
Executive Officers, there are no preclinical, clinical or other information with
respect to
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products the Company or any of its subsidiaries owns, markets or is developing
that suggests any quality, identity, stability, toxicity, strength, purity,
reliability, safety, efficacy or data integrity concerns that are reasonably
likely, individually or in the aggregate, to have a material adverse effect upon
the Company's or any subsidiary's right or ability to own, market or develop any
such product.
(ii) Except to the extent that such items are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect and are not
reasonably likely to result in the entry or filing of any material injunction or
criminal action or proceeding against or involving the Company or any of its
subsidiaries and would not require that officers of the Company, any of its
subsidiaries or Purchaser be added as a named individual party to the consent
decree to which the Company or any of its subsidiaries is presently subject: (A)
each of the Company, any of its subsidiaries and each Contract Manufacturer (as
defined below) has obtained all consents, approvals, certifications,
authorizations and permits of, and has made all filings with, or notifications
to, all Pharmaceutical Regulatory Agencies pursuant to applicable requirements
of all FDA rules, regulations and consent decrees, and all applicable state and
foreign laws, rules and regulations applicable to the Company or any of its
subsidiaries or any Contract Manufacturer; (B) all representations made by the
Company or any of its subsidiaries in connection with any such consents,
approvals, certifications, authorizations, permits, filings and notifications
were true and correct in all material respects at the time such representations
and warranties were made, and the Company's products and the products of the
Company's subsidiaries, comply with, and perform in accordance with the
specifications described in, such representations; (C) the Company and the
Company's subsidiaries and their respective products and all of the facilities
and entities that evaluate, test, process, develop or manufacture such products,
including, but not limited to, any third party hired by the Company or any of
its subsidiaries to manufacture, evaluate, test, develop, process, package or
store any of the Company's products or products of any of the Company's
subsidiaries (each a "Contract Manufacturer"), are in compliance with all
applicable FDA rules, regulations and consent decrees, and all applicable state
and foreign laws, rules and regulations (including Good Laboratory Practices,
Good Clinical
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Practices and Current Good Manufacturing Practices) relating to pharmaceutical
laboratories, clinical studies, manufacturers and distributors or otherwise
applicable to the Company's or the Company's subsidiaries' businesses; (D) the
Company has no reason to believe that any of the consents, approvals,
authorizations, registrations, certifications, permits, filings or notifications
that it or any of its subsidiaries or any Contract Manufacturer has received or
made to operate their respective businesses have been or are being revoked or
challenged; and (E) there are no investigations or inquiries pending or
threatened relating to the Company's or any of the Company's subsidiaries' or
any Contract Manufacturer's businesses or operations or the Company's or any of
the Company's subsidiaries' or any Contract Manufacturer's compliance with
applicable laws and regulations relating to its businesses or operations and the
Executive Officers are not aware of any facts or conditions likely to result in
such investigations or inquiries.
(q) Intellectual Property.
(i) The Company and/or each of its subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents, trademarks,
technology, and know-how, each of which is listed in Schedule 6.1(q)(i), and
tangible and intangible proprietary information or materials that are used or
held for use in the business of the Company or any of its subsidiaries as
currently conducted, and all patents and trademarks held and used in the
business currently conducted by the Company or any of its subsidiaries are valid
and subsisting.
(ii) With such exceptions as, individually or in the aggregate, have
not had and are not reasonably likely to have a Material Adverse Effect, the
Company and/or each of its subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use all trade names, service marks,
copyrights (and applications therefor), computer software and applications, each
of which is listed in Schedule 6.1(q)(ii), and all trade names, service marks
and copyrights held and used in the business currently conducted by the Company
or any of its subsidiaries are valid and subsisting.
(iii) Neither the Company nor any of its subsidiaries is, nor will the
Company or any of its
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subsidiaries be as a result of the execution, delivery or performance of this
Agreement by the Company or the Purchaser, in violation of any licenses,
sublicenses and other agreements as to which the Company or any of its
subsidiaries is a party and pursuant to which the Company or any of its
subsidiaries is authorized to use any third-party patents, trademarks, service
marks or copyrights ("Third-Party Intellectual Property Rights").
(iv) No claims with respect to (A) the patents, registered and material
unregistered trademarks and service marks, registered copyrights, trademarks,
trade names, and any applications therefor owned by the Company or any of its
subsidiaries (the "Company Intellectual Property Rights"); (B) any trade secret
material to the Company or any of its subsidiaries; or (C) Third-Party
Intellectual Property Rights are currently pending or, to the knowledge of the
Executive Officers, threatened by any person or entity.
(v) The Executive Officers do not know of any valid grounds for any
bona fide claims (A) to the effect that the use, sale or licensing of any
product as now used, sold or licensed or proposed for use, sale or license by
the Company or any of its subsidiaries infringes on any copyright, patent,
trademark, service mark or trade secret; (B) against the use by the Company or
any of its subsidiaries of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs and
applications used in the business of the Company or any of its subsidiaries as
currently conducted or as proposed to be conducted; (C) challenging the
ownership, priority, scope, validity or effectiveness of any of the Company
Intellectual Property Rights or other trade secret material to the Company or
any of its subsidiaries; or (D) challenging the license or legally enforceable
right to use of the Third-Party Intellectual Rights by the Company or any of its
subsidiaries.
(vi) To the knowledge of the Executive Officers, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any of its subsidiaries.
(vii) The Company and its subsidiaries have taken reasonable measures
to maintain the confidentiality of the processes and formulae, research and
development results and
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other know-how of the Company and its subsidiaries, the value of which to the
Company and its subsidiaries is contingent upon maintenance of the
confidentiality thereof.
(viii) The Company and/or each of its subsidiaries has filed for, and,
through the Effective Time, will continue to file for, any extensions on its
Company Intellectual Property Rights, including, but not limited to, any patent
term extensions under the Drug Price Competition and Patent Term Restoration Act
of 1984, the Generic Animal Drug and Patent Term Restoration Act of 1984 or 35
U.S.C. Section 154.
(ix) All application and registration fees on any Company Intellectual
Property, including any maintenance fees, are fully paid and current.
(r) Year 2000 Compliance. Other than the actions summarized in Schedule
6.1(r), which actions remain to be taken by the Company and its subsidiaries as
of the date of this Agreement, the Company and its subsidiaries have taken all
action reasonably necessary to ensure that all computer systems used by the
Company and its subsidiaries recognize, record, store, process and present
calendar dates falling on or after January 1, 2000 and that the operation and
functionality of such computer systems will not be adversely affected by the
advent of the year 2000 or any manipulation of data featuring information
relating to dates before, on or after January 1, 2000. The aggregate expense to
be incurred by the Company and its subsidiaries in connection with the actions
summarized on Schedule 6.1(r) is not reasonably likely to exceed $100,000.
6.2. Representations and Warranties of Purchaser and Merger Sub.
Purchaser and Merger Sub represent and warrant to the Company that:
(a) Capitalization of Merger Sub. The authorized capital stock of
Merger Sub consists of 1,000 shares of Common Stock, par value $.25 per share,
all of which are validly issued and outstanding. All of the issued and
outstanding capital stock of Merger Sub is, and at the Effective Time will be,
owned directly or indirectly by Purchaser, and there are (i) no other shares of
capital stock or voting securities of Merger Sub authorized, (ii) no securities
of Merger Sub convertible into or exchangeable for shares of capital stock or
voting securities of Merger
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Sub and (iii) no options or other rights to acquire from Merger Sub, and no
obligations of Merger Sub to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of Merger Sub other than as set forth in Section 5.1(c). Merger Sub
has not conducted any business prior to the date hereof and has no, and prior to
the Effective Time will have no, assets, liabilities or obligations of any
nature other than those incident to its formation and pursuant to or in
connection with this Agreement, the Offer and the Merger and the other
transactions contemplated by this Agreement.
(b) Corporate Organization and Qualification. Each of Purchaser and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization, has all
requisite corporate power and authority to carry on its business as presently
conducted and is in good standing as a foreign corporation in each jurisdiction
where the properties owned, leased or operated, or the business conducted, by it
require such qualification, except for any such failure to be so organized,
existing, in good standing or to have such power and authority or to so qualify,
that, when taken together with all other such failures, is not reasonably likely
to have a material adverse effect on the business, properties, results of
operations or financial condition of Purchaser and its subsidiaries, taken as a
whole.
(c) Corporate Authority. Purchaser and Merger Sub each has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is a valid and binding
agreement of Purchaser and Merger Sub enforceable against Purchaser and Merger
Sub in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights or to general equity principles.
(d) Governmental Filings; No Violations. (i) Other than the Regulatory
Approvals, no notices, reports or other filings are required to be made by
Purchaser and Merger Sub with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by Purchaser and Merger Sub
from, any Governmental Entity in
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connection with the execution and delivery of this Agreement by Purchaser and
Merger Sub and the consummation of the transactions contemplated hereby, the
failure to make or obtain any or all of which could prevent, materially delay or
materially burden the transactions contemplated by this Agreement.
(ii) The execution and delivery of this Agreement by Purchaser
and Merger Sub do not, and the consummation by Purchaser and Merger Sub of the
transactions contemplated by this Agreement will not, constitute or result in
(i) a breach or violation of, or a default under, the certificate of
incorporation or bylaws of Purchaser or Merger Sub or (ii) a breach or violation
of, a default under, the acceleration of or the creation of a lien, pledge,
security interest or other encumbrance on assets (with or without the giving of
notice or the lapse of time) pursuant to, any provision of any Contract of
Purchaser or Merger Sub or any law, ordinance, rule or regulation or judgment,
decree, order, award or governmental or non-governmental permit or license to
which Purchaser or Merger Sub is subject, except, in the case of clause (ii)
above, for such breaches, violations, defaults or accelerations that, alone or
in the aggregate, could not prevent or materially delay the transactions
contemplated by this Agreement.
(e) Funds. Purchaser has or will have the funds necessary to
consummate the transactions contemplated by this Agreement.
ARTICLE VII
Covenants
7.1. Interim Operations of the Company. The Company covenants
and agrees, as to itself and its subsidiaries, that, prior to the Effective Time
(unless Purchaser shall otherwise consent in writing and except as otherwise
permitted by this Agreement):
(a) the business of the Company and its subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent
consistent therewith, each of the Company and its subsidiaries shall
use its commercially reasonable efforts to preserve its business
organization intact and maintain
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its existing relations with customers, suppliers, employees and
business associates;
(b) the Company shall not (i) sell or pledge or agree to sell
or pledge any stock or other securities owned by it or permit any of
its subsidiaries to sell, pledge or agree to sell or pledge any stock
or other securities owned by such subsidiary; (ii) amend the
Certificate or its bylaws or amend, modify or terminate the Rights
Agreement, or redeem the Rights issued pursuant thereto; (iii) split,
combine or reclassify the outstanding Shares; or (iv) declare, set
aside or pay any dividend payable in cash, stock or property with
respect to the Shares;
(c) neither the Company nor any of its subsidiaries shall (i)
issue, sell, pledge, dispose of or encumber any additional shares of,
or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any
shares of its capital stock of any class of the Company, its
subsidiaries or any other property or assets other than, in the case of
the Company, Shares issuable pursuant to options outstanding on the
date hereof under the Stock Plans and shares issuable pursuant to the
Warrants; (ii) transfer, lease, license, guarantee, sell, mortgage,
pledge, dispose of or encumber any assets or incur or modify any
indebtedness or other liability other than in the ordinary and usual
course of business; (iii) acquire directly or indirectly by redemption
or otherwise any shares of the capital stock of the Company or any of
its subsidiaries or (iv) authorize capital expenditures in excess of
$50,000 individually or $100,000 in the aggregate or make any
acquisition of (by merger, consolidation or acquisition of stock or
assets), or any investment in, assets or stock of any other person or
entity (other than acquisitions of assets in the ordinary course of
business consistent with past practice);
(d) neither the Company nor any of its subsidiaries shall
grant any severance or termination pay to, or enter into any employment
or severance agreement with any director, officer or other employee of
the Company or any such subsidiary; and neither the Company nor any of
its subsidiaries shall establish,
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adopt, enter into, make any new grants or awards under or amend, any
Compensation and Benefit Plan (or any trust or fund thereunder);
(e) neither the Company nor any of its subsidiaries shall settle
or compromise any material claims or litigation or, except in the
ordinary and usual course of business and with the consent of
Purchaser, modify, amend or terminate any of its material Contracts or
waive, release or assign any material rights or claims;
(f) neither the Company nor any of its subsidiaries shall make
any tax election or permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated
without notice to Purchaser, except in the ordinary and usual course of
business;
(g) except as may be required as a result of a change in law or
in generally accepted accounting principles, neither the Company nor
any of its subsidiaries shall change any of the accounting practices or
principles used by it;
(h) neither the Company nor any of its subsidiaries shall adopt
a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization, or other reorganization
of the Company (other than the Merger and other than in compliance with
Section 9.4(a)); and
(i) neither the Company nor any of its subsidiaries will
authorize or enter into an agreement to do any of the foregoing or take
any action that would knowingly cause any of the representations or
warranties of the Company contained in this Agreement to be untrue or
incorrect or would result in any of the Offer Conditions set forth in
Annex A hereto not being satisfied.
7.2. Acquisition Proposals. The Company, its subsidiaries and
its and their respective officers, directors, employees, representatives and
agents (including, without limitation, any investment banker, attorney or
accountant retained by the Company or any of its subsidiaries) shall immediately
cease any existing
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discussions or negotiations, if any, with any parties conducted heretofore with
respect to any acquisition or exchange of all or any material portion of the
assets of, or more than 9.9% of the equity interest in, the Company or any of
its subsidiaries (by direct purchase from the Company, tender or exchange offer
or otherwise) or any business combination, merger or similar transaction
(including an exchange of stock or assets) with or involving the Company or any
of its subsidiaries or any division of the Company or any of its subsidiaries
(an "Acquisition Transaction"). Except as set forth in this Section 7.2, neither
the Company nor any of its subsidiaries or any of its or their respective
officers, directors, employees, representatives or agents, shall, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information or data to, or have any
discussions with, any corporation, partnership, person or other entity or group
(as described in Section 13(d)(3) of the Exchange Act) other than Purchaser and
Merger Sub, any affiliate or associate of Purchaser and Merger Sub or any
designees of Purchaser and Merger Sub with respect to any inquiries or the
making of any offer or proposal (including, without limitation, any offer or
proposal to the stockholders of the Company) concerning an Acquisition
Transaction (an "Acquisition Proposal") or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent either the Company or any of
its representatives or the Board of Directors of the Company from (A) complying
with Rule 14e-2 promulgated under the Exchange Act with respect to a bona fide
written Acquisition Proposal received by the Company on or following the date of
this Agreement; (B) providing information in response to a written request
therefor by a person or entity which has made a bona fide written Acquisition
Proposal received by the Company on or following the date of this Agreement that
was not solicited by the Company or any of its officers, directors, employees,
representatives and agents (including, without limitation, any investment
banker, attorney or accountant retained by the Company); or (C) engaging in any
negotiations or discussions with any person or entity that has made such an
Acquisition Proposal concerning such Acquisition Proposal; or (D) subject to
complying with Section 9.4(a), authorizing the Company, subject to complying
with the terms of this Agreement, to enter into a binding written agreement
concerning a Superior Proposal (as defined below), if, and
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only to the extent that, (I) in each such case referred to in clause (B), (C) or
(D) above, the Board of Directors of the Company determines (x) based upon the
written, reasoned advice of outside legal counsel to the Company to such effect,
that the failure to take such action is likely to constitute a breach of the
Company's directors' fiduciary duties under applicable law, and (y) based upon
the written advice of financial advisors to the Company to the effect that the
person or entity making such Acquisition Proposal has the financial ability to
consummate such Acquisition Proposal and such Acquisition Proposal would, if
consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the transaction contemplated by
this Agreement (any such Acquisition Proposal as to which both of the
determinations referred to in subclauses (x) and (y) of this clause (I) have
been made being referred to in this Agreement as a "Superior Proposal"), and
(II) the Board of Directors of the Company receives from the person or entity
making such bona fide written Acquisition Proposal an executed confidentiality
agreement the terms of which are (without regard to the terms of such
Acquisition Proposal) (A) no less favorable to the Company, and (B) no less
restrictive to the person or entity making such bona fide written Acquisition
Proposal than those contained in the Mutual Confidentiality Agreement, effective
as of March 4, 1999 (the "Confidentiality Agreement"), between the Company and
Purchaser. Notwithstanding the proviso to the immediately preceding sentence,
(i) no Acquisition Proposal received by the Company on or prior to the date of
this Agreement shall be deemed a Superior Proposal unless the purchase price for
the Shares to be paid pursuant to any such Acquisition Proposal has been
increased by more than a de minimis amount after the date hereof, and (ii) no
Acquisition Proposal received by the Company following the date of this
Agreement shall be deemed to have been solicited by the Company or any of its
officers, directors, employees, representatives and agents (including, without
limitation, any investment banker, attorney or accountant retained by the
Company) solely by virtue of either or both of the facts that the person or
entity making such Acquisition Proposal made an Acquisition Proposal prior to
the date of this Agreement (any such Acquisition Proposal made prior to the date
of this Agreement, a "Prior Proposal") or the Company or any of its officers,
directors, employees, representatives and agents (including, without limitation,
any investment banker or attorney retained by the Company) solicited such
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Acquisition Proposal prior to the date of this Agreement. Schedule 7.2 sets
forth a list of each person or entity which made a Prior Proposal within three
months prior to the date of this Agreement. The Company will notify Purchaser
within 48 hours if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, the Company and shall in such notice indicate the
identity of the offeror and the terms and conditions of any such proposal and
thereafter shall keep Purchaser informed, on a current basis, of the status and
terms of such proposals, providing copies to Purchaser of any Acquisition
Proposals made in writing. The Company agrees not to release any third party
from, or waive any provisions of, any confidentiality or standstill agreement to
which the Company is a party and which relates to an Acquisition Proposal or
potential Acquisition Proposal. The Company will take the necessary steps to
inform the individuals or entities referred to in the first sentence of this
Section 7.2 of the obligations undertaken in this Section 7.2. The Company also
will promptly request each person or entity that has heretofore executed a
confidentiality agreement in connection with an Acquisition Proposal or
potential Acquisition Proposal to return all confidential information heretofore
furnished to such person or entity by or on behalf of the Company or any of its
subsidiaries.
7.3. Meetings of the Company's Stockholders. (a) If required to
consummate the Merger, the Company will take, consistent with applicable law,
the Certificate and the Company's bylaws, all action necessary to convene a
meeting of holders of Shares as promptly as practicable following the purchase
of Shares pursuant to the Offer to consider and vote upon the approval of this
Agreement and the Merger. Subject to fiduciary requirements of applicable law,
the Board of Directors of the Company shall recommend such approval and the
Company shall take all lawful action to solicit such approval. At any such
meeting of the Company's stockholders all of the Shares then owned by the
Purchaser Companies will be voted in favor of this Agreement. The Company's
proxy or information statement with respect to such meeting of stockholders (the
"Proxy Statement"), at the date thereof and at the date of such meeting, will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
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misleading; provided, however, that the foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information concerning the Purchaser Companies furnished to the Company
by Purchaser specifically for use in the Proxy Statement. The Proxy Statement
shall not be filed, and no amendment or supplement to the Proxy Statement will
be made by the Company, without consultation with Purchaser and its counsel.
(b) Notwithstanding the foregoing, in the event that Merger Sub
shall acquire at least 90% of the outstanding Shares, the Company agrees,
subject to Article VIII, to take, at the request of Merger Sub, all necessary
and appropriate action to cause the Merger to become effective as soon as
reasonably practicable after such acquisition, without a meeting of the
Company's stockholders, in accordance with Section 253 of the DGCL.
7.4. Filings; Other Action. (a) Subject to the terms and
conditions herein provided, the Company and Purchaser shall: (i) promptly make
their respective filings and thereafter make any other required submissions
under the HSR Act and the filings and submissions required to be made in order
to obtain the other Regulatory Approvals with respect to the Offer and the
Merger; and (ii) use all commercially reasonable best efforts to promptly take,
or cause to be taken, all other action and do, or cause to be done, all other
things necessary or advisable under applicable laws and regulations to
consummate and make effective the other transactions contemplated by this
Agreement as soon as practicable, including, but not limited to, cooperating in
the preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy
Statement, any required filings under the HSR Act, all other documentation to
effect all other necessary applications, notices, petitions, filings and other
documents and any amendments to any of the foregoing as soon as practicable.
Each party hereto shall use all commercially reasonable best efforts to obtain
as soon as practicable all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to Contracts with the Company and its subsidiaries as are necessary or
advisable for the consummation of the other transactions contemplated by this
Agreement and to fulfill the conditions to the Offer and the Merger; provided,
however, that nothing
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in this Section 7.4 shall require, or be construed to require, Purchaser to
proffer to, or agree to, sell or hold separate and agree to sell, before or
after the Effective Time, any material assets, businesses, or interest in any
material assets or businesses of Purchaser, the Company or any of their
respective affiliates (or to consent to any sale, or agreement to sell, by the
Company of any of its material assets or businesses) or to agree to any material
changes or restriction in the operations of any such assets or businesses;
provided, further, that nothing in this Section 7.4 shall require, or be
construed to require, a proffer or agreement that would, in the good faith
judgment of Purchaser, be reasonably likely to have a material adverse effect on
the benefits to Purchaser of the transactions contemplated by this Agreement.
Subject to any applicable law, ordinance, regulation, judgment, order, decree,
arbitration award, license or permit of any Governmental Entity relating to the
exchange of information, Purchaser and the Company shall have the right to
review in advance, and to the extent practicable each will consult the other on,
all the information relating to Purchaser or the Company, as the case may be,
and any of their respective affiliates, that appear in any filing made with, or
written materials submitted to, any third party and/or any Governmental Entity
in connection with the Merger and the other transactions contemplated by this
Agreement. In exercising the foregoing right, each of the Company and Purchaser
shall act reasonably and as promptly as practicable.
(b) The Company and Purchaser each shall keep the other apprised
of the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Purchaser or the Company, as the case may be, or any
of their subsidiaries, from any Governmental Entity with respect to the Offer or
the Merger or any of the other transactions contemplated by this Agreement. The
parties hereto will consult and cooperate with one another, and consider in good
faith the views of one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other antitrust law.
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7.5. Access. Subject to the provisions of the Confidentiality
Agreement, upon reasonable notice, the Company shall (and shall cause its
subsidiaries to) afford Purchaser's officers, employees, counsel, lenders,
accountants and other authorized representatives ("Representatives") access,
during normal business hours throughout the period prior to the earlier of (i)
termination of this Agreement and (ii) the Effective Time, to its properties,
books, Contracts and records and, during such period, the Company shall (and
shall cause its subsidiaries to) furnish promptly to Purchaser all information
concerning its business, properties and personnel as Purchaser or its
Representatives may reasonably request, provided that no investigation pursuant
to this Section 7.5 shall affect or be deemed to modify any representation or
warranty made by the Company and provided, further, that the foregoing shall not
require the Company to permit any inspection, or to disclose any information,
that in the reasonable judgment of the Company would result in the disclosure of
any trade secrets of third parties or violate any obligation of the Company with
respect to confidentiality if the Company shall have used reasonable efforts to
obtain the consent of such third party to such inspection or disclosure. Upon
any termination of this Agreement, Purchaser will destroy or collect and deliver
to the Company all documents obtained by it pursuant to this Section 7.5 or any
of its Representatives then in their possession and any copies thereof.
7.6. Notification of Certain Matters. The Company shall give
prompt notice to Purchaser of: (a) any notice of, or other communication
relating to, any environmental matter, default or event that, with notice or
lapse of time or both, would become a default, received by the Company or any of
its subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any Contract to which the Company or any of its
subsidiaries is a party or is subject; and (b) the occurrence of a Material
Adverse Effect or any event that, so far as reasonably can be foreseen at the
time of its occurrence, is reasonably likely to result in a Material Adverse
Effect. Each of the Company and Purchaser shall give prompt notice to the other
party of any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
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7.7. Publicity. The initial press release relating to the
transactions contemplated hereby shall be a joint press release and thereafter
the Company and Purchaser each shall consult with the other prior to issuing any
press releases or otherwise making public announcements with respect to the
transactions contemplated hereby and prior to making any filings with any
Governmental Entity or with any national securities exchange with respect
thereto, except as may be required by law or by obligations pursuant to any
listing agreement with or rules of any national securities exchange or national
market system.
7.8 Options and Benefits. (a) Stock Options. At the Effective
Time each stock option outstanding pursuant to the Stock Plans ("Option"),
whether or not then exercisable, shall be canceled and only entitle the holder
thereof, upon surrender thereof, to receive an amount in cash equal to the
difference between the Merger Consideration and the exercise price per Share of
such Option multiplied by the number of Shares previously subject to such Option
(the "Option Consideration"); provided, however, that each Option outstanding as
of the date hereof held by any member of the Company's Board of Directors who
resigns upon Purchaser's request pursuant to Section 4.2 shall be deemed to be
outstanding at the Effective Time and shall be entitled to be exchanged for the
Option Consideration whether or not such Option has terminated as a result of
such resignation unless such Option has been exercised or has otherwise expired
pursuant to the terms of the Option grant prior thereto. Prior to the Effective
Time, the Company shall take such actions as may be necessary to effectuate such
cancelation. The Surviving Corporation shall pay as soon as practicable
following the Effective Time the Option Consideration, but in any event within
five days following the Effective Time. The cancelation of an Option in exchange
for the Option Consideration shall be deemed a release of any and all rights the
holder had or may have had in respect of such Option, and any required consents
received from Option holders shall so provide.
(b) Employee Benefits. Purchaser agrees that, during the
period commencing at the Effective Time and ending on the first anniversary
thereof, the employees of the Company will continue to be provided with benefits
under employee benefit plans (other than plans involving the potential issuance
of securities of the Company, any of its subsidiaries or of any of the Purchaser
Companies) that in
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the aggregate are substantially comparable to those currently provided by the
Company to such employees, provided that employees covered by collective
bargaining agreements need not be provided such benefits. Following the
Effective Time, Purchaser shall cause service by employees of the Company to be
taken into account for purposes of eligibility to participate and vesting under
any benefit plans of Purchaser or its subsidiaries (including the Surviving
Corporation) which cover such employees, to the same extent such service was
counted under a similar plan of the Company. From and after the Effective Time,
Purchaser shall (i) cause to be waived any pre-existing condition limitations
under benefit plans of Purchaser or its subsidiaries in which employees of the
Company participate, to the same extent waived under the Company's benefit plans
and (ii) cause to be credited any deductibles and out-of-pocket expenses
incurred by such employees and their beneficiaries and dependents under the
Company's benefit plans during the portion of the calendar year prior to their
participation in the benefit plans provided by Purchaser and its subsidiaries.
Purchaser shall cause the Surviving Corporation to honor all employee benefit
obligations to current and former employees under the Compensation and Benefit
Plans accrued as of the Effective Time and all employee severance plans and all
employment or severance agreements set forth in Schedule 6.1(i)(i).
Section 7.9 Indemnification; Directors' and Officers' Insurance.
(a) The Certificate shall contain the provisions with respect to indemnification
set forth in Article X of the Certificate on the date of this Agreement and
shall not be amended, repealed or otherwise modified for a period of six years
after the Effective Time. From and after the Effective Time, Purchaser agrees
that it will, to the fullest extent that the Company would have been permitted
under Delaware law (and Purchaser shall also advance expenses as incurred to the
fullest extent permitted under applicable law), the Certificate in effect on the
date hereof to indemnify such person, indemnify and hold harmless the individual
named in Schedule 7.9 (the "Individual") and each present and former director
and officer of the Company, determined as of the Effective Time (collectively
with the Individual, the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
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administrative or investigative, solely by reason of the fact that such person
is or was a director or officer of the Company, as the case may be, arising out
of matters existing or occurring at or prior to the Effective Time, including
the transactions contemplated by this Agreement (and, in the case of the
Individual, without regard to whether the Individual is or was a director or
officer of the Company but only in respect of any Costs incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative arising out of the transactions
contemplated by this Agreement), whether asserted or claimed prior to, at or
after the Effective Time.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 7.9, upon receiving written notification of any
such claim, action, suit, proceeding or investigation, shall promptly notify
Purchaser thereof, but failure to so notify will not relieve Purchaser of
liability except to the extent Purchaser is materially adversely affected
thereby. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i)
Purchaser or the Surviving Corporation shall have the right, within a reasonable
time following the notification of Purchaser by the Indemnified Person of such
claim, action, suit, proceeding or investigation (but in any event within 30
days following such notification) to assume the defense thereof and Purchaser
shall not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if Purchaser or the
Surviving Corporation elects not to assume such defense or counsel for the
Indemnified Parties advises that, in such counsel's reasonable judgment, there
are issues that constitute conflicts of interest between Purchaser or the
Surviving Corporation and the Indemnified Parties, or the Indemnified Parties
have substantial defenses available to them that are not available to Purchaser,
the Indemnified Parties may retain counsel satisfactory to them, and Purchaser
or the Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that Purchaser shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction, (ii) the Indemnified Parties
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will cooperate in the defense of any such matter and (iii) Purchaser shall not
be liable for any settlement effected without its prior written consent; and
provided further that Purchaser shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that the indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law.
(c) Prior to the Effective Time, Purchaser shall cause the
Company to purchase tail insurance coverage extending the Company's existing
officers' and directors' liability insurance for a period of six years after the
Effective Time for a premium not to exceed $250,000 in the aggregate.
7.10. Takeover Statutes. If any Takeover Statute shall become
applicable to the transactions contemplated hereby, the Company and the members
of the Board of Directors of the Company shall grant such approvals and take
such actions as are necessary so that the transactions contemplated hereby may
be consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the transactions contemplated hereby.
7.11. Warrants. As of the Effective Time, each Warrant that is
outstanding at the Effective Time will be exchanged for, and the holders of each
such Warrant will be entitled to receive at the Closing (or thereafter, if
necessary) upon surrender of such Warrant for cancellation, cash equal to (a)
the product of (i) the excess, if any, of the Merger Consideration over the
exercise price of each such Warrant, multiplied by (ii) the number of Shares
covered by such Warrant. Purchaser and the Company shall take all action
necessary to give effect to this Section 7.11.
ARTICLE VIII
Conditions
8.1. Conditions to Obligations of Purchaser and Merger Sub. The
respective obligations of Purchaser and Merger Sub to consummate the Merger are
subject to the fulfillment of each of the following conditions, any or all of
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which may be waived in whole or in part by Purchaser or Merger Sub, as the case
may be, to the extent permitted by applicable law:
(a) Stockholder Approval. If required by the DGCL, this
Agreement shall have been duly approved by the holders of a majority of the
Shares, in accordance with applicable law, the Certificate and the Company's
bylaws;
(b) Purchase of Shares. Merger Sub (or one of the Purchaser
Companies) shall have purchased Shares pursuant to the Offer;
(c) Litigation. No United States or state court or other
Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
that is in effect and prohibits consummation of the transactions contemplated by
this Agreement or imposes material restrictions on Purchaser or the Company in
connection with consummation of the Merger or with respect to their respective
business operations, either prior to or subsequent to the Merger (collectively,
an "Order"); and
(d) Other Obligations. The Company shall have fulfilled its
obligations under Section 7.8 and the representations set forth in Section
6.1(l) and 6.1(m) shall be true and correct.
(e) Tax Withholding. The Company shall have delivered to
Purchaser and Merger Sub a written statement, dated not more than 30 days prior
to the Effective Time, certifying that the Shares are not a U.S. real property
interest within the meaning of Section 897(c) of the Code. Such written
statement shall comply with the requirements of Treasury Regulations Sections
1.897-2(h) and 1.1445-2(c)(3).
8.2. Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger are subject to the fulfillment of each
of the following conditions, any or all of which may be waived in whole or in
part by the Company to the extent permitted by applicable law:
(a) Stockholder Approval. If required by the DGCL, this
Agreement shall have been duly approved by the
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holders of a majority of the Shares, in accordance with applicable law, the
Certificate and the Company's bylaws;
(b) Purchase of Shares. Merger Sub (or one of the Purchaser
Companies) shall have purchased Shares pursuant to the Offer; and
(c) Order. There shall be in effect no Order.
ARTICLE IX
Termination
9.1. Termination by Mutual Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to the Effective Time, before or after the approval by holders of Shares,
by the mutual consent of Purchaser and the Company, by action of their
respective Boards of Directors.
9.2. Termination by either Purchaser or the Company. This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned by action of the Board of Directors of either Purchaser or the Company
if (i) Merger Sub, or any Purchaser Company, shall have terminated the Offer
without purchasing any Shares pursuant thereto; or (ii) the Merger shall not
have been consummated by December 1, 1999 whether or not such date is before or
after the approval by holders of Shares; or (iii) if required, following the
purchase of Shares in the Offer, the approval of stockholders required by
Section 8.1(a) shall not have been obtained at a meeting duly convened therefor;
or (iv) any court of competent jurisdiction or other governmental body located
or having jurisdiction within the United States or any country or economic
region in which either the Company, any of its subsidiaries or Purchaser,
directly or indirectly, has material assets or operations, shall have issued a
final order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Offer or the Merger and such order,
decree, ruling or other action is or shall have become final and nonappealable;
provided, however, that the right to terminate this Agreement pursuant to
Section 9.2(i), (ii) or (iii) shall not be available to any party whose failure
to perform any obligation under this Agreement has been the cause of, or
resulted in, the failure of Merger Sub to
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purchase Shares pursuant to the Offer on or prior to such date.
9.3. Termination by Purchaser. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior to
the Effective Time, before or after the approval by holders of Shares, by action
of the Board of Directors of Purchaser, if:
(a) the Company shall have breached or failed to perform in any
material respect any of the covenants or agreements contained in this Agreement
to be complied with or performed by the Company at or prior to the Effective
Time, or any representation or warranty of the Company set forth in this
Agreement shall have been inaccurate or incomplete when made; or
(b) the board of directors of the Company (or a committee
thereof) shall have amended, modified or withdrawn in a manner adverse to
Purchaser or Merger Sub its approval or recommendation of the Offer, this
Agreement or the Merger or the Board of Directors of the Company, upon request
by Purchaser, shall have failed to publicly reaffirm such approval or
recommendation within ten business days of such request by Purchaser, or shall
have endorsed, approved or recommended any other Acquisition Proposal without
terminating this Agreement pursuant to Section 9.4(a), or shall have resolved to
do any of the foregoing; or
(c) the Company shall have entered into any agreement, letter of
intent or agreement in principle with respect to any other Acquisition Proposal
and shall have theretofore failed to terminate this Agreement pursuant to
Section 9.4(a); or
(d) the Company, any of its subsidiaries or any of the other
persons or entities described in Section 7.2 as officers, directors, employees,
representatives or agents of the Company or of any of its subsidiaries shall
take any of the actions that would be proscribed by Section 7.2 but for the
exception therein allowing certain actions to be taken pursuant to the proviso
of the second sentence thereof.
9.4 Termination by the Company. This Agreement may be terminated
and the transactions contemplated by this Agreement may be abandoned at any time
prior to the Effective Time, before or after the approval by holders of
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Shares by action of the Board of Directors of the Company, if:
(a) (i) the Company is not in material breach of any of the
terms of this Agreement, (ii) the Board of Directors of the Company authorizes
the Company, subject to complying with the terms of this Agreement, to enter
into a binding written agreement concerning a Superior Proposal and the Company
notifies Purchaser in writing that it intends to enter into such an agreement,
attaching the most current version of such agreement to such notice and (iii)
Purchaser does not make, within five calendar days of receipt of the Company's
written notification of its intention to enter into such an agreement, an offer
to acquire the Shares or the Company for consideration equal to or greater than
the fair market value (based, if applicable, on market prices on the business
day prior to such offer) of the consideration per Share payable pursuant to such
Superior Proposal. The Company agrees (x) that it will not enter into a binding
agreement referred to in clause (ii) of the previous sentence until at least the
sixth calendar day after it has provided the written notice to Purchaser
required thereby and (y) to notify Purchaser promptly if its intention to enter
into a written agreement referred to in such notice shall change at any time
after giving such notification; or
(b) Purchaser shall have breached or failed to perform in any
material respect any of the covenants or agreements contained in this Agreement
to be complied with or performed by Purchaser at or prior to the second business
day prior to the expiration of the Offer, or any representation or warranty of
Purchaser set forth in this Agreement shall have been inaccurate or incomplete
when made; or
(c) Merger Sub shall have failed to commence the Offer within
the time required in Section 1.1.
9.5. Effect of Termination and Abandonment. (a) In the event of
the termination of this Agreement pursuant to this Article IX, no party hereto
(or any of its directors or officers, employees, agents or advisors) shall have
any liability or further obligation to any other party to this Agreement, except
as provided in Section 10.2 and except that nothing herein will relieve any
party from liability for any breach of this Agreement.
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(b) If (i)(x) the Offer shall have remained open for a minimum
of at least 20 business days, (y) after the date hereof any corporation,
partnership, person or other entity or group (as described in Section 13(d)(3)
of the Exchange Act) other than Purchaser and Merger Sub, any affiliate or
associate of Purchaser and Merger Sub or any designees of Purchaser and Merger
Sub shall have become the beneficial owner of 9.9% or more of the outstanding
Shares or shall have publicly announced a proposal or intention to make an
Acquisition Proposal or shall have commenced, or shall have publicly announced
an intention to commence, a tender offer or exchange offer for 9.9% or more of
the outstanding Shares, and (z) the Minimum Condition (as defined in Annex A)
shall not have been satisfied and the Offer is terminated without the purchase
of any Shares thereunder or pursuant to Section 9.2(iii), or (ii) this Agreement
is terminated by Purchaser pursuant to Section 9.3, or (iii) this Agreement is
terminated by the Company pursuant to Section 9.4(a), then the Company (p) shall
promptly, but in no event later than two days after the date of such
termination, pay Purchaser a termination fee of $4,000,000 payable by wire
transfer of same day funds, and (q) shall promptly, but in no event later than
two calendar days after being notified of such by Purchaser, pay all of the
charges and expenses incurred by Purchaser or Merger Sub in connection with this
Agreement and the transactions contemplated hereby, up to a maximum of
$1,000,000; provided, however, that no termination fee shall be payable to
Purchaser by reason of Section 9.5(b)(i) or a termination of this Agreement
pursuant to Section 9.3(d) or 9.4(a) unless and until (I) any person or entity
(other than Purchaser) (an "Acquiring Party") has acquired, by purchase, merger,
consolidation, sale, assignment, lease, transfer or otherwise, in one
transaction or any related series of transactions within 24 months of such
termination, a majority of the voting power of the outstanding securities of the
Company or all or substantially all of the assets of the Company or (II) there
has been consummated a merger, consolidation or similar business combination
between the Company and an Acquiring Party or an affiliate thereof. The Company
acknowledges that the agreements contained in this Section 9.5(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Purchaser and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 9.5(b), and, in order to obtain such payment, Purchaser
or Merger Sub
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commences a suit that results in a judgment against the Company for the fee set
forth in this paragraph (b), the Company shall pay to Purchaser or Merger Sub
its costs and expenses (including reasonable attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
ARTICLE X
Miscellaneous and General
10.1. Payment of Expenses. Whether or not the Merger shall be
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
Merger.
10.2. Survival. The agreements of the Company, Purchaser and
Merger Sub contained in Sections 5.2 (but only to the extent that such Section
expressly relates to actions to be taken after the Effective Time), 5.3, 5.4,
7.8, 7.9, 7.10, 10.1 and 10.6 through 10.13 and the Confidentiality Agreement
shall survive the consummation of the Merger. The agreements of the Company,
Purchaser and Merger Sub contained in Sections 9.5, 10.1 and 10.6 through 10.13
and the Confidentiality Agreement shall survive the termination of this
Agreement. All other representations, warranties, agreements and covenants in
this Agreement shall not survive the consummation of the Merger or the
termination of this Agreement.
10.3. Modification or Amendment. Subject to the applicable
provisions of the DGCL, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of the respective parties.
10.4. Waiver of Conditions. The conditions to each of the
parties' obligations to consummate the Merger are for the sole benefit of such
party and may be waived by such party in whole or in part to the extent
permitted by applicable law.
10.5. Counterparts. For the convenience of the parties
hereto, this Agreement may be executed in any number
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of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
10.6. Governing Law
(a) GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. THIS
AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The
parties hereby irrevocably submit to the jurisdiction of the courts of the State
of New York and the Federal courts of the United States of America located in
the Borough of Manhattan, The City of New York solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby and thereby, and hereby waive, and agree not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
hereof or of any such document, that it is not subject thereto or that such
action, suit or proceeding may not be brought or is not maintainable in said
courts or that the venue thereof may not be appropriate or that this Agreement
or such document may not be enforced in or by such courts, and the parties
hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a New York State or Federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 10.7 or in such other manner as may
be permitted by law shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
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THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND
(iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.6.
10.7 Notices. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile, if to Purchaser or Merger Sub, addressed to Purchaser or Merger
Sub, as the case may be, at Solvay Pharmaceuticals, Inc., 901 Sawyer Road,
Marietta, Georgia 30062, Attention: Jeffrey D. Linton, facsimile number: (770)
578-5749 (with a copy to Earl D. Weiner, Sullivan & Cromwell, 125 Broad Street,
New York, New York 10004, facsimile number: (212) 558-3588); and if to the
Company, addressed to the Company at Unimed Pharmaceuticals, Inc., 2150 East
Lake Cook Road, Buffalo Grove, Illinois 60089, Attention: Robert E. Dudley,
Ph.D, facsimile number: (847) 541-2533 (with a copy to Kurt W. Florian, Katten
Muchin & Zavis, 525 West Monroe Street, Chicago, Illinois 60661, facsimile
number: 312-902-1061), or to such other persons or addresses as may be
designated in writing by the party to receive such notice.
10.8. Severability. It is the intention of the parties that if
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the fullest extent possible.
10.9. Entire Agreement, etc. This Agreement (including the
disclosure schedules and any exhibits or Annexes hereto) and the Confidentiality
Agreement (a)
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constitutes the entire agreement, and supersedes all other prior agreements,
understandings, representations and warranties both written and oral, among the
parties, with respect to the subject matter hereof, and (b) shall not be
assignable by operation of law or otherwise and is not intended to create any
obligations to, or rights in respect of, any persons other than the parties
hereto; provided, however, that Purchaser may designate, by written notice to
the Company, another wholly owned direct or indirect subsidiary to be a
Constituent Corporation in lieu of Merger Sub, in the event of which, all
references herein to Merger Sub shall be deemed references to such other
subsidiary except that all representations and warranties made herein with
respect to Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other subsidiary as of
the date of such designation.
10.10. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except for Section
7.9, nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
10.11. Definition of "Subsidiary". When a reference is made in
this Agreement to a subsidiary of a party, the word "subsidiary" means any
corporation or other organization whether incorporated or unincorporated of
which at least a majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its subsidiaries, or by such party and
one or more of its subsidiaries.
10.12. Obligation of Purchaser. Whenever this Agreement requires
Merger Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of Purchaser to cause Merger Sub to take such action.
10.13. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be
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deemed to limit or otherwise affect any of the provisions hereof.
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<PAGE> 53
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
UNIMED PHARMACEUTICALS, INC.
By: /s/ Robert E. Dudley
------------------------------
Name: Robert E. Dudley
Title: President and CEO
SOLVAY PHARMACEUTICALS, INC.
By: /s/ Robert A. Solheim
------------------------------
Name: Robert A. Solheim
Title: Vice President, Finance
and Administration
UTAH ACQUISITION CORPORATION
By: /s/ Harold H. Shlevin
------------------------------
Name: Harold H. Shlevin
Title: President
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<PAGE> 54
ANNEX A
Certain Conditions of the Offer. The capitalized terms used in
this Annex A have the meanings set forth in the attached Agreement.
Notwithstanding any other provision of the Offer, Merger Sub shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Merger Sub's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, or may delay the acceptance
for payment of, any tendered Shares, or may, in its sole discretion, subject to
the Agreement, terminate or amend the Offer as to any Shares not then paid for
if, (i) prior to the expiration of the Offer, (x) a number of Shares which,
together with any Shares owned by Purchaser, Merger Sub and the Purchaser
Companies, constitutes more than 50% of the voting power (determined on a
fully-diluted basis) of all the securities of the Company entitled to vote
generally in the election of directors or in connection with a merger shall not
have been validly tendered and not withdrawn prior to the expiration of the
Offer (the "Minimum Condition") or (y) any waiting periods under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall not have
expired or been terminated, or any material approval, permit, authorization or
consent of any Governmental Entity shall not have been obtained on terms
satisfactory to the Purchaser in its reasonable discretion, or (ii) on or after
June 11, 1999, and at or before the time of acceptance for payment for any of
such Shares, any of the following events shall occur:
(a) there shall have occurred and be continuing (i) any
general suspension of, or limitation on prices for, trading in
securities on the New York Stock Exchange, Inc. or the Nasdaq Stock
Market's National Market System or in the over-the-counter market, (ii)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) a commencement or
escalation of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States
(other than any declaration of war resulting from the current conflict
in Yugoslavia), (iv) any limitation (whether or
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not mandatory) by any Governmental Entity, on, or any other event which
might affect, the extension of credit by banks or other lending
institutions, or (v) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(b) the Company shall have breached or failed to perform in
any material respect any of its obligations, covenants or agreements
contained in the Agreement, or any representation or warranty of the
Company set forth in the Agreement shall have been inaccurate or
incomplete in any material respect when made or thereafter shall become
inaccurate or incomplete in any material respect;
(c) there shall have been threatened or instituted or be
pending any action, litigation, proceeding, investigation or other
application (hereinafter, an "Action") before any court or other
Governmental Entity by any Governmental Entity or by any other Person,
domestic or foreign: (i) challenging the acquisition by Purchaser or
Merger Sub of Shares, seeking to restrain or prohibit the consummation
of the transactions contemplated by the Offer or the Merger or other
subsequent business combination, seeking to obtain any material damages
or otherwise directly or indirectly relating to the transactions
contemplated by the Offer or the Merger or other subsequent business
combination; (ii) seeking to prohibit, or impose any material
limitations on, Purchaser's or Merger Sub's ownership or operation of
all or any portion of their or the Company's business or assets
(including the business or assets of their respective affiliates), or
to compel Purchaser or Merger Sub to dispose of or hold separate all or
any portion of Purchaser's or Merger Sub's or the Company's business or
assets (including the business or assets of their respective
affiliates) as a result of the transactions contemplated by the Offer
or the
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<PAGE> 56
Merger or other subsequent business combination; (iii) seeking to make
the acceptance for payment, purchase of, or payment for, some or all of
the Shares illegal or render Merger Sub unable to, or result in a delay
in, or restrict, the ability of Merger Sub to, accept for payment,
purchase or pay for some or all of the Shares; (iv) seeking to impose
material limitations on the ability of Purchaser or Merger Sub
effectively to acquire or hold or to exercise full rights of ownership
of the Shares including, without limitation, the right to vote the
Shares purchased by them on an equal basis with all other Shares on
all matters properly presented to the stockholders; (v) seeking to
impose material restrictions on Purchaser or the Company in connection
with consummation of the Merger or with respect to their business
operations, either prior to or subsequent to the Merger; (vi) in
connection with which there is filed on or subsequent to the date of
the Merger Agreement any motion, order to show cause or other request
for relief seeking to impose, create, place or construe any lien,
claim, charge, security interest, constructive trust, restriction,
covenant or other encumbrance of any kind on, or with respect to, a
material number of Shares or any securities of the Surviving
Corporation, or in connection with which Purchaser, Merger Sub, the
Company or any of their respective affiliates (other than nonemployee
directors of the Company) shall have received a notice, claim or demand
on or subsequent to the date of the Merger Agreement; or (vii) that, in
any event, in the sole judgment of Purchaser, is reasonably likely to
have a Material Adverse Effect or a material adverse effect on the
business, properties, results of operation or financial condition of
Purchaser (or any of its affiliates);
(d) any statute, rule, regulation, order or injunction shall
be enacted, promulgated, entered, enforced or deemed by a Governmental
Entity or become applicable to the Offer or
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the Merger or other subsequent business combination, or any Action
shall be instituted or pending brought by any person or entity not on
behalf of a Governmental Entity, or any other action shall have been
taken, proposed or threatened, by any court or other Governmental
Entity other than the application to the Offer or the Merger or other
subsequent business combination of waiting periods under the HSR Act,
that, in the sole judgment of Purchaser, is reasonably likely, directly
or indirectly, to result in any of the effects of, or have any of the
consequences sought to be obtained or achieved in, any Action referred
to in clauses (i) through (vii) of paragraph (c) above;
(e) a tender or exchange offer for some portion or all of the
Shares shall have been commenced or publicly proposed to be made by
another corporation, partnership, person, other entity or group (as
described in Section 13(d)(3) of the Exchange Act) other than Purchaser
or Merger Sub or any of their respective subsidiaries or affiliates
(collectively, a "Person"), including the Company and its subsidiaries,
or it shall have been publicly disclosed or the Purchaser shall have
learned that (i) any Person (including the Company and its
subsidiaries) shall have become the beneficial owner (as defined in
Section 13(d) of the Exchange Act and the rules promulgated thereunder)
of more than 9.9% of any class or series of capital stock of the
Company (including the Shares); or (ii) any Person shall have entered
into a definitive agreement or an agreement in principle or made a
proposal with respect to a tender offer or exchange offer for 9.9% or
more of the outstanding Shares or a merger, consolidation or other
business combination with or involving the Company;
(f) there shall have occurred a Material Adverse Effect or any
event or occurrence, or series of events or occurrences that,
individually or in the aggregate, are
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reasonably likely to have a Material Adverse Effect;
(g) the Board of Directors of the Company (or any committee
thereof) shall have amended, modified or withdrawn in a manner adverse
to Purchaser or Merger Sub its approval or recommendation of the Offer,
the Agreement or the Merger, or, upon request by Purchaser or Merger
Sub, shall have failed to publicly reaffirm such approval or
recommendation within ten business days of such request by Purchaser or
Merger Sub, or shall have endorsed, approved or recommended any other
Acquisition Proposal, or shall have resolved to do any of the
foregoing;
(h) all Shares of which any member of the Company's Board of
Directors, or any trust with which any such member or such member's
spouse is affiliated, is a record holder or beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) as of June 4, 1999 shall
not have been validly tendered into the Offer prior to the seventeenth
business day following the Commencement Date, or any such Shares shall
have been withdrawn from the Offer; or
(i) the Agreement shall have been terminated by the Company or
Purchaser or Merger Sub in accordance with its terms or Purchaser or
Merger Sub shall have reached an agreement or understanding in writing
with the Company providing for termination or amendment of the Offer or
delay in payment for the Shares
which, in the sole judgment of Purchaser and Merger Sub, in any such case, and
regardless of the circumstances (including any action or inaction by Purchaser
or Merger Sub) giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions other than the Minimum Condition are
for the sole benefit of Purchaser and Merger
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<PAGE> 59
Sub and may be asserted by Purchaser or Merger Sub regardless of the
circumstances (including any action or inaction by Purchaser or Merger Sub not
in violation of this Agreement) giving rise to such condition or may be waived
(other than the Minimum Condition) by Purchaser or Merger Sub, by express and
specific action to that effect, in whole or in part at any time and from time to
time in its sole discretion. The failure by Merger Sub at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
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<PAGE> 1
[SOLVAY PHARMACEUTICALS LOGO]
EXHIBIT 10
MUTUAL CONFIDENTIALITY AGREEMENT
This AGREEMENT, effective the 4TH day of March, 1999, by and between
SOLVAY PHARMACEUTICALS, INC., a Georgia corporation having its principal place
of business at 901 Sawyer Road, Marietta, Georgia 30062-2224 (hereinafter
"COMPANY"), and UNIMED PHARMACEUTICALS, INC., a corporation, having its
principal place of business at 2150 East Lake Cook Road, Buffalo Grove,
Illinois 60089-1862 (hereinafter "UNIMED").
WHEREAS, COMPANY and UNIMED are interested in exploring a potential
transaction between COMPANY and UNIMED; and
WHEREAS, in order for COMPANY and UNIMED to discuss said subject, it
may be necessary for each party to disclose to the other certain valuable,
proprietary technical and commercial information ("Confidential Information").
The COMPANY Confidential Information consists of general business strategies
and capabilities, and commercial operations. The UNIMED Confidential
Information consists of information concerning financial information,
commercial operations and research and development portfolio; and
NOW, THEREFORE, in consideration of the above premises and commitments
contained herein, it is hereby agreed that:
1. COMPANY and UNIMED will each hold in confidence and not disclose to any
third party, without written permission of the disclosing party,
information contained in the confidential disclosures of the disclosing
party. Such disclosures to be considered confidential and subject to
this Agreement shall be:
A. In writing or in other physical or electronic form; or
B. Disclosed verbally as "Confidential", and subsequently reduced
to a writing or other physical form and provided to the
receiving party, marked "Confidential", within one (1) month
from date of disclosure; or
C. Generated by the receiving party materially based upon
confidential information provided by the disclosing party.
These obligations shall not apply to information which:
D. Was generally available to the public at the time of
disclosure, or becomes generally available to the public
without act or negligence of the receiving party; or
- Page 1 -
<PAGE> 2
E. Can be shown to have been in the receiving party's possession prior to
disclosure by the other party; or
F. Is obtained without restriction by the receiving party from an
independent third party having a lawful right to disclose the
information; or
G. Is developed by the receiving party or an affiliate independently of
the information received from the disclosing party.
2. Neither party shall disclose confidential information of the other to any
party other than the minimum number of its own and its affiliates
responsible employees who are directly engaged in the consultation,
evaluation and preparation of information with respect to the purposes of
this Agreement, and to whom it is essential to disclose the same, and shall
take all reasonable steps to ensure that such employees, whether during or
after their employment with either COMPANY or UNIMED, shall treat
confidential information as such and keep it secret from other entities or
persons.
3. Nothing in this Agreement shall be construed to grant either party any
right or license under any patent or other intellectual property of the
other party, and nothing herein shall obligate either party to enter into
any further agreements with the other. Neither party shall use or publicly
disclose that it is engaged in discussions or has entered a business
arrangement with the other (except as may be required by law), and neither
party shall use the confidential information of the other except for the
purposes of consultation, evaluation and preparation of information and
business proposals for the other.
4. Upon termination of interactions between the parties with respect to this
subject, or upon the written request of the disclosing party, the receiving
party shall return all written or other physical or electronic embodiments
of confidential information to the disclosing party, together with all
copies thereof (except for one record copy) or copies of any part thereof,
as shall then be in receiving party's possession.
5. This Agreement shall be binding on any parent, subsidiary, affiliate,
successor or assign of either party participating in the evaluation of the
subject matter, as if a party to this Agreement.
6. The obligations of COMPANY and UNIMED under this Agreement shall survive
the conclusion of technical and business discussions related to evaluation
of the subject matter and shall continue for a period of ten (10) years
from the date of this Agreement.
7. This Agreement shall be construed and the relationship between the parties
determined in accordance with the substantive Laws of the State of Georgia.
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<PAGE> 3
IN WITNESS WHEREOF, COMPANY and UNIMED hereby execute this Agreement in
duplicate by their respective duly authorized officers on the date(s) below:
UNIMED PHARMACEUTICALS, INC. SOLVAY PHARMACEUTICALS, INC.
[UNIMED] [COMPANY]
By: /s/ Robert E. Dudley By: /s/ Joseph H. Feldhouse
-------------------------- --------------------------
Robert E. Dudley, Ph.D. Joseph H. Feldhouse
Title: President and CEO Title: Director, Licensing and
Acquisitions
Date: 3/12/99 Date: 3/5/99
------------------------ ------------------------
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<PAGE> 1
EXHIBIT 11
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
AMENDMENT NO. 1 TO RIGHTS AGREEMENT ("Amendment No. 1"), dated as of
June 11, 1999, between Unimed Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and HARRIS TRUST AND SAVINGS BANK (the "Rights Agent"), amending the
Rights Agreement, dated as of June 16, 1997, between the Company and the Rights
Agent (the "Rights Agreement").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company has approved an
Agreement and Plan of Merger (the "Merger Agreement") among Solvay
Pharmaceuticals, Inc., a Georgia corporation ("Parent"), Utah Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Acquisition Sub"), and the Company, providing for Acquisition Sub to commence
an all-cash tender offer for all outstanding shares of the common stock, par
value $.25 per share, of the Company (the "Offer") and for the subsequent merger
of Acquisition Sub with and into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company has determined that the
Merger Agreement and the transactions contemplated thereby, including, without
limitation, the Offer and the Merger, are fair to and in the best interests of
the Company and its stockholders;
WHEREAS, Section 27 of the Rights Agreement provides that the Company
may from time to time supplement or amend the Rights Agreement without the
approval of any stockholders of the Company to, among other things, make any
provisions with respect to the Rights which the Company may deem necessary or
desirable; provided, however, that from and after the Distribution Date, the
Rights Agreement may not be supplemented or amended in any manner which would
adversely affect the interests of the holders of Rights; and
WHEREAS, in compliance with Section 27 of the Rights Agreement, on June
8, 1999 the Board of Directors of the Company resolved to amend the Rights
Agreement as hereinafter set forth and has executed and delivered this Amendment
No. 1 immediately prior to the execution and delivery of the Merger Agreement,
and directs the Rights Agent to enter into this Amendment No. 1.
NOW, THEREFORE, the Company hereby amends the Rights Agreement as
follows:
1. Section 1 of the Rights Agreement is hereby amended by adding the
following definitions thereto:
<PAGE> 2
"Acquisition Sub" shall mean Utah Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of Parent.
"Merger" shall mean the merger of Acquisition Sub with and
into the Company as contemplated by the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of June 11, 1999, by and among Parent, Acquisition Sub
and the Company, as the same may be amended in accordance with the
terms thereof.
"Offer" shall have the meaning set forth in the Merger
Agreement.
"Parent" shall mean Solvay Pharmaceuticals, Inc., a Georgia
corporation.
2. Section 1(a) of the Rights Agreement is hereby amended by adding to
the end thereof the following:
"Notwithstanding anything to the contrary contained herein,
neither Parent, Merger Sub, nor any Affiliate of Parent or Merger Sub
shall be or become an Acquiring Person (and no Stock Acquisition Date,
Distribution Date or Triggering Event shall occur) as a result of (i)
the announcement, commencement or consummation of the Offer, or (ii)
the execution, delivery or performance of the Merger Agreement (or any
amendment thereto in accordance with the terms thereof) or the
consummation of the transactions contemplated thereby (including,
without limitation, the Offer and the Merger)."
3. Sections 1(g) and 3(a) of the Rights Agreement are hereby amended by
adding to the end thereof the following:
"Notwithstanding anything to the contrary contained herein, no
Distribution Date shall occur as a result of (i) the announcement,
commencement or consummation of the Offer, or (ii) the execution,
delivery or performance of the Merger Agreement (or any amendment
thereto in accordance with the terms thereof) or the consummation of
the transactions contemplated thereby (including, without limitation,
the Offer and the Merger)."
4. Section 11 of the Rights Agreement is hereby amended by adding to
the end thereof the following:
"(q) Notwithstanding anything to the contrary contained
herein, the provisions of this Section 11 will not apply to or be
triggered by (i) the announcement, commencement or consummation of the
Offer, or (ii) the
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<PAGE> 3
execution, delivery or performance of the Merger Agreement (or any
amendment thereto in accordance with the terms thereof) or the
consummation of the transactions contemplated thereby (including,
without limitation, the Offer and the Merger)."
5. Section 13 of the Rights Agreement is hereby amended by adding to
the end thereof the following:
"(d) Notwithstanding anything to the contrary contained
herein, the provisions of this Section 13 will not apply to or be
triggered by (i) the announcement, commencement or consummation of the
Offer, or (ii) the execution, delivery or performance of the Merger
Agreement (or any amendment thereto in accordance with the terms
thereof) or the consummation of the transactions contemplated thereby
(including, without limitation, the Offer and the Merger)."
6. The term "Agreement" as used in the Rights Agreement shall be deemed
to refer to the Rights Agreement as amended by this Amendment No. 1.
7. Capitalized terms used herein but not defined herein shall have the
respective meanings ascribed to them in the Rights Agreement.
8. Except as set forth herein, the Rights Agreement shall remain in
full force and effect and shall be otherwise unaffected hereby.
9. This Amendment No. 1 may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed, as of the day and year first above written.
UNIMED PHARMACEUTICALS, INC.
By: /s/ Robert E. Dudley
---------------------------------
Name: Robert E. Dudley
Title: President and Chief Executive
Officer
HARRIS TRUST AND SAVINGS BANK,
as Rights Agent
By: /s/ K.W. Penn
---------------------------------
Name: K.W. Penn
Title: Assistant Vice President
<PAGE> 1
Exhibit 12
[GRAPHIC OMITTED]
Solvay Group
Notes to the consolidated financial Statements
56 Income statement summary
57 Balance sheet summary
58 Cash flow statement
59 Changes in shareholders' equity
59 Criteria and methods of consolidation
60 Notes to the financial statements
69 Changes to the scope of consolidation in 1997
70 List of consolidated companies
72 Valuation rules
74 Financial data
Statutory Annexes
78 Consolidated financial statements
80 Balance sheet - Income statement
82 Notes to consolidated statement
85 The External Auditor's report on the consolidated
financial statements of the Solvay Group
86 Financial statements of Solvay S.A. (summary)
<PAGE> 2
- ----------
56 SOLVAY
[GRAPHIC OMITTED]
Consolidated income statement summary
<TABLE>
<CAPTION>
(in BEF million) Notes 1996 1997
<S> <C> <C> <C>
Sales (1) 281,967 310,979
Cost of sales -206,263 -231,846
Gross margin (1) 75,704 79,133
General and sales overheads (2) -42,038 -42,912
Research expenditures (3) -12,303 -11,471
Other operating expenses and income (4) -1,779 -3,290
Other financial expenses and income (5) 1,737 665
EBIT (6) 21,321 22,125
Unallocated expenses and income (4) -- -280
Net debt expenses (7) -3,680 --1,553
Current taxes (8) -6,233 -7,073
Share in earnings of companies valued according 134 -6
to the equity method
Net earnings before extraordinary items 11,542 13,213
Extraordinary items, net after tax (9) 2,087 549
Net income 13,629 13,762
Minority interests 328 430
Solvay's share of earnings 13,301 13,332
</TABLE>
<PAGE> 3
------------------------
Financial Statements 57
Consolidated balance sheet summary
<TABLE>
<CAPTION>
At December (in BEF million) Notes 1996 1997
<S> <C> <C> <C>
Assets
Fixed assets 162 289 183 789
Start-up expenditures and intangible assets (10) 7 783 9 938
Consolidation differences (goodwill) (11) 2 415 3 394
Tangible assets (12) 138 466 150 583
Financial assets (13) 13 625 19 874
Current assets 120 835 130 835
Inventories (14) 38 428 40 933
Trade receivables (14) 46 577 56 749
Other receivables (14) 28 928 14 260
Cash or cash equivalents (15) 6 902 18 893
TOTAL ASSETS 283 124 314 624
Shareholders' equity and liabilities
Total equity (16) 116 066 130 547
Shareholders' equity 108 625 119 806
Minority equity 7 441 10 741
Provisions and deferred taxes (17) 56 505 66 005
Liabilities 110 553 118 072
Financial liabilities (15) 44 589 47 830
due in more than one year 37 622 26 418
due within one year 6 967 21 412
Trade liabilities (14) 33 528 35 158
Other liabilities (14) 32 436 35 084
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 283 124 314 624
</TABLE>
<PAGE> 4
- ----------
58 SOLVAY
Cash Flow statement
The cash flow statement shows changes in the cash and cash equivalents relating
to operations, investments and financing from one accounting period to the next.
The comparison explains the overall change in cash and cash equivalents. The
statement is prepared using the indirect method proposed by IAS 7. This method
enables cash flow (net earnings + depreciation), adjusted to exclude non-cash
items(1) and changes in working capital(2), to be reconciled with net
investments, income from sales of fixed assets and investments and financing
operations (changes in debt, increase of capital and distributions).
<TABLE>
<CAPTION>
(in BEF million) 1996 1997
<S> <C> <C> <C>
Cash flow from operations
Net earnings 13 629 13 762
Depreciation and amortization 19 416 20 098
Cash flow 33 045 33 860
Non Cash items (1) -8 254 -5 996
Changes in provisions 3 416 9 500
Changes in working capital (2) -12 565 6 269
Net cash provided by operations 15 642 43 633
Cash flow from investing activities
Acquisition of assets and investments -27 959 -29 956
Sales of assets and investments (3) 18 503 5 763
Change in notes receivable (4) -132 -5 333
Net cash used by investing activities -9 588 -29 526
Cash flow from financing activities
Increase of capital (5) 406 500
Changes in borrowings -4 655 3 242
Dividends -6 599 -6 292
Net cash used by financing activities -10 848 -2 550
Net changes in cash and cash equivalents -4 794 11 557
Effect of exchange rates and change in scope -5 821 434
Cash and cash equivalents at the beginning of the year 17 517 6 902
Cash and cash equivalents at the end of the year 6 902 18 893
</TABLE>
(1) Non-cash items are chiefly income from the sale of fixed assets and
investments (income and expenses included in the earnings but not
reflected in the cash position).
(2) In 1996, changes in working capital included the BEF 14.4 billion
receivable from American Home Products for the sale of the Animal Health
businesses. Balance sheet difference as determined in the consolidated
accounts.
(3) Sale of fixed assets and investments include income from the sale of
Kali-Chemie Akzo Gmbh, Griffine Enduction and Gorvi, and 48.8% of Solvay
Indupa do Brasil.
(4) Changes in long-term receivables relate mainly to the purchase of assets
in the Group's risk portfolio (technical reserves) bought back from
insurance companies (see note 17 under "provisions" heading).
(5) Increases of capital include those in Solvay S.A. related to the exercise
of warrants issued to Group managers around the world, and those related
to the capital contributions of our partners to jointly owned
subsidiaries.
Cash flow statement
[GRAPHIC OMITTED]
<PAGE> 5
------------------------
Financial Statements 59
[GRAPHIC OMITTED]
Changes in shareholders' equity
<TABLE>
<CAPTION>
Negative
consolidation
and equity
Issue Revaluation method
(in BEF million) Capital Premiums surplus Reserves differences
<S> <C> <C> <C> <C> <C>
Book value at
the end of the
previous year 32 266 1 226 4 492 65 268 1 568
Changes during the year:
Income for the year 13 332
Proposed dividend -7 152
Changes during the year 17 802 -1 099 -1 083 -15 611 -341
Changes in exchange rates
Changes in scope
Changes in
minority interests
Book value at the
end of the year 50 068 127 3 409 55 837 1 227
<CAPTION>
Exchange Capital Shareholders' Minority
(in BEF million) differences Subsidies equity interests TOTAL
<S> <C> <C> <C> <C> <C>
Book value at
the end of the
previous year 2 350 1 455 108 625 7 441 116 066
Changes during the year:
Income for the year 13 332 13 332
Proposed dividend -7 152 -7 152
Changes during the year -430(1) -762 -762
Changes in exchange rates 5 743 12 5755 5 755
Changes in scope 11 -3 8 8
Changes in
minority interests 3 300 3 300
Book value at the
end of the year 8 104 1 034 119 806 10 741 130 547
</TABLE>
(1) Subsidies received - 27
Subsidies reversed : 457
Criteria and methods of consolidation
1. Criteria
To appear in the consolidated statements a company must be significant with
respect to the Group: that is, it must satisfy at least one of the following
conditions:
o sales of BEF 400 million
o total assets of BEF 200 million
o employment of 150 persons.
Nevertheless, companies that do not meet these criteria are consolidated if the
Group believes that they have the potential for rapid development, or if they
hold shares of other companies consolidated under the above criteria.
2. Methods
A) FULL CONSOLIDATION
Companies over which the Group has exclusive control, either legally or in fact,
are fully consolidated.
B) PROPORTIONAL CONSOLIDATION
Companies over which the Group has joint control with a limited number of
associates are consolidated proportionally.
C) EQUITY METHOD
Companies in which the Group holds 20% to 50% of the capital and over which it
has a significant influence are valued according to the equity method.
<PAGE> 6
- ----------
60 SOLVAY
[GRAPHIC OMITTED]
Notes to the financial statements
The notes refer to the numbers indicated in the summaries of the consolidated
statements. The statutory annexes provide additional details on the headings
commented on below.
Consolidated income statement
Consolidated results
[GRAPHIC OMITTED]
(1) SALES AND GROSS MARGIN
Sales topped the BEF 300 billion mark for the first time in Group history, with
a 10% increase from 1996. The strengthening of foreign currencies against the
Belgian franc, mainly the U.S. dollar and the Mercosur currencies linked to
it but also the British pound, had a positive impact in the order of 5%
Acquisitions and sales of activities reduced consolidated sales by 2%. In 1996,
Group sales included sales of the Animal Health (approximately BEF 7 billion)
and enzymes (BEF 1.3 billion) businesses and Plavinil (BEF 1.7 billion). The
1997 figures, on the other hand, include Indupa S.A.I.C. for the entire fiscal
year and Solvay Sodi from April 15. Oy Finnish Peroxide sales are included in
full for the entire fiscal year, and Solvay Engineered Polymers sales from April
on are included in full, reflecting the Group's increased ownership in the two
companies. Gross margin showed a BEF 3.4 billion improvement, owing chiefly to a
strong performance by the Plastics sector. On the other hand, it also suffered
from the negative impact of the sharp fall in profits in the Chemicals and, to a
lesser degree, Processing sectors. The combined effect was a slip from 26.8% of
sales in 1996 to 25.4% in 1997. Gross margin is calculated after distribution
and warehousing costs and depreciation of related facilities, which totaled BEF
18.7 billion in 1996 and BEF 20.1 billion in 1997, after warehouse adjustments
and license fees.
(2) GENERAL SALES AND OVERHEADS
This item rose by BEF 0.9 billion (+ 2%), but in constant currency it declined.
The increase was chiefly the result of the impact of the stronger currencies;
the dollar alone accounts for an increase of BEF 1.2 billion. Write-downs on
receivables and inventories of finished goods climbed to BEF 0.7 billion in
1997, compared to BEF 0.5 billion in 1996.
(3) RESEARCH EXPENDITURES
These represent 3.7% of sales, or BEF 11.5 billion -- down slightly from 1996.
The decrease can be explained largely by the absence of expenditures in the
Animal Health businesses, now sold. Major investment in research continues in
the Pharmaceuticals sector (55% of total Group research expenditure). Research
represents 15% of the sector's sales, compared to l7% in 1996. This reflects
strong growth in sales and the reorganization of Pharmaceuticals research with a
view to enhancing efficiency.
Furthermore, the Group acquired the marketing rights for an innovative hormone
replacement therapy patch to add to its range of gynecological products, and
signed an agreement in the field of molecular biology with the Belgian research
company Innogenetics; the Group has also acquired an ownership interest in that
company.
<TABLE>
<CAPTION>
(in BEF million) 1996 1997
<S> <C> <C>
Start-up costs and preliminary studies - 691 - 520
Cost of closures, retirements and demolitions - 615 - 708
Costs or trials and tests - 158 - 146
Amortization of goodwill - 188 - 261
Net charges to provisions for risks and expenses - - 1 470
not allocated to operating expenses(1)
Results of miscellaneous operations - 127 - 185
Balance of the other expenses and income - 1 779 - 3 290
</TABLE>
(1) In 1996 : this item came under balance of the other expenses and income.
(4) OTHER OPERATING EXPENSES AND INCOME
This item records adjustments to non-financial assets, start-up costs, income on
miscellaneous loans, and recording and reversal of provisions for risks and
charges and depreciation of intangible assets, where they are not charged to
cost of sales. Changes in this item are as follows:
<PAGE> 7
------------------------
Financial Statements 61
The net unallocated charges to provisions include:
o major provisions intended to cover expenses relating to the reorganization
into subsidiaries;
o the annual adjustment expense relating to retired personnel, which is
recorded under this heading, whereas the establishment of pensions for
working personnel is charged to operating costs. In Germany, the annual
pension adjustment will from now on cover the three-yearly revaluation of
pensions.
Furthermore in 1997, compensation has been paid or provided for in settlement of
legal disputes relating to drilling activities or for maintenance of customer
relations. In 1996, cavities from the salt extraction activity were sold,
generating operating income; no such transactions were conducted in 1997.
Lastly, BEF 0.3 billion of expenses not allocated by sector are recorded below
EBIT; these form part of the corresponding item in the full accounts, shown in
the annex.
(5) OTHER FINANCIAL EXPENSES AND INCOME
This heading, down BEF 1.1 billion, records mainly income from investments and
financial receivables and reversals of capital subsidies. It also includes
miscellaneous financial expenses (banking costs, costs linked to the creation of
corporations and increase of capital, costs of capital contribution, etc.) and
income (commissions, guarantees received, income from trade receivables, etc.).
In 1996, this heading included exchange differences in the amount of BEF 0.5
billion relating to debt positions that in 1997 were entered as net debt
expenses to enable a clearer analysis EBIT on the one hand and net debt expenses
on the other hand.
<TABLE>
<CAPTION>
(in BEF million) 1996 1997
<S> <C> <C>
Income from financial assets 942 892
Exchange profits and losses 1 132 297
Miscellaneous (net) -337 -524
Other financial expenses and income 1 737 665
</TABLE>
(6) EBIT
EBIT is the level of results recorded by the ongoing activities of the Group
before taking into account net debt expenses, taxes and elements not allocated
by sector. EBIT by sector has developed as follows:
<TABLE>
<CAPTION>
(in BEF million) 1995 1996 1997
<S> <C> <C> <C>
Chemical Sector 11.2 11.0 7.7
Plastics Sector 8.8 3.5 7.7
Processing Sector 0.8 2.5 1.9
Health 3.3 4.3
incl. Pharmaceuticals Sector 3.1 3.9 4.2
Total 24.1 21.3 22.1
</TABLE>
EBIT / Sales
[GRAPHIC OMITTED]
(7) NET DEBT EXPENSES
The expenses related to net indebtedness were as follows: Net debt expenses were
down 58% from 1996. To permit better analysis of results, exchange differences
linked to net debt positions are recorded under this heading as of 1997. The
sharp reduction in net debt expenses is due to the reduction of the Group's net
debt, which fell from BEF 37.7 billion at the end of 1996 to BEF 28.9 billion at
the end of 1997, relatively stable interest rates and the adjustment mentioned
above.
As regards interest rates:
Net debt expenses
[GRAPHIC OMITTED]
<PAGE> 8
- ----------
62 SOLVAY
<TABLE>
<CAPTION>
(in BEF million) 1996 1997
<S> <C> <C>
Borrowing costs - 5 219 - 3 774
Income from investments 1 539 1 361
Effects of exchange rate differences - 860
Net debt expenses (total) - 3680 - 1 553
</TABLE>
o Rates in continental Europe settled at a low level, where most of the
Group's indebtedness carries variable interest rates. Sharp falls were
recorded for some currencies (ESP, ITL)
o In the US, rates rose only slightly. The Group, however, was not affected
as its US indebtedness almost exclusively carries fixed interest rates.
Our cash and cash equivalents in US dollars continue to benefit from more
favorable interest rates than those in the Deutsche mark zone.
Capital structure
[GRAPHIC OMITTED]
(8) CURRENT TAXES
Current taxes rose 13% from 1996, slightly less than the increase in earnings.
The Group's average tax rate fell from 35.3% in 1996 to 34.9%.
(9) EXTRAORDINARY ITEMS
Net extraordinary items showed a positive balance of approximately BEF 0.6
billion in 1997. The figure is down from the BEF 2.1 billion generated in 1996,
which had come in part from profits on the sale of the Animal Health businesses.
A share of the profits was generated by the sale of activities, principally the
Group's share in the Kali-Chemie Akzo joint venture and Solvay do Brasil's
caustic soda and PVC activities, sold to Indupa S.A.I.C. Profit on the latter
transaction relates to the interest of the minority shareholders in Indupa
S.A.I.C., i.e. 48.8%. But there were also expenses: reorganization costs and
provisions for emulsion PVC, persalts and hydrogen peroxide, among others,
and the establishment of a provision on the order of BEF 1.7 billion for
unrealized Group exchange losses on the foreign currency debts of our Asian
subsidiaries.
During the second half of the year, faced with the continuing volatility of
Asian currencies and having established the provision described above to cover
unrealized exchange losses on the entire US dollar debt of our Asian
subsidiaries, we set up an accounting hedge designed to delay the impact of
potential future exchange differences until the corresponding maturity dates.
The differences are then recorded as realized at the time of repayment. This
mechanism covers all the emerging markets of Asia and Latin America.
Extraordinary items break down as follows:
<TABLE>
<CAPTION>
(in BEF million) 1996 1997
<S> <C> <C>
Extraordinary income 8.39 4.84
Extraordinary expenses -5.76 -4.76
Tax effect of extraordinary items -0.54 0.47
Net extraordinary items 2.09 0.55
</TABLE>
<PAGE> 9
------------------------
Financial Statements 63
[GRAPHIC OMITTED]
Consolidated balance sheet
(10) START-UP EXPENDITURES AND INTANGIBLE ASSETS
These are composed principally of start-up expenses (Incurred before the
commissioning of new facilities), mining leases for trona in the US and
registration and development costs related to the introduction of fluvoxamine in
the US and Japanese markets. Acquired patents and licenses are also included.
Start-up expenses are amortized over five years and intangible assets on the
basis of their economic lifetime.
Intangible assets rose from BEF 6.6 billion at the end of 1996 to BEF 8.8
billion, largely owing to concessions, patents and licenses following
acquisition of mines at Solvay Soda Ash Joint Venture and licenses in the
Pharmaceuticals Sector in the United States. Start-up expenses remained stable
at BEF 1.2 billion.
(11) POSITIVE CONSOLIDATION DIFFERENCES
This is an excess in the price paid over the value, adjusted if necessary, of
shareholders' equity in consolidated companies and those accounted for using the
equity method; this item primarily records goodwill generated in the acquisition
of companies in the fields of health, automotive products, pipes and trona, and
shares purchased from minority shareholders in Kali-Chemie AG.
Goodwill is amortized over 15 years, with the exception of goodwill relating to
trona mining activities (40 years) and human health (between 15 and 40 years,
depending on the activity acquired).
The figures for this item are as follows:
The increase of close to BEF 1 billion in this heading is largely the result of
the surcharge that the minority shareholders in Indupa S.A.I.C. agreed to pay
for their share in the net assets of Solvay Indupa do Brasil. The surcharge
reflects the difference between the historical cost of the assets and
liabilities acquired, as recorded in the consolidated accounts, and their
appraised value.
<TABLE>
<CAPTION>
(in BEF million)
<S> <C>
Net value at the end of 1996 2 415
Acquisitions of activities 1 116
Deprecation for the fiscal year - 261
Conversion differences 124
Net value at the end of 1997 3 394
</TABLE>
(12) TANGIBLE ASSETS
This item contains the acquisition cost, adjusted if necessary, of the Group's
fixed assets, less cumulative depreciation.
The net value of tangible assets rose from BEF 138.5 billion at the end of 1996
to BEF 150.6 billion at the end of 1997.
The principal factors in this growth can be summarized below:
At the end of 1997, construction in progress amounted to BEF 15.6 billion, up
BEF 3.3 billion from 1996, and concerned principally Solvay Interox and Solvay
Minerals' mine at Green River in the US, and the Brazilian subsidiaries.
<TABLE>
<CAPTION>
(in BEF million)
<S> <C>
Net value at the end of 1996 138 466
Expenditure on fixed assets 20 866
Depreciation - 18 970
Divestitures and closures - 1 404
Exchange differences 5 299
Changes to the scope of consolidation 6 326
Net value at the end of 1997 150 583
</TABLE>
<PAGE> 10
- ----------
64 SOLVAY
[GRAPHIC OMITTED]
<TABLE>
<S> <C>
Land not depreciated
industrial buildings 20 to 30 years
Administrative buildings 30 to 40 years
Industrial plants 10 to 17 years
Equipment and fittings approximately 10 years
Computer equipment 4 to 5 years
Rolling stock 5 to 25 years
</TABLE>
The lives generally used for the various categories of fixed asset are as
follows:
(13) FINANCIAL ASSETS
With the exception of interests in companies valued using the equity method,
financial assets are recorded on the balance sheet at the lower of purchase cost
or realizable value. This heading covers:
o interests in companies valued using the equity method
o interests in companies that, not being significant for the Group, are
neither consolidated nor accounted for using the equity method
o long-term loans to and receivables from these companies
o interests in other companies intended to create long-term relationships
with them: Sofina S.A. (12.6%) and Generale de Banque S.A. (3%), and in
the Pharmaceuticals sector ArQule and Cadus in the US and Innogenetics in
Belgium in the field of biotechnology research
o assets relating to the Group's risk portfolio (technical reserves) bought
back from insurance companies (see note 17 under "provisions").
A combination of the last item, the participating interest in Innogenetics and
the sale of Plavinil accounts for the BEF 6.3 billion increase in the balance
of financial assets headings in 1997.
(14) CURRENT ASSETS AND LIABILITIES
The working capital requirement consists of all inventories and trade and other
receivables, less trade and other liabilities. The balance fell by BEF 6.3
billion. This was due to:
o the collection of the BEF 14.4 billion receivable from American Home
Products for the sale of Animal Health
o the recovery of the deposit made at the end of 1996 to purchase the
Bulgarian soda ash plant Sodi
o the payment of the balance of the purchase price of Indupa S.A.I.C. (BEF
1.2 billion)
o less recourse to securitization and discounting of trade receivables, and
the increase in working capital requirement connected with the development
of activities.
The change can be shown as follows:
<TABLE>
<CAPTION>
(in BEF million) 1996 1997
<S> <C> <C>
Inventories 38 428 40 933
Trade receivables 46 577 56 749
Other receivables and transitory accounts 28 928 14 260
Trade payables - 33 528 - 35 158
Other debts and transitory accounts - 32 436 - 35 084
Working capital requirements 47 969 41 700
</TABLE>
Inventories of salable products represented an average of 24 days' sales in both
1996 and 1997. Trade receivables increased by 21.8%, more sharply than sales,
and represent 66 days' sales compared to 60 days in 1996, partly the result of
decreased securitization and discounting of receivables.
(15) NET INDEBTEDNESS
The Group's net indebtedness is the difference between borrowings and cash and
cash equivalents (including term and demand deposits). The cash position
increased by BEF 12 billion.
<PAGE> 11
------------------------
Financial Statements 65
This was the result of major inflows and outflows of funds. In particular, the
BEF 14.4 billion receivable relating to the sale of the Animal Health businesses
has been collected, as have the proceeds from the sale of Kali-Chemie Akzo
GmbH, Griffine Enduction and Gorvi. On the other hand, part of the cash position
was used, together with cash flow, to cover the major program of investments and
acquisitions implemented in 1997.
In 1998, the Group will use its cash to repay a number of major borrowings: a
private placement of USD 150 million, a public placement of 1.5 billion
Luxemburg Francs and a government loan of 1 billion French Eurofrancs.
Indebtedness rose from BEF 44.6 billion to BEF 47.8 billion, largely as a result
of exchange-rate effects. The Group's net indebtedness fell by BEF 8.8 billion
to BEF 28.9 billion at the end of 1997, compared to BEF 37.7 billion at the end
of 1996.
<TABLE>
<CAPTION>
(in BEF million) 1996 1997
<S> <C> <C>
Cash and cash equivalents 6 902 18 893
Long-term financial liabilities 37 822 26 418
Subordinated debt 626 700
Debenture debt 27 012 14 137
Financing leases 537 1 679
Credit institutions 8 965 9 139
Other borrowings 482 763
Short-term financial liabilities 6 967 21 412
Current portion of
long-term debt 1 127 16 468
Credits institutions 5 196 4 128
Other borrowings 644 726
Net financial indebtedness 37 687 28 937
</TABLE>
Net debt to equity
<TABLE>
<CAPTION>
<S> <C>
1989 -4
1990 19
1991 27
1992 34
1993 45
1994 38
1995 32
1996 32
1997 22
(in %)
</TABLE>
Net debt to equity
The Group's ratio of net debt to equity improved considerably from 1996,
dropping from 32% to 22%, as a result of the combined effect of an improvement
in the net debt situation and an increase in Group equity brought about by
additions to reserves and strong currency markets, especially for the dollar,
and an increase in minority interests. The latter factor is principally a
reflection of the acquisition of Solvay Sodi in Bulgaria and Indupa S.A.IC.'s
purchase of Solvay Indupa do Brasil.
Financing currencies
The Group's borrowings are generally effected through special financing
vehicles, which make the proceeds of their borrowings available to the Group's
operating entities. The choice of currency for a borrowing depends largely on
the opportunities offered by various markets; the currency selected is not
necessarily the currency of the country in which the funds will be invested.
However, the proceeds of borrowings are made available to operating companies in
local currencies, where necessary by means of a "currency swap" from the
currency in which the financing vehicle holds the funds. The cost of currency
swaps is included in borrowing costs. This enables the Group to limit the
foreign exchange risks for both the financing vehicle and the final user of the
funds. In emerging markets, it is not always possible to use local financial
markets to borrow in local currency, either because they are too small and the
funds are not available, or because of cost. In such cases strong currency
borrowings are necessary. Following the devaluation of the Asian currencies, the
Group set up provisions to cover potential exchange losses, and established an
accounting hedge as protection against the volatility of currency markets in the
region.
<PAGE> 12
- ----------
66 SOLVAY
<TABLE>
<CAPTION>
(in BEF million) end 1997
<S> <C>
Borrowings maturing:
end 1998 16 468
in 1999 3 111
in 2000 5 584
in 2001 4 056
in 2002 3 112
in 2003 2 302
from 2003 onwards 13 197
Total 47 830
</TABLE>
Maturity of indebtedness
For the purposes of analysis, the sum total of revolving lines of credit has
been included under permanent indebtedness.
Borrowings and facilities
The main borrowings maturing after 1998 are:
o in the US:
USD 100 million maturing in equal portions from now until 2002, at 8.16%,
and USD 175 million maturing in equal portions from 2003 onwards, at
8.55%
o Our 44.9% share in the USD 250 million financing for Vinythai, a set of
borrowings maturing at regular intervals from now until 2006, at rates
ranging from 7.9 to 10.3% at December 31, 1997
o BEF 3 billion maturing in the year 2000, at 4.64% at December 31, 1997
o GBP 23 million maturing in portions from now until 2008 at LIBOR
o DEM 50 million maturing in portions from now until 2005 at 6.5%
The Group also has access to various credit facilities. These include:
o a commercial paper program worth USD 500 million
o a standby credit facility of DEM 1 billion or its equivalent in Euros. In
addition, the Group has access to a multi-currency, multi-country program
of securitization of receivables worth the equivalent of BEF 16 billion.
During the 1997 fiscal year, the Group had very limited recourse to the
latter program.
Derivatives
These are used to cover clearly identified financial risks only. In practice
they are principally currency and interest swaps. In addition to making
financing available to our operating subsidiaries (see above), currency swaps
are part of our policy of insuring against transactional exchange-rate risks.
Interest swaps are a means of:
o fixing the rate for a portion of our debt (particularly in US dollars and
British pounds), and
o replacing our interest rate risk relating to a portion of our debt in
European currencies with an interest rate risk in Deutsche marks.
Interest swaps generally cover a period of rears.
Interest rate management
Interest rate management operates at Group level and is applied to the
balance of net indebtedness per currency. The Group is currently on a fixed rate
for the US dollars and the British pounds and a floating rate for the main
currencies of continental Europe. This enables it to take advantage of the
differential between the short- and long-term rates for the latter currencies.
(16) SHAREHOLDERS' EQUITY
Capital
At 31 December 1997, the issued capital of Solvay S.A. had increased to BEF
50,068 million compared with BEF 32,266 million at 31 December 1996, mainly as a
result of the capitalization of reserves approved at the General Shareholders'
Meeting of June 5, 1997. Giving effect to the 10-for-one stock split approved at
that meeting, the capital was represented at 31 December 1997 by 83 925 280
shares without par value.
<PAGE> 13
------------------------
Financial Statements 67
[GRAPHIC OMITTED]
During the 1997 fiscal year, 24,500 warrants issued to senior Group executives
around the world were excercised, each representing the issue of 10 new shares.
During an exercise period running from February 10-27 1998, 11,640 warrants were
exercised and converted into 116,400 new shares.
These entitle their holders to the balance of the dividend payable on June 11,
1998 and bring the total number of shares eligible to receive that balance to
84,041,680.
Issue premiums
The issue premiums for Solvay S.A. were capitalized on June 30, 1997.
The balance at the end of 1997 represents the premium paid as a result of the
exercise of warrants in September 1997, and totals BEF 127 million.
Reserves
These were capitalized at an amount of BEF 16,309 million. The second factor in
the change in reserves is net undistributed income, since the balance sheet is
presented after distribution.
The dividend proposed to the General Shareholders' Meeting of Solvay S.A. is
recorded under the "other liabilities" heading.
Negative consolidation differences
This heading shows negative consolidation differences recorded when companies
are first included in the scope of consolidation, or first valued using the
equity method.
The reduction of BEF 341 million is due to the realization of certain items. In
particular, when Solvay Indupa do Brasil was sold to Indupa S.A.I.C., the
portion of the negative consolidation difference resulting from the merger of
Brasivil into Solvay do Brasil in 1990 was realized; that portion was therefore
incorporated in the year's results up to the value of the interest of the
minority shareholders in Indupa S.A.I.C.
Conversion differences
This heading records the sum of conversion differences that arise when the
conversion of shareholders' equity at the end of the year is compared with the
value in Belgian francs of the same shareholders' equity as it was built up over
time.
Also included are differences resulting from the use of average rates in
expressing results.
The increase of BEF 5,754 million was the result of two opposing factors:
o on the one hand, the appreciation of certain currencies (the US dollar in
particular against the Belgian franc
o and on the other hand, exchange-rate differences generated by Solvay do
Brasil as part of the integral annual revaluation of its balance sheets,
which differences were not accounted for in the consolidated accounts;
when Solvay Indupa do Brasil was sold to Indupa S.A.I.C. these differences
were realized, up to the value of the minority shareholders' interest in
the latter.
Capital Subsidies
This heading covers investment subsidies granted by public authorities. It
declined when the amounts of equipment grants included in the results were
prorated to reflect the depreciation recorded on the applicable equipment.
Beginning this year, new subsidies are entered under this heading and
immediately recorded in results. At the same time, a corresponding depreciation
is applied to the subsidized assets to bring the figure into line with their
actual cost to the Group. This can be seen in the table showing changes in
shareholders' equity, page 59.
In 1997, the sums concerned were insignificant.
<PAGE> 14
[GRAPHIC OMITTED]
- ----------
68 SOLVAY
Minority interests
This heading groups the interests of third parties in partly owned, fully
consolidated subsidiaries.
They chiefly represent the interests of Asahi Glass in Solvay Soda Ash Joint
Venture in the US, the minority interests in Indupa S.A.I.C. and, beginning this
year, the interest of local shareholders in the Bulgarian subsidiary Solvay Sodi
JS Co.
(17) PROVISIONS AND DEFERRED TAXES
In total, provisions and deferred taxes increased from BEF 56.5 billion to BEF
66.0 billion. These concern primarily pension funds and similar commitments made
by the parent company and its subsidiaries to personnel, by way of ordinary
pensions and provisions for early retirement -- a total of BEF 21.4 billion.
The heading also includes deferred taxes totaling BEF 8 billion -- up an
appreciable BEF 2.2 billion from 1996 as a result both of accelerated tax
depreciation by our American businesses and the appreciation of the US dollar.
The remainder of BEF 36.6 billion (up BEF 1 billion from 1996), represents the
costs of major repairs and maintenance (BEF 1 billion, unchanged from 1996) and
also a number of risks and charges connected with:
o mining activities, the basis for a number of Group products
o increasing constraints governing the disposal and treatment of waste,
which remain technically unavoidable in certain activities, yet represent
an ever-growing concern along with other aspects of environmental
protection
o production and marketing activities ("product" and "country" risks, civil
liability for products); and, finally
o the Group's relations with others involved in or affected by Group
activities (customers, suppliers, staff, authorities, local communities,
partners in subsidiaries and participating interests, etc.).
Some of these risks cannot be insured by a third party, or can be only partially
covered (franchises, guarantee ceilings, etc.). The Group has therefore
gradually built up a provision to cover these risks and expenses as far as they
can be assessed at the general management level. For inventory, this provision
is adjusted to an appropriate level. In addition, the insurance company
ICInsurance has decided to withdraw from Blair International Insurance (Cayman)
Ltd., which it owned jointly with the Solvay Group. Now free to act with the
company, Solvay has decided to recover its risk portfolio from the insurance
companies managing it. The provisions intended to cover such risks "technical
reserves" are now recorded as Group provisions. At December 31, 1997, these
stood at around USD 150 million, and the corresponding assets are recorded under
financial assets.
Solvay Group Insurance policy
The Solvay Group's policy is to use insurance to cover all catastrophic hazards,
where insurance is compulsory, and where it is economically the best option for
allocating risk. The Group will therefore seize every new opportunity offered by
the insurance market to reduce the financial impact of accidents that could have
a major effect on its assets, profits, and civil liability.
<PAGE> 15
------------------------
Financial Statements 69
Changes to the scope of consolidation
The Group consists of Solvay S.A. and its subsidiaries and affiliated companies,
numbering 315 and located in 43 countries. Of these, 148 are fully consolidated,
20 are proportionally consolidated and four are accounted for using the equity
method; the other 136 are too small to be consolidated.
In comparison with 1996, the changes in the scope of consolidation were as
follows:
A. Fully consolidated companies
ADDITIONS
1. Acquisitions
o Solvay Sodi JS Co (Bulgaria)
2. Increased holdings
o Oy Finnish Peroxides AB (Finland)
o Blair International Insurance (Cayman) Ltd
o Solvay Engineered Polymers, Inc., (formerly: D & S Plastics
International) (USA)
o Research Polymers International, Inc (USA)
3. Reorganization
o Solvay S.A. has converted its Spanish branch into a subsidiary,
Solvay Espana SL.
o It has also reorganized its European polyolefins activity into
Solvay Polyolefins Europe S.A., Solvay Polyolefins Europe Belgium
S.A., Solvay Polyolefins Europe - France S.A., Solvay Polyolefins
Europe - Italia S.p.A.
o Abelia Decors S.A. has reorganized its marketing activities into a
subsidiary, Abelia France S.A.
o Alkor Kunststoffe GmbH (Germany) has reorganized its marketing
activity into a subsidiary, Alkor Folien GmbH (Germany)
o Argentinian Stocks Investments Ltd, Brazilian Stocks Investments
Ltd, Korean Stocks Investments Ltd, and Global Stocks Investments
Ltd (United Kingdom) have been set up as part of the accounting
hedge (see page 62)
o Solvay do Brasil S/A (Brazil) has been split into four companies:
Solvay do Brasil Ltda, Solvay Polietileno Ltda, Solvay Holding Ltda
and Solvay Indupa do Brasil Ltda. The last two have been sold to the
Argentinian company INDUPA S.A.I.C.
o Solkatronic Chemicals (US) has reorganized its fluorine activity
into Solvay Fluorides, Inc. (US).
o Solvay Engineered Polymers (US) has reorganized its Canadian
activity into a subsidiary Solvay Engineered Polymers, Inc. (Canada)
o Solvay Pharma Inc. in Canada has reorganized its R&D activity into a
subsidiary, Solvay Pharma Clinical Inc.
4. Growth of companies that previously did not meet the size criteria
o Solvay Finance (Cayman) Ltd
o Thai Stocks Investments Ltd (United Kingdom)
DELETIONS
1. Interests sold to third parties
o Gorvi S.A. (Spain)
o Griffine Enduction (France), established as a subsidiary in 1997
o Malharia Industrial do Nordeste S/A (Brazil)
o Plasticos Plavinil S/A (Brazil)
2. Mergers, absorptions, reorganization
o Alkor-Draka S.A., Courbevoic, merged with Griffine Industries SA
(France)
o Lyssia GmbH, Hannover, and Duphar Pharma GmbH & Co KG. Hannover,
merged with Solvay Arzneimittel GmbH (Germany)
o Sporic AG, Chur, merged with Solvay (Switzerland) AG
o L.A. (Holdings), Inc., L.P. Inc. et Solvay Peroxygen, Inc. merged
with Solvay Interox, Inc. (USA)
o Canlac Corporation merged with Solvay Pharma, Inc. (Canada)
o Solvay Finance (Dutch East Indies) NV merged with Solvay Finance
International NV
B. Companies consolidated by proportional consolidation
ADDITIONS
1. Establishment of a new subsidiary
Solvay Sodi Holding AG (Austria) in joint control with our partners
(Sisecam and EBRD) for the acquisition of Solvay Sodi JS Co (Bulgaria).
The Group holds a 67% stake in the latter, which therefore is fully
consolidated.
2. Growth of a company that previously did not meet the size criteria
o Pipelife Fatra Spal s.r.o. (Czech Republic).
DELETIONS
1. Interests sold to third parties
o Kali-Chemie Akzo GmbH (Germany)
2. Mergers, absorptions, reorqanization
o Societe Mediterranenne de Plastiques Agricoles (M.P.A.) S.A. and
France Tube S.A. merged with Pipelife France S.A.
<PAGE> 16
- ----------
70 SOLVAY
List of Consolidated companies
COMPANIES TO BE FULLY CONSOLIDATED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COUNTRY Name and registered office %
control
================================================================================
<S> <C> <C>
BELGIUM Alkor Draka & Cie SNC, Oudenaarde
(formerly Plavina S.N.C.) 100
Mutuelle Solvay S.C.S., Brussels 99,9
Ondex & Cie S.N.C. Brussels 100
Solvay Coordination Internationale des
Credits Commereciaux (CICC) S.A., Brussels 100
Solvay Interox S.A., Brussels 100
Solvay Pharma & Cie S.N.C., Brussels 100
Solvay Polyolefins Europe SA., Brussels,
Solvay Polyolefins Europe - Belgium S.A., Brussels 100
Solvie & Cie S.N.C., Brussels 100
Venilia & Cie S.N.C. Zaventem 100
GRAND-DUCHY OF LUXEMBOURG
Solvay Finance (Luxembourg) SA., Luxembourg 100
NETHERLANDS Bockelo Folien B.V. Enschede 100
Physica B.V, Weesp 100
Plavina Benelux B.V., Weesp 100
Sodufa B.V., Weesp 100
Solvay Chemie B.V., Linne-Herten 100
Solvay Draka B.V., Enkhuizen 100
Solvay Finance B.V., Weesp 100
Solvay lnterox B.V., Linne-Herten 100
Solvay Interox Holding B.V., Weesp 100
Solvay Pharma B.V., Weesp 100
Solvay Pharmaceuticals B.V., Weesp
(formerly Solvay Duphar B.V.) 100
FRANCE Abelia, Puteaux 100
Abelia Decors SA, Puteaux 100
Alkor Draka SA. Roissypole Le Dome 100
Barytine de Chaillac S.A., Chaillac 100
Buflon S.A., Puteaux 100
Ondex S.A., Chevigny-St-Sauveur 100
Saline Cerebus et de Bayonne S.A., Paris
(formerly SISB) 100
Solvay Automotive France S.A., Laval 100
Solvay Finance France S.A., Paris 100
Solvay Interox S.A., Paris 100
Solvay Pharma S.A., Suresnes 99,9
Solvay Polyolefins Europe - France S.A., Paris 100
Soplachim S.A., Paris 100
Venilia S.A., Rueil-Malmaison 100
ITALY Adriaplast S.p.A., Monfalcone 100
Caleppiovinil S.p.A., Fucine di Ossana 100
GOR Applicazioni Speciali S.p.A., Buriasco 100
Societa Elettrochimica Solfuri e Cloroderivati
(ELESO) S.p.A., Milano 100
Societa Generale per l'lndustria della Magnesia
(SGIM) S.p.A., Angera 100
Solvay Bario e Derivati (SABED) S.p.A., Massa 100
Solvay lnterox S.p.A., Milan 100
Solvay Pharma S.p.A., Grugliasco 100
Solvay Polyolefins Europe - Italia S.p.A., Rosignano 100
GERMANY Solvay Deutschland GmbH, Hannover 100
Alkor Deco Vertriebs GmbH. Grafelfing 100
Alkor Draka Handel GmbH, Wuppertal 100
Alkor Folien GmbH, Thansau 100
Alkor GmhH Kunstoffe, Munich 100
Berka Speditions-und Schiffahrt GmbH,
Hannover 100
DMS Verwaltungs GmbH. Solingen 100
Hoelzle & Chelius Verwaltungs GmbH,
Hannover 100
Kali-Chemie AG, Hannover 98,2
Salzgewinnungsgesellschaft Westfalen mbH,
Ahaus-Graes 65
Solvay Alkali GmbH, Hannover 100
Solvay Arzneimittel GmbH, Hannover 100
Solvay Automotive GmbH, Bad Harzburg 100
Solvay Barium Strontium GmbH, Hannover 100
Solvay Fluor and Derivate GmbH, Hannover 100
Solvay Fluor and Derivate Holding GmbH, Hannover 100
Solvay lnterox GmbH, Hannover 100
Solvay Kali-Chemie Holding, Hannover 100
Solvay Kunstoffe GmbH, Hannover 100
Solvay Pharmaceuticals GmbH, Hannover 100
Solvay Salz, GmbH, Hannover 100
Sulvay Verarbeitung Holding GmbH, Hannover 100
Solvay Verwaltungs- und Vermittlungs GmbH,
Hannover 100
SPAIN Solvay Espana S.L., Barcelona 100
Alkor Draka Iberica S.A., Barcelona
(formerly Manhusa) 100
Duphar S.A., Barcelona 100
Electrolisis de Torrelavega A.E.I., Torrelavega 100
Hispavic Industrial S.A., Barcelona 100
Nezel S.A., Bareclona 100
Solvay Automotive Iberica S.A., Gava 100
Solvay Fluor lberica S.A., Tarragona 100
Solvay Interox S.A., Barcelona 100
Solvay Minerales S.A., Barcelona
(formerly Kali-Chemie Iberica) 100
Solvay Pharma S.A. Barcelona 100
Venilia S.A., Gava 100
SWITZERLAND Solvay (Schweiz) AG, Zurzach 100
Dutraco S.A., Delemont 100
Ingetra AG, Basel 100
Solvay Pharma AG, Bern 100
Soltraco AG, Basel 100
PORTUGAL Solvay Farma Lda, Lisbon 100
Solvay lnterox -- Produtos Peroxidados Lda, Lisbon 100
Solvay Portugal - Participacoes (SGPS) Lda, Lisbon 100
Solvay Portugal - Produtos Quimicos S.A., Lisbon 100
AUSTRIA Solvay Osterreich AG, Vienna 100
</TABLE>
<PAGE> 17
[GRAPHIC OMITTED]
------------------------
Financial Statements 71
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COUNTRY Name and registered office %
control
================================================================================
<S> <C> <C>
Solvay Pharma GmbH, Klosterneuburg 100
UNITED KINGDOM
Alkor Draka Ltd, Watford 100
Argentinian Stocks lnvestments Ltd, St Peter Port 100
Brazilian Stocks Investments Ltd, St Peter Port 100
Korean Stocks Investments Ltd, St Peter Port 100
Global Stocks Investments Ltd, St Peter Port 100
Solvay Automotive Ltd, Pontypridd 100
Solvay Chemicals Ltd, Hemel Hempstead 100
Solvay Healthcare Ltd, Southampton 100
Solvay Interox Ltd, Warrington 100
Solvay UK Holding Company Ltd, Hemel Hempstead 100
Thai Stocks Investments Ltd, St Peter Port 100
BULGARIA Solvay Sodi JS Co, Devnya 67
DENMARK Alkor Draka Nordic K/S, Albertslund 100
FINLAND Oy Finnish Peroxides AB, Voikkaa 75
UNITED STATES
Solvay America, Inc., Houston TX 100
Hedwin Corporation, Baltimore, MD 100
Research Polymers International, Inc., Grand Prairie, TX 100
Solkatronic Chemicals, Inc. Fairfield, NJ 100
Solvay Alkalis, Inc., Houston,TX 100
Solkay America Funding Company Houston, TX 100
Solvay Automotive, Inc., Troy, MI 100
Solvay Compounding, Inc., Houston, TX 100
Solvay Engineered Polymers, Grand Prairie, TX 100
Solvay Finance (America) Inc., Houston, TX 100
Solvay Fluorides Inc., Greenwich
Solvay Industrial Films, Inc., Baltimore, MD 100
Solvay Interox, Inc., Houston, TX 100
Solvay Management Services, Inc., Houston, TX 100
Solvay Minerals, Inc., Houston, TX 100
<CAPTION>
COMPANIES TO BE CONSOLIDATED PROPORTIONALLY
- --------------------------------------------------------------------------------
COUNTRY Name and registered office %
control
================================================================================
<S> <C> <C>
BELGIUM Polva Pipelife S.A., Kalmthout 50
NETHERLANDS
Polva Pipelife B.V., Fnkhuizen 50
FRANCE Pipelife France S.A., Deols-Chateauroux 50
ITALY SAFIPLAST S.p.A., Pisticci (Matera) 50
GERMANY Deutsche Baryt-Industrie Dr Rudolf
Alberti GmbH & Co KG, Bad Lauterberg 50
Pipelife Rohrsysteme Gmbh,
Bad Zwischenahn-Ekern 50
Pipelife Rohrsyteme Golzau GmbH, Golzau 50
Witco Solvay Duromer GmbH, Bergkamen 50
SPAIN Pipelife Hispania S.A., Granollers 50
Viniclor S.A., Madrid 55
<CAPTION>
COMPANIES TO BE EVALUATED UNDER THE EQUITY METHOD
- --------------------------------------------------------------------------------
COUNTRY Name and registered office %
control
================================================================================
<S> <C> <C>
FRANCE Clement - R.P.C. S.A., Gennevilliers 49
SLOVENIA Belinka Perkemija D.D., Ljubljana 20
Solvay Olefins L.P., Houston, TX 100
Solvay Performance Chemicals, Inc., Houston, TX 100
Solvay Petrochemicals, Inc., Houston TX 100
Solvay Pharmaceuticals, Inc., Marietta, GA 100
Solvay Polymers, Inc., Houston, TX 100
Solvay Soda Ash Joint Venture, Houston, TX 80
CANADA Solvay Automotive Canada, Inc., Blenheim 100
Solvay Engineered Polymers (Canada), Inc,
Concord 100
Solvay Pharma Inc., Scarborough
(formerly Solvay Kingswood) 100
Solvay Pharma Canada, Inc., Scarborough 100
Solvay Pharma Clinical, Inc., Scarborough 100
MEXICO Solvay Quimica Y Minera S.A. de C.V.,
Monterrey 90
DUTCH EAST INDIES
Solvay Finance International N.V., Curacao 100
CAYMAN Blair International Insurance (Cayman) Ltd,
Georgetown 100
Solvay Finance (Cayman) Ltd, Georgetown 100
BRAZIL Solvay do Brazil Ltda, Sao Paulo 100
CBCC - Companhia Brasileira Carbureto de
Calcio, Rio de Janeiro 99,9
Solvay Holding Ltda, Sao Paulo 100
Solvay - Indupa do Brasil Ltda, Sao Paulo 100
Solvay Polietieno Ltda, Sao Paulo 100
ARGENTINA Derivados Petroquimicos Sociedad de
Inversion S.A., Buenos Aires 100
INDUPA S.A.I.C., Bahia Blanca 51,2
Solvay Quimica S.A., Buenos Aires 100
AUSTRALIA Solvay Interox Pty Ltd. Banksmeadow 100
JAPAN Nippon Solvay KK,Tokyo 100
Solvay Seiyaku KK, Tokyo 100
THAILAND Peroxythai Ltd, Bangkok 66,5
SINGAPORE Solvay Asia Pacific Pte Ltd, Singapore 100
<CAPTION>
- --------------------------------------------------------------------------------
COUNTRY Name and registered office %
control
================================================================================
<S> <C> <C>
AUSTRIA Pipelife Rohsysteme GmbH & Co Nfg KG,
Wiener Neudorf 50
Solvay Sodi Holding AG, Vienna 56,8
HUNGARY Pannonpipe Muanyagipari KFT, Budapest 25
GREECE Pipelife Hellas S.A., Athens 50
CZECH REPUBLIC
Pipelife Fatra Spol s.r.o., Otrokovice 33,5
BRAZIL Peroxidos do Brasil Ltda, Sao Paulo 69,4
JAPAN Nippon Peroxide Co Ltd, Tokyo 25
THAILAND Vinythai Public Company Ltd, Bangkok 44,9
SOUTH KOREA
Daechan Specialty Chemicals Co Ltd, Seoul 50
Hanwha Advanced Materials Co Ltd, Seoul 50
<CAPTION>
- --------------------------------------------------------------------------------
COUNTRY Name and registered office %
control
================================================================================
<S> <C> <C>
INDIA Duphar Interfran Ltd, Bombay 38.9
National Peroxide Ltd, Bombay 25.1
</TABLE>
<PAGE> 18
[GRAPHIC OMITTED]
- ----------
72 SOLVAY
Valuation rules
The following are the valuation rules adopted for these statements:
1. Start-up expenditures
Start-up expenditures are amortized over a maximum period of five years; in all
cases, fees and reimbursement premiums for borrowings are amortized over the
period of the corresponding borrowings.
2. Intangible assets
Intangible fixed assets are valued at acquisition cost. To the extent that their
utilization is limited in time, intangible fixed assets acquired from third
parties are amortized on a straight-line basis over their expected period of
utilization. Research costs are expensed in the year in which they are incurred.
Costs related to applications for or the issuance or utilization of a patent or
trademark are recorded as assets at cost, to the extent that this does not
exceed a reasonable estimate of the future value of utilization of or return on
the patent or trademark.
3. Consolidation differences
At the time of consolidation of a new subsidiary or at the time of proportional
consolidation of an interest in a new affiliate, or on acquisition of the
remainder of an interest in an entity, the book value of the shares or interests
in such company is compared to the portion they represent of the net assets of
the company, taking into account, if necessary, any revaluation of the assets
and liabilities. A consolidation difference is established in this way; it is
recorded under the heading "Consolidation differences", under liabilities if it
is negative and under assets if it is positive. A positive difference is
amortized over its anticipated economic life in accordance with a method adopted
by the Board of Directors. Amortization charges are accelerated if changes in
circumstances indicate that the asset may be overvalued.
4. Tangible assets
Tangible fixed assets are recorded at acquisition cost, which is revalued as
required by law.
Tangible fixed assets with a limited useful life are depreciated on a
straight-line basis over their estimated lives; however, they may be subject to
anticipated, accelerated or retarded depreciation.
5. Financial assets and receivables maturing in more than one year
Interests which are neither consolidated nor recorded under the equity method,
as well as receivables maturing in more than one year, are recorded at
acquisition cost.
Financial fixed assets and receivables maturing in more than one year are
written down when it appears that they are less valuable than their acquisition
cost or the value recorded under the equity method.
6. Inventories
Inventory values are generally determined by using weighted-average-cost or LIFO
methods. Cost of goods sold includes, in addition to costs of production
directly attributable to products, those which are indirectly attributable, as
well as depreciation and amortization. When products from inventory are
transferred within the group, their inventory value is carried at the cost of
goods sold, as if these transfers were effected at cost price.
7. Orders in process
Orders in process are valued at cost, without any finance charges.
8. Receivables and liabilities
These are recorded on the balance sheet at face value. Receivables are written
down if their payment at maturity is, in whole or in part, uncertain.
<PAGE> 19
------------------------
Financial Statements 73
9. Provisions for risks and charges
1) PROVISIONS FOR PENSIONS AND SIMILAR OBLIGATIONS
Provisions for pensions and similar obligations are estimated according to
actuarial procedures, using standard mortality tables and interest rates in each
country.
2) PROVISION FOR TAXES
This provision is intended to cover taxes which may result from adjustments to
the taxable base or to the calculation of the tax.
3) PROVISIONS FOR MAJOR REPAIRS AND MAINTENANCE
This lump-sum provision is intended to cover expenses of this type.
4) PROVISIONS FOR OTHER RISKS AND CHARGES
At the close of the fiscal year, there is a review of risks which could justify
the creation of new provisions or the use of existing provisions.
1O. Conversion into Belgian francs of financial statements of foreign companies
and assets and liabilities expressed in foreign currencies
In the statements of branches and subsidiaries, monetary assets and liabilities
recorded in foreign currencies are converted at the exchange rate in effect at
the end of the year; the exchange-rate differences realized in transactions in
foreign currencies are recorded in the income statement, as are unrealized
exchange losses, while unrealized exchange profits are recorded in transitory
accounts on the balance sheet.
At the time of consolidation, the statements of companies located in
high-inflation countries are subject to preliminary adjustments required or
permitted by local authorities. The recorded assets and liabilities (other than
shareholders' equity), rights and commitments of such companies are then
converted into Belgian francs at year-end rates. Shareholders' equity of
affiliated companies is maintained at historical value and conversion
differences on such values are recorded in a separate entry.
Income and expenses of branches and foreign affiliates are converted into
Belgian francs at the average exchange rate for the year. The principal exchange
rates used for conversions in the accounts are as follows:
Number of Belgian francs per unit of currency
<TABLE>
<CAPTION>
End of year Average
1996 1997 1996 1997
<S> <C> <C> <C> <C> <C>
ECU XEU 39.7525 40.7750 38.9623 40.4169
Dutch guilder NLG 18.3555 18.3025 18.3640 18.3303
French franc FRF 6.1115 6.1655 6.0656 6.1323
Italian lira ITL 0.0210 0.0210 0.0203 0.0210
German mark DEM 20.6020 20.6280 20.5822 20.6349
Spanish peseta ESP 0.2443 0.2436 0.2444 0.2440
Austrian schilling ATS 2.9279 2.9325 2.9253 2.9320
Portuguese escudo PTE 0.2046 0.2017 0.2012 0.2038
Finnish markka FIM 6.8945 6.8090 6.7436 6.8843
Pound sterling GBP 54.3925 61.1425 49.0255 58.7833
American dollar USD 32.0050 36.9200 31.0542 35.8477
Argentine austral ARS 32.0050 36.9200 31.1139 36.0091
Brazilian real BRC 30.6792 33.0706 30.8279 33.3086
Thai baht THB 1.2436 0.7805 1.2276 1.1791
Japanese yen JPY 0.2750 0.2838 0.2840 0.2950
South Korean Won KRN 0.0377 0.0261 0.0383 0.0381
</TABLE>
<PAGE> 20
- ----------
74 SOLVAY
Financial data (in BEF million)
<TABLE>
<CAPTION>
BALANCE SHEET 1989 1990 1991 1992 1993 1994 1995 1996 1997
Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed assets 97 740 113 077 131 967 155 670 160 060 152 438 149 026 162 289 183 789
Start up expenditures and
intangible assets 1 617 2 755 3 841 8 412 9 402 8 562 7 851 7 783 9 938
Consolidation differences
(goodwill) 1 176 2 525 2 503 3 182 3 105 2 587 2 414 2 415 3 394
Tangible assets 75 828 84 949 106 410 131 250 135 339 128 226 125 612 138 466 150 583
Financial assets 19 119 22 848 19 213 12 826 12 214 13 063 13 149 13 625 19 874
Current assets 145 836 162 847 145 099 106 944 108 300 111 814 113 004 120 835 130 835
Inventories 36 108 38 688 41 682 42 130 40 528 37 584 38 909 38 428 40 933
Trade receivables 50 242 51 228 45 528 37 106 35 945 42 776 42 782 46 577 56 749
Other receivables 15 256 21 166 22 752 16 743 15 127 15 009 13 796 28 928 14 260
Cash or cash equivalents 44 230 51 765 35 137 10 965 16 700 16 445 17 517 6 902 18 893
TOTAL ASSETS 243 576 275 924 277 066 262 614 268 360 264 252 262 030 283 124 314 624
Shareholders' equity and liabilities
Total equity 91 677 93 038 102 161 106 851 98 235 98 111 99 614 116 066 130 547
Shareholders' equity 86 359 89 165 99 025 103 263 94 273 94 778 96 618 108 625 119 806
Minority interests 5 318 3 873 3 136 3 588 3 962 3 333 2 996 7 441 10 741
Provisions and deferred taxes 54 350 55 006 54 623 49 984 53 165 51 572 53 089 56 505 66 005
Liabilities 97 549 127 880 120 282 105 779 116 960 114 569 109 327 110 553 118 072
Financial liabilities 40 310 69 525 59 237 50 010 60 469 53 911 49 244 44 589 47 830
o due in more than one year 22 777 46 233 39 656 32 155 48 402 40 063 37 285 37 622 26 418
o due within one year 17 533 23 292 19 581 17 855 12 067 13 848 11 959 6 967 21 412
Trade liabilities 26 093 27 299 31 626 28 284 28 67 32 725 30 602 33 528 35 158
Other liabilities 31 146 31 056 29 419 27 485 27 884 27 933 29 481 32 436 35 084
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 243 576 275 924 277 066 262 614 268 360 264 252 262 030 283 124 314 624
RATIOS (%)
Return on equity 18.2 17.1 12.2 9.2 -7 8.1 12.6 11.7 10.5
Net Debt to equity ratio -4 19 22 36 45 38 32 32 22
</TABLE>
Definitions
ROE: Consolidated net income/total equity
Net Debt to equity ratio: Net indebtedness / equity
<PAGE> 21
------------------------
Financial Statements 75
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
INCOME (in BEF million) 1989 1990 1991 1992 1993 1994 1995(1) 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 265 798 255 241 254 801 254 470 244 146 262 227 273 353 281 967 310 979
Cost of sales -166 261 -167 101 -171 851 -171 188 -169 101 -175 619 -196 907 -206 263 -231 846
Gross margin 90 537 88 140 82 950 83 282 75 045 86 608 76 446 75 704 79 133
General and sales overhead -46 710 -49 167 -53 795 -57 732 -58 697 -57 683 -39 777 -42 038 -42 912
Research expenditures -11 965 -12 846 -12 866 -12 185 -12 052 -11 489 -11 811 -12 303 -11 471
Other operating expenses
and income -2 632 -88 501 1 202 -3 054 -3 371 -2 349 -1 779 -3 570
Operating results 29 230 26 039 16 790 14 567 1 242 14 065 22 509 19 584 21 180
Financial expenses
and income 722 -1 870 -4 456 -4 181 -4 412 -3 769 -3 534 -1 943 -888
Current taxes -9 746 -7 201 -2 293 -1 859 -783 -3 382 -6 472 -6 233 -7 073
Share in earnings of
companies valued according
to the equity method 386 833 570 5 -9 23 36 134 -6
Net earnings before
extraordinary items 20 592 17 801 10 611 8 532 -3 962 6 937 12 539 11 542 13 213
Extraordinary items (net) -3 880 -1 891 1 829 1 347 -2 950 1 023 -32 2 087 549
Consolidated net income 16 712 15 910 12 440 9 879 -6 912 7 960 12 507 13 629 13 762
Minority interests 1 239 937 754 124 253 269 216 328 430
Solvay's share of earnings 15 473 14 973 11 686 9 755 -7 165 7 691 12 291 13 301 13 332
Depredation and amortization 14 910 15 461 17 518 19 407 19 085 18 967 18 259 19 416 20 098
Cash flow 31 622 31 371 29 958 29 286 12 173 26 927 30 766 33 045 33 860
RATIOS
Gross margin as a percentage
of sales 35.3 34.5 32.6 32.7 30.7 33 28 26.8 25.4
Times charges earned (2) -- 27.2 5.3 3.4 0.5 3 5.9 5.8 15.7
Current taxes/Current earnings
before tax as a % 32 29 18 18 17 33 34 35 35
</TABLE>
(1) From 1995 the gross margin is calculated after distribution and
warehousing costs. Before that change the 1995 gross margin amounted to
BEF 95,591 million.
(2) Times charges earned : Earnings before taxes and extraordinary items and
net debt expenses/net debt expenses.
<PAGE> 22
[GRAPHIC OMITTED]
- ----------
76 SOLVAY
Notes:
<PAGE> 23
Financial statements of
the Solvay Group
Statutory Annex
78 Consolidated financial statements
80 Balance sheet - Income statement
82 Notes to consolidated statement
85 The External Auditor's report on the consolidated
financial statements of the Solvay Group
86 Financial statements of Solvay S.A. (summary)
<PAGE> 24
- ----------
78 SOLVAY
[GRAPHIC OMITTED]
Consolidated Balance Sheet
<TABLE>
<CAPTION>
--------
ASSETS (in BEF million) 1996 1997
--------
<S> <C> <C>
FIXED ASSETS 162 289 183 789
--------
I. Start-up expenditures 1 207 1 147
--------
II. Intangible assets 6 576 8 791
--------
III. Consolidation differences (goodwill) 2 415 3 394
--------
IV. Tangible assets 138 466 150 583
--------
A. Land and buildings 33 365 35 442
--------
B-C. Plant, machinery and equipment, 91 514 97 129
--------
rolling stock and personal property
--------
D. Financing leases and similar rights 785 1 875
--------
E. Other tangible fixed assets 538 535
--------
F. Construction in progress 12 264 15 602
--------
V. Financial assets 13 625 19 874
--------
A. Companies valued under the equity method 788 453
--------
1. Investments 443 453
--------
2. Receivables 345
--------
B. Other companies 12 837 19 421
--------
1. Investments, shares and equity certificates 10 214 11 120
--------
2. Receivables 2 623 8 301
--------
--------
--------
--------
CURRENT ASSETS 120 835 130 835
--------
VI. Receivables maturing in more than one year 1 246 1 456
--------
A. Trade receivables 77 46
--------
B. Other receivables 1 169 1 410
--------
VII. Inventories and orders in progress 38 428 40 933
--------
A. Inventories 37 458 40 199
--------
1. Supplies 14 434 15 372
--------
2. Work in progress 3 675 3 633
--------
3-4. Finished goods and merchandise 18 998 20 656
--------
5. Real property to be sold
--------
6. Down payments 351 538
--------
B. Orders in progress 970 734
--------
VIII. Receivables maturing within one year 70 931 65 951
--------
A. Trade receivables 46 500 56 703
--------
B. Other receivables 24 431 9 248
--------
IX. Short-term cash investments 5 741 14 010
--------
A. Treasury shares
--------
B. Other investments 5 741 14 010
--------
X. Cash and cash equivalents 1 161 4 883
--------
XI. Transitory accounts 3 328 3 602
--------
--------
TOTAL ASSETS 283 124 314 624
--------
</TABLE>
<PAGE> 25
-------------------
Statutory Annex 79
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY & LIABILITIES (in BEF million) 1996 1997
--------
<S> <C> <C>
TOTAL EQUITY 116 066 130 547
--------
SHAREHOLDERS' EQUITY 108 625 119 806
--------
I. Capital 32 266 50 068
--------
A. Issued capital 32 266 50 068
--------
B. Unpaid issued capital (-) --
--------
II. Issued premiums 1 226 127
--------
III. Revaluation surplus 4 492 3 409
--------
IV. Reserves 65 268 55 837
--------
V. Consolidation differences (goodwill) 1 568 1 227
--------
VI. Conversion differences 2 350 8 104
--------
VII. Capital Subsidies 1 455 1 034
--------
THIRD-PARTY INTERESTS
--------
VIII. Minority interests 7 441 10 741
--------
PROVISIONS AND DEFERRED TAXES 56 505 66 005
--------
IX. A. Provisions for risks and charges 50 696 57 956
--------
1. Pensions and similar obligations 21 065 21 391
--------
2. Taxes 1 961 2 131
--------
3. Major repairs and maintenance 1 008 972
--------
4. Other 26 662 33 462
--------
B. Deferred taxes 5 809 8 049
--------
LIABILITIES 110 553 118 072
--------
X. Liabilities due un more than one year 41 872 31 436
--------
A. Financial liabilities 37 625 26 418
--------
1. Subordinated loans 626 700
--------
2. Non-subordinated debenture loans 27 011 15 084
--------
3. Financing leases and similar debts 537 1 679
--------
4. Credit institutions 8 969 8 192
--------
5. Other loans 482 763
--------
B. Trade payables 76 0
--------
1. Accounts payable 54
--------
2. Bills payable 22
--------
C. Down payments 993 548
--------
D. Other liabilities 3 181 4 470
--------
XI. Liabilities due within one year 65 207 83 086
--------
A. Current portion of long-term debt 1 166 16 468
--------
B. Financial liabilities 5 840 4 944
--------
1. Credit institutions 5 196 4 218
--------
2. Other loans 644 726
--------
C. Trade payables 31 573 35 158
--------
1. Accounts payable 29 552 33 324
--------
2. Bills payable 2 021 1 834
--------
D. Down payments 848 1 273
--------
E. Taxes, wages, salaries and benefits payable 10 971 9 917
--------
1. Taxes 2 954 1 800
--------
2. Wages, salaries and benefits 8 017 8 117
--------
F. Other liabilities 14 809 15 326
--------
XII. Transitory accounts 3 474 3 550
--------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 283 124 314 624
--------
</TABLE>
<PAGE> 26
- ----------
80 SOLVAY
Consolidated income statement
<TABLE>
<CAPTION>
--------
From 01/01 through 12/31 (in BEF million) 1996 1997
--------
<S> <C> <C>
I. Sales 281 967 310 979
--------
II. Cost of sales -206 263 -231 846
--------
III. Gross margin 75 704 79 133
--------
IV/V. General and sales overheads -42 038 -42 912
--------
VI. Research expenditures -12 303 -11 471
--------
VII. Other operating income 2 308 1 895
--------
VIII. Other operating expenses -4 087 -5 465
--------
IX. Operating earnings 19 584 21 180
--------
X. Financial income 5 634 4 993
--------
A. Income from financial fixed assets 942 892
--------
B. Income from current assets 1 538 2 221
--------
C. Other financial income 3 154 1 880
--------
XI. Financial expenses -7 576 -5 881
--------
A. Indebtedness expenses -5 219 -3 774
--------
B. Write-downs of current assets other
than inventories, orders in progress and --------
trade receivables (contributions-, reversals +) -34 23
--------
D. Other financial expenses -2 323 -2 084
--------
--------
XII. Earnings, before taxes and extraordinary items,
of consolidated companies 17 642 20 292
--------
XIII. Extraordinary income 8 391 4 843
--------
A. Reversals of depreciation, amortization and
write-downs of intangible and tangible assets 90 27
--------
B. Reversal of write-downs of financial assets 17 5
--------
C. Reversal of provisions for extraordinary risks
and charges 182 337
--------
D. Gains from sale of assets 7 233 4 121
--------
E. Other extraordinary income 869 353
--------
</TABLE>
<PAGE> 27
-------------------
Statutory Annex 81
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
l996 1997
--------
<S> <C> <C>
XIV. Extraordinary charges -5 763 -4 758
--------
A. Extraordinary depreciation, amortization and
write-downs of consolidation differences,
start-up expenditures, intangible and tangible --------
assets -395 -304
--------
B. Write-downs of financial assets -301 -242
--------
C. Provisions for extraordinary risks and charges -3 386 -3 290
--------
D. Loss on sale of assets -l 079 -348
--------
E. Other extraordinary charges -602 -574
--------
XV. Earnings, before taxes, of consolidated companies 20 270 20 377
--------
XVI. Transfers to, withdrawals from deferred taxes -1 605 -614
--------
A. Transfers to deferred taxes -l 714 -l 211
--------
B. Withdrawals from deferred taxes 109 597
--------
XVII. Income tax -5 170 -5 995
--------
A. Transfers to deferred taxes -5 478 -6 078
--------
B. Tax adjustment and reversal of tax provisions 308 83
--------
XVIII. Net income of consolidated companies 13 495 13 768
--------
XIX. Share in earnings of companies valued
according to the equity method 134 -6
--------
A. Earnings 134
--------
B. Losses -6
--------
XX. Consolidated net income (loss) 13 629 13 762
--------
XXI. Minority interests 328 430
--------
XXII. Solvay's share of earnings 13 301 13 332
--------
</TABLE>
<PAGE> 28
- ----------
82 SOLVAY
[GRAPHIC OMITTED]
Notes to consolidated statements (all amounts in BEF million)
I. Criteria and methods of consolidation
The criteria and methods of consolidation are found on page 59
II. List of group companies to be fully consolidated
III. List of group companies to be consolidated proportionally
IV. List of group companies to be valued under the equity method
Lists of the consolidated companies and those page 70
V. Main companies in which the group holds between 10 and 20%
Data from financial statements as of 12/31/1996
<TABLE>
<CAPTION>
Name and registered VAT number % Equity Net income
office control
<S> <C> <C> <C> <C>
Sofina S.A. 403 219 397 12.6% 19 815 1 542
</TABLE>
The complete statement or shareholdings of the Solvay Group has been filed with
the Belgian National Bank where it may be consulted. A free copy of this
statement can be obtained simply by sending a request to the Company's
registered office. The Group's subsidiaries and affiliates number 315 companies.
Those excluded from Notes II. through V. are excluded because they are not
significant to the Group.
VI. Valuation criteria for the consolidated statements
The valuation rules are found on page 72
VII. Statement of start-up expenditures (Item 1, under Assets)
<TABLE>
<S> <C>
Net book value at the end of the previous year: 1 207
Changes during the year:
- New expenses incurred 440
- Amortization -373
- Conversion differences -132
- Changes in the scope of consolidation and other 5
Net book value at the end of this year, consisting of: 1 147
- Formation and capital-increase expenses, expenses
of debt issues, reimbursement premiums and other
start-up expenditures 1 147
- Reorganization expenses
</TABLE>
VIII. Statement of intangible assets (Item II under Assets)
<TABLE>
<CAPTION>
Concessions,
R&D patents, Down
expenditures licences, etc. Goodwill payments Other
<S> <C> <C> <C> <C> <C>
a) Cost
At the end of the previous year - 9 021 837 94 154
Changes during the year:
- Acquisitions, including capitalized expenditures 1 357 3 10 82
- Transfers and disposals -104 -46 -7 -3
- Transfers from one heading to another 53 17 -1 54
- Conversion differences 765 187 2 11
- Changes in the scope of consolidation and other 8 706 -2 1
At the end of this year - 11 100 1 704 96 299
c) Depredation and write-downs
At the end of the previous year -3 142 -351 -l -36
Changes during the year:
- Recorded -560 -16 -5 -18
- Acquired from third parties -5 -1 -1
- Canceled 80 9 2
- Transfers from one heading to another 12 0 8
- Conversion differences -131 -57 2 -1
- Changes in the scope of consolidation and other 2 -199
At the end of this year - -3 744 -614 -5 -46
d) Net book value at the end of the year (a)-(c) - 7 356 1 090 91 253
</TABLE>
<PAGE> 29
------------------
Statutory Annex 83
IX. Statement of tangible assets (item IV under Assets)
<TABLE>
<CAPTION>
Plant, machinery, Financing
tools, rolling leases and Other
land and stock and similar tangible Construction
buildings personal property rights assets in progress
<S> <C> <C> <C> <C> <C>
a) Cost
At the end of the previous year 66 562 296 902 1 076 1 287 12 280
Changes during the year:
- Acquisitions including 857 4 818 1 050 42 14 099
capitalized expenditures
- Transfers and disposals -2 332 -7 922 -26 -109 -246
- Transfers from one 391 10 056 577 -11 387
heading to another
- Conversion differences 1 165 9 338 115 84 806
- Changes in the scope of 3 022 2 353 -2 -634 50
consolidation and other
At the end of this year 69 665 315 545 2 213 1 247 15 602
b) Write-ups
At the end of the previous year 622 284 4
Changes during the year:
- Recorded surplus
- Acquired from third parties
- Canceled -1
- Transferred from
one heading to another
- Conversion differences 7 -1
- Changes in the scope of -26 -45
consolidation and other
At the end of this year 602 238 4
c) Depreciation and write-downs
At the end of the previous year -33 819 -205 672 -291 -753 -16
Changes during the year:
- Recorded -2 240 -16 600 -53 -76
- Reversed 2 83
- Acquired from third parties 100 1 252 -51
- Canceled 1 629 7 495 22 85
- Transferred from 58 278 96 16
one heading to another
- Conversion differences -493 -5 701 -18 -3
- Changes in the scope of -62 211 2 -14
consolidation and other
At the end of this year -34 825 -218 654 -338 -716 0
d) Net book value at the end
of the year (a) + (b) - (c) 35 442 97 129 1 875 535 15 602
Breakdown of financing leases
and similar rights between:
- Land and buildings 1 797
- Other 78
</TABLE>
<PAGE> 30
- ----------
84 SOLVAY
X. Statement of financial assets
<TABLE>
<CAPTION>
(Item V under assets) Companies
equity method other
- --------------------------------------------------------------------------------
<S> <C> <C>
1. Investments, shares and equity certificates
a) Cost
At the end of the previous year 779 10 568
Changes during the year:
- - acquisitions 2 432
- - Transfers and disposals -359 -827
- - Transfers from one heading to another -15
- - Conversion differences 3 68
- - Changes in the scope of consolidation and other
- --------------------------------------------------------------------------------
At the end of this year 423 12 226
b) Write-ups
At the end of the previous year -1
Changes during the year:
- - Recorded 1
- - Transferred from one heading to another
- - Conversion differences
- --------------------------------------------------------------------------------
At the end of this year 0 0
c) Write-downs
At the end of he previous year -235 -342
Changes during the year:
- - Recorded -260
- - Reversed 15
- - Acquired from third parties -1
- - Canceled 48
- - Transferred from one heading to another -189
- - Conversion differences -1 -8
- - Changes in the scope of consolidation and other
- --------------------------------------------------------------------------------
At the end of this year -236 -737
d) Increases and reductions resulting from
the application of the equity method -91
e) Amounts subscribed, not paid
At the end of the previous year -11
Changes during the year: -1
- --------------------------------------------------------------------------------
At the end of this year 0 -12
f) Net book value at the end of
the year (a)+(b)-(c)+/-(d)-(e) 96 11 477
2. Receivables
Net book value at the
end of the previous year 345 2 623
Changes during the year:
- - additions 14 6 104
- - Reimbursement -374 -868
- - Reversed write-downs -14 5
- - Conversion differences 29 304
- - Changes in the scope of consolidation and other - 133
Net book value at the
end of this year 0 8 301
Cumulative write-downs at
the end of this year 97 50
- --------------------------------------------------------------------------------
XI. Statement of reserves
Book value at the end of the previous year 65 268
Consolidated net income 13 332
Dividend payable -7 152
Capitalization of reserves -15 611
- --------------------------------------------------------------------------------
Book value at the end of this year 55 837
</TABLE>
XII. Statement of consolidation and equity method
differences (Items III under Assets and V under Liabilities)
<TABLE>
<CAPTION>
Negative
Positive consolidation Positive Negative
consolidation differences equity equity
differences (negative method method
(goodwill) goodwill) differences differences
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
a) Net book value at the end of the
previous year 2 415 1 365 203
b) Changes during the year:
- - changes due to
an increase in the
percentage held 1 116
- - Amortization -261
- - Changes due to
conversion differences 124
- - Changes in the scope of
consolidation and other -341
c) Net book value at
the end of this year 3 394 1 024 203
</TABLE>
XIII. Statement of liabilities
<TABLE>
<CAPTION>
A. Breakdown of liabilities
originally due in more than maturing maturing maturing
one year; listed according within the year in between in more
to due dated (item XIX) 1 and 5 years than 5 years
<S> <C> <C> <C>
Financial liabilities 16 468 15 863 10 555
1. Subordinated loans 222 478
2. Non-subordinated
debenture loans 14 136 3 556 6 889
3. Financing leases
and similar debt 416 153 1 526
4. Credit institutions 1 489 11 248 1 583
5. Other loans 427 684 79
Trade Liabilities 0 0
1. Accounts payable
2. Bills payable
Down payments received 317 231
Other liabilities 1 100 3 370
TOTAL 16 468 17 280 14 156
</TABLE>
<TABLE>
<CAPTION>
Liabilities guaranteed by pledges, given or irrevocably
B. Secured liabilities committed on assets of companies included in the consolidation
- -------------------------------------------------------------------------------------------
<S> <C>
Financial liabilities 2310
2. Non-subordinated debenture loans 215
4. Credit 1720
5. Other loans 375
Trade Liabilities 636
1. Accounts payable 636
Taxes, wages, salaries, and benefits payable 77
1. Wages and salaries 77
Other liabilities 61
</TABLE>
<PAGE> 31
-------------------
Statutory Annex 85
XIV. Analysis of income
<TABLE>
<CAPTION>
A. Net sales 1996 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
1. Geographic distribution
of sales by customer location % %
Europe 66.4 62.7
Belgium and Luxembourg 4.4 4.5
Netherlands 3.0 2.4
France 16.2 15.2
Italy 7.8 7.8
Germany 14.2 12.8
Spain 6.5 6.5
United Kingdom 4.3 4.1
Austria 1.5 1.5
Switzerland 1.3 1.3
Portugal 1.5 1.3
Other European countries 5.7 5.3
(Central Europe + Scandinavia)
Americas 27.4 31.3
United States 19.0 22.1
Brazil 5.0 4.7
Other American countries 3.4 4.5
Asia-Pacific 4.6 4.2
Africa + Middle East 1.6 1.8
- --------------------------------------------------------------------------------
TOTAL 100.0 100.0
2. Breakdown by product sector
Chemicals 34.6 32.1
Plastics 30.1 35.9
Processing 18.9 18.4
Health 16.4
incl. Pharmaceuticals 13.2 13.6
- --------------------------------------------------------------------------------
TOTAL 100.0 100.0
</TABLE>
<TABLE>
<CAPTION>
Average headcount Personnel expenditures
1997 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
B. Companies consolidated
1. By full consolidation 69 221
Workers 14 168
Clerical 12 877
Management personnel 5 493
Other
2. By proportional consolidation 2 330
Workers 1 523
Clerical 1 034
Management personnel 138
Other
C. Extraordinary items
1. Breakdown of other extraordinary income (Item XIII,E):
Reversals of tax-related items and recovery
of past extraordinary losses 175
Miscellaneous 178
2. Breakdown of other extraordinary charges (Item XIV,E):
Miscellaneous headings linked to the
restructuring of less important sites 574
D. Income tax (Item XV)
1. Difference between the tax to be charged to the
statement of consolidated income for the year and
previous years and the tax already paid or to be paid
for these years: None
2. Effect of extraordinary income on the amount of income tax for the year:
Credit of BEF 464 million
</TABLE>
<TABLE>
<CAPTION>
XV. Rights and commitments not reflected
on the balance sheet 1997
- --------------------------------------------------------------------------------
<S> <C>
A. 1. Liabilities and commitments of
third parties guaranteed by the company:
- - outstanding negotiable instruments
endorsed by the company
2. Pledges given or irrevocably committed by
Group companies or their own assets as
security for liabilities and commitments,
of their own or of third parties 579
3. Forward contracts:
Currencies bought (to be received) 69 531
Currencies sold (to be delivered) 69 393
B. Litigation and other important commitments 884
C. Group company benefits in the area of pension and
survivor benefits in favor of personnel or executives 4 583
D. In relation to the divestiture of activities, the
Group has made certain commitments to provide
duly for possible risks.
Under these conditions and given the care taken in
this regard, the company considers these commitments
should be recorded pro mem.
</TABLE>
XVI. Relations with affiliated companies and related companies not included in
the consolidation Insignifiant.
XVII. Financial relations with directors of the consolidating company
A. Compensation for the year for their service in the consolidating company,
its subsidiaries and affiliated companies, including pensions for former
directors: 227 millions BEF.
B. Advances and credits granted by the consolidating company. by a subsidiary
or by an affiliated company: Nil.
The External Auditor's Report on the consolidated financial statements of the
Solvay Group as of December 31, 1997
Ladies and Gentlemen,
In compliance with the legal and statutory requirements, we hereby submit
our report on the accounts we have been asked to audit.
We examined the application of the consolidation criteria and procedures
by numerous tests and cross-checks of both the statements and the accounting
records.
The basic information reported by the fully consolidated companies is the
subject of regular review by the audit departments of the Head Office, by the
internal auditors of the various National Organizations of the Group, as well as
by the people in charge of the consolidation.
This expanded scope of the internal audit to include checks of the
consolidated statements, as well as the existence of a consistent and
appropriate set of procedures applied in the consolidation, in our opinion, are
well in keeping with the nature and volume of data being handled.
We follow closely the auditing work of this expanded team, which enables
us to certify that the timely information forwarded to the patent company
reflects accurately and in the required form the assets and earnings of the
companies to be consolidated.
The consolidated statements are drawn up in compliance with the applicable
regulations and legal provisions. The consolidated management report comprises
the information legally required and complies with the consolidated statements.
Considering the above, we confirm without reservation that the consolidated
statements which show total assets of: BEF 314 624 million
and a net profit of: BEF 13 762 million
present fairly the assets, financial position and earnings of the Group, taking
into account the applicable regulations and legal requirements. The explanations
given in the notes to the financial statements are appropriate.
Brussels, April 24, 1998.
Andre Hoste
External Auditor
<PAGE> 32
- ----------
86 SOLVAY
[GRAPHIC OMITTED]
XVIII. Financial statements of Solvay S.A. (SUMMARY)
The annual financial statements of Solvay S.A. are presented in an abridged
form below. In accordance with the law governing commercial corporations,
the management report and annual financial statements of Solvay S.A. as well as
the report of the External Auditor have been deposited with the National Bank of
Belgium. These documents are available on request from: Solvay SA.
rue du Prince Albert 33
B - 1050 Brussels
The External Auditor has given an unqualified report on the annual financial
statements of Solvay SA.
Summary Balance Sheet
<TABLE>
<CAPTION>
-----------
At December 31 (in BEF million) 1996 1997
-----------
<S> <C> <C>
-----------
ASSETS
-----------
Fixed assets 161 560 155 684
-----------
Start-up expenditures and intangible assets 2 665 1 699
-----------
Tangible assets 29 160 18 313
-----------
Financial assets 129 735 135 672
-----------
Current assets 37 183 32 0054
-----------
Inventories 10 860 6 977
-----------
Trade receivables 15 577 16 053
-----------
Other receivables 10 610 8 788
-----------
Short-term investments and cash or cash equivalents 136 187
-----------
-----------
TOTAL ASSETS 198 743 187 689
-----------
-----------
SHAREHOLDERS' EQUITY AND LIABILITIES
-----------
-----------
Shareholders' equity 126 689 128 069
-----------
Capital 32 266 50 068
-----------
Other equity 82 070 66 654
-----------
Net earnings carries forward 12 292 11 328
-----------
Capital subsidies 61 19
-----------
-----------
Provisions and deferred taxes 13 285 12 800
-----------
-----------
Financial liabilities 27 566 21 304
-----------
due in more than one year 22 322 12 475
-----------
due within one year 5 244 8 829
-----------
-----------
Trade liabilities 16 397 12 411
-----------
-----------
Other liabilities 14 806 13 105
-----------
-----------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 198 743 187 689
-----------
</TABLE>
<PAGE> 33
-------------------
Statutory Annex 87
Summary income statement
----------
(in BEF millions) 1996 1997
Sales and other revenues 100 387 90 443
----------
----------
Sales 88 629 76 969
----------
Other operating income 11 758 13 474
----------
----------
----------
Operating expenses -97 939 -87 333
----------
----------
Operating earnings 2 448 3 110
Financial expenses and income 4 527 7 572
----------
----------
Pretax earnings before extraordinary items 6 975 10 682
----------
----------
Extraordinary items 1 605 -601
----------
----------
Pretax earnings 8 580 10 081
----------
----------
Tax -1 290 -l 734
----------
----------
Net income for the year 7 290 8 347
----------
----------
Transfer to (-), withdrawal from (+) untaxed reserves 139 -810
----------
----------
NET INCOME AVAILABLE FOR DISTRIBUTION 7 429 7 537
----------
<PAGE> 34
- ----------
88 SOLVAY
XIX. Statement of Capital
Number
(in BEF million) Amounts of shares
- -----------------------------------------------------------------------------
A. Capital
1. Issued capital (heading 100 under liabilities)
- At the end of previous year 32 266 8 368 028
- Changes during the year 17 802 75 557 252
50 068 83 925 280(1)
2. Capital representation
2.1 Type of share
Without par value 83 925 280
2.2 Registered or bearer shares
Registered 31 825 672
Bearer 52 099 608
(1) At December 31. 1997, the issued capital of Solvay S.A. had increased to BEF
50,068 million compared with BEF 32,266 million at December 31, 1996, mainly as
a result of the capitalization of reserves decided on at the General
Shareholders' Meeting of June 5. 1997. As the meeting also adopted a 10 for one
stock split, the capital was represented at December 31, 1997 by 83,925,280
shares without par value. During the 1997 fiscal year, 24,500 warrants issued to
senior Group executives around the world were exercised, each representing the
issue of 10 new shares.
During an exercise period running from 10 to 27 February 1998, 11,640 warrants
were exercised and converted into 116,400 new shares. These entitle their
holders to the balance of the dividend payable on June 11, 1998 and bring the
total number of shares eligible to receive that balance to 84,041,680.
Amount of Number of
(in BEF million) capital held shares
- --------------------------------------------------------------------------------
D. Commitments to issue
shares
2. Pursuant to
SOUSCRIPTION right
- Amount of subscription rights
outstanding 1 659 050
- Amount of capital to subscribe 9 898
- Maximum number of corres-
ponding shares to be issued 16 590 500
E. Authorized. unissued capital 568
G. Declarations received in compliance with the law of March 2, 1989
The Company received on July 3, 1989 a statement from Solvac S.A., Brussels,
according to which it holds:
- - 2,072,458 Solvay S.A. shares, giving it 25.0l% of voting rights;
- - together with Deutsche Bank AG, Credit Suisse S.A. and Sofina S.A., 1,600,000
subscription rights of the 1,659,050 mentioned under item VIII.D.2 above.
The 1,600,000 subscription rights may only be exercised up until October 1998 at
the request of the Board of Directors of Solvay S.A.
Their exercise price would be based on the average market price for the last 6
months, minus a discount of 15% justified by the limited transferability of the
new shares.
These would be paid-up at 25% (plus 100% of the share premium).
The entire stock issued would represent 16% of the increased capital which would
be distributed in equal parts among the current warrant-holders.
Taking dilution into account, Solvac S.A.'s interest in Solvay would remain
above 25%.
XX. Summary of company policies used in asset valuation, pursuant to article 7
of the law of July 17, 1975
1. Start-up expenditures
Start-up expenses are amortized over a periode of five years; however, fees and
reimbursement premiums on loans are written off over the duration of the loan.
2. Intangible assets
Research and development expenditures are capitalized only if capitalization is
a necessary condition for obtaining tax or other advantages. They are amortized
at the fastest allowable rate. Expenses related to registration, filing or
utilization of a parent or trademark are recorded under assets at cost, to the
extent this does not exceed a prudent estimate of the value of utilization or
future profitability of the trademark. When their use is limited in time, the
intangible assets acquired from third parties are amortized on a straight-line
basis over their estimated life.
3. Tangible assets
Tangible fixed assets the use of which is limited in time are depreciated on a
straight-line basis over their estimated life; however, anticipated, accelerated
or retarded depreciation may be used. Tangible fixed assets may be revalued
under applicable law. For assets located abroad, if on the closing date, as a
result of the decline of a foreign currency against the Belgian franc, the
residual value to be depreciated in Belgian francs exceeds the residual value in
the currency converted into Belgian francs at the exchange rate prevailing on
the closing date, the excess is amortized over the remaining period.
4. Financial assets and receivables maturing in more than one year
Write-downs are recorded on financial fixed assets and on receivables maturing
in more than one year when evaluation shows that they are permanently worth less
than their carrying value.
5. Inventories
The value of raw materials, work in progress, finished products, merchandise and
packaging material inventories is determinated by the UFO method or by the
weighted - average - cost method.
The cost of finished goods includes cost of production directly attributable to
the products and the indirect costs of production, as well as depreciation.
6. Orders in progress
Orders in progress are valued at cost, excluding all financial expenses.
7. Provisions for risks and expenses
At the close of the year, existing risks are examinated to determine whether to
set up new reserves or update existing reserves.
8. Conversion into Belgian francs of assets and liabilities in foreign
currencies
The following are converted into Belgian francs at the historical exchange rate:
o tangible assets and reserves recorded in foreign branches
o shares with variable dividends expressed in foreign currency, representing
financial fixed assets.
The other assets and liabilities, abroad as well as in Belgium, are converted
into Belgian francs at the year-end exchange rate.
Income and expenses of foreign branches are converted at the average exchange
rate for the year.
When conversion differences resulting from the application of this rule, derived
currency by currency, or by group of currencies linked economically, correspond
to deferred losses, they are recorded in the income statement. Those relating to
deferred gains are recorded in the income statement in transitory accounts.
Exchange-rate differences realized on foreign currency transactions are recorded
in the income statement.
<PAGE> 35
- ----------
92 SOLVAY
[GRAPHIC OMITTED]
AUSTRIA
SOLVAY OESTERREICH AG
Kundmanngasse, 21
A - 1030 Wien
Tel: 43/1/716880 o Fax: 43/1/7102426
BENELUX|
SOLVAY S. A.
Rue du Prince Albert 44
B - 1050 Bruxelles
Tel: 32/2/5096111 o Fax: 32/2/5096624
BRASIL
(+ ARGENTINA)
SOLVAY DO BRASIL SA.
Alameda Santos, 2101
Cerqueira Cesar
BR - 01419-002 Sao Paulo - SP
Tel: 55/11/30675000 o Fax: 55/11/30675380
FRANCE
SOLVAY S.A. - FRANCE
12, Cours Albert ler
F - 75008 Paris
Tel: 33/1/40758000 o Fax: 33/1/45635728
GERMANY
SOLVAY DEUTSCHLAND GmbH
Hans-Bockler-Allee, 20
D-30173 Hannover
Tel: 49/511/8570 o Fax: 49/511/282126
ITALY
SOLVAY S.A. ITALIE
Via Filippo Turati, 12
1 - 20121 Milano MI
Tel: 39/2/290921 o Fax: 39/2/6570581
PORTUGAL
SOLVAY PORTUGAL - Produtos Quimicos S.A.
Av. Marechal Gomes Da Costa, 33
P - 1800 Lisboa
Tel: 351/1/8593001 o Fax: 351/1/8590673
SINGAPORE
(+ SOUTH EST ASIA & AUSTRALIA)
SOLVAY ASIA PACIFIC Pte Ltd
80 Anson Road, #3700
IBM Towers
SGP - 0798907 Singapore
Tel: 65/2226991 o Fax: 65/2212768
SPAIN
SOLVAY ESPANA S.I.
Calle Mallorca, 269
E - 08008 Barcelona
Tel: 34/93/4847400 o Fax: 34/93/4847656
SWITZERLAND
SOLVAY (SCHWITZ) AG
Zurcherstrasse, 42
CH - 5330 Zurzach
Tel: 41/56/26965161 o Fax: 41/46/2696363
UNITED KINGDOM
SOLVAY U.K. HOLDING Co. Ltd.
Grovelands Business Centre
Boundary Way
GB - HP2 7TE Hemel Hempstead (Herts)
Tel: 44/1442/236555 o Fax: 44/1442/238770
UNITED STATES (+ CANADA AND MEXICO)
SOLVAY AMERICA, INC.
3333 Richmond Avenue
USA - 77098-3009 Houston, TX
Tel: 1/713/5256000 o Fax: 1/713/5257887
Ce rapport est aussi disponible en Francais.
Het jaarverslag is ook beschikbaar in het Nederlands.
Dieser Bericht ist auch in Deutsch vertugbar.
SOLVAY S.A. - Societe Anonyme.
Registered office: Ixelles (Bruxelles) o Rue du Prince Albert 33
Tel: 32 2 509 61 11 o Fax: 32 2 509 66 17
Commercial register: Brussels No 5554 o VAT: BF 403.091.220
================================================================================
Conception & production: ARROWDESIGN o Digital Prepress & Printing:
Snoeck-Ducaju
Photographs: SOLVAY, T. Philippart de Foy, Isopress Senepart, P. Mathieu,
Chrysler, M. Wybaux, Image Bank, Benelux Press, Tony Stone Images.
<PAGE> 36
---------------
91
Notes:
<PAGE> 37
--------
[LOGO]
SOLVAY
--------
----------------------
a Passion for Progress
----------------------
<PAGE> 1
Exhibit 13
[GRAPHIC OMITTED]
SOLVAY
Annual Report 1998
o Home Page
o in Focus
o Products
o Markets
o Strategies
o Finance
o HSE
o People
- --------------------------------------------------------------------------------
Annual Report
- --------------------------------------------------------------------------------
For other detailed information, please contact the Investor Relations Department
at head office by telephone, fax, E-mail or post. Click here for contact
information.
The following information from the Annual Report 1998 are available:
o [GRAPHIC OMITTED] Downloadable PDF version of the 1998 Annual Report
o General Section
[GRAPHIC OMITTED]
o Financial section
o Key figures
o Consolidated income statement summary
o Cash flow statement.
Click here to see the related notes.
o Consolidated balance sheet summary.
Click here to see the related notes.
o Changes in shareholders' equity
o Changes to the scope of consolidation and valuation rules
o 10 year Financial data (balance sheet)
o 10 year Financial data (income statement)
For other detailed information, please contact the Investor Relations Department
at head office by telephone, fax, E-mail or post. Click here for contact
information.
================================================================================
Key figures
<TABLE>
<CAPTION>
======================================================================================
1994 1995 1996 1997 1998 1998
in millions EUR EUR EUR EUR EUR USD
======================================================================================
<S> <C> <C> <C> <C> <C> <C>
Solvay group
======================================================================================
Consolidated Sales 6,500 6,776 6,990 7,709 7,451 8,694
======================================================================================
Consolidated net
earnings 197 310 338 341 378 441
======================================================================================
</TABLE>
<PAGE> 2
<TABLE>
======================================================================================
<S> <C> <C> <C> <C> <C> <C>
of which:
Net earnings before
extraordinary items 172 311 286 327 377 440
======================================================================================
Net extraordinary items 25 -1 52 14 1 1
======================================================================================
Depreciation 470 453 481 498 507 591
======================================================================================
Cash flow 667 763 819 839 885 1,032
======================================================================================
Shareholder's equity 2,432 2,469 2,877 2,235 3,293 3,848
======================================================================================
Net debt 929 786 934 717 565 658
======================================================================================
Capital expenditures 493 511 694 743 640 747
======================================================================================
Research expenditures 285 293 305 284 292 341
======================================================================================
Personnel costs 1,783 1,777 1,803 1,774 1,754 2,046
======================================================================================
Added value 2,702 2,843 2,918 2,873 2,888 3,369
======================================================================================
Gross distribution to 139 152 152 167 174 203
Solvay shareholders
======================================================================================
Minority interests 7 5 8 11 3 3
======================================================================================
Persons employed as of January 1 39,874 38,616 35,400 34,445 33,104 --
======================================================================================
Solvay S.A.
======================================================================================
Net earnings for the year 156 185 181 207 189 220
======================================================================================
Transfer to(-) withdrawal
from(+) untaxed reserves 2 -1 3 -20 -1 -1
======================================================================================
Net earnings available
for distribution 158 184 184 187 188 219
======================================================================================
Per Share
======================================================================================
Cash flow 7.93 9.02 9.67 9.87 10.47 12.22
======================================================================================
Net earnings 2.28 3.64 3.94 3.94 4.45 5.20
======================================================================================
Net earnings before
extraordinary items 1.98 3.67 3.32 3.79 4.38 5.11
======================================================================================
Gross dividend 1.67 1.82 1.82 1.98 2.07 2.41
======================================================================================
Net dividend 1.23 1.36 1.36 1.49 1.55 1.81
======================================================================================
Number of shares (thousands) 83,329 83,528 83,811 84,042 84,206 --
======================================================================================
Exchange rate (BEF) -- -- -- -- 40.3399 34.575
======================================================================================
</TABLE>
<PAGE> 3
Consolidated income statement summary
<TABLE>
<CAPTION>
================================================================================
in millions in millions
BEF EUR
======================================
1997 1997 1998 Notes
================================================================================
<S> <C> <C> <C> <C>
Sales 310,979 7,709 7,451 (1)
================================================================================
Cost of sales -231,846 -5,747 -5,392 --
================================================================================
Gross margin 79,133 1,962 2,059 (1)
================================================================================
General and sales overhead -42,912 -1,064 -1,102 (2)
================================================================================
Research expenditures -11,471 -284 -292 (3)
================================================================================
Other operating expenses and income -3,290 -82 -69 (4)
================================================================================
Other financial expenses and income 665 16 13 (5)
================================================================================
EBIT 22,125 548 609 (6)
================================================================================
Unallocated expenses and income -280 -7 -- --
================================================================================
Net debt expense -1,553 -39 -54 (7)
================================================================================
Current taxes -7,073 -175 -178 (8)
================================================================================
Share in earnings of companies
valued according to the equity method -6 -- -- --
================================================================================
Net earnings before extraordinary items 13,213 327 377 --
================================================================================
Extraordinary items, net after tax 549 14 1 (9)
================================================================================
Net income 13,762 341 378 --
================================================================================
Minority interests 430 11 3 --
================================================================================
Solvay's share of earnings 13,332 330 375 --
================================================================================
</TABLE>
Cash flow statement
<TABLE>
<CAPTION>
================================================================================
in millions in millions
BEF EUR
======================================
1997 1997 1998 Notes
================================================================================
<S> <C> <C> <C> <C>
Cash flow from operations
================================================================================
Net earnings 13,762 341 378 --
================================================================================
Depreciation and amortization 20,098 498 507 (10)
================================================================================
Cash flow 33,860 839 885 --
</TABLE>
<PAGE> 4
<TABLE>
================================================================================
<S> <C> <C> <C> <C>
Non cash items -5,996 -149 -80 (11)
================================================================================
Changes in provisions 9,500 235 -15 --
================================================================================
Changes in working capital 6,269 155 93 --
================================================================================
Net cash provided by operations 43,633 1,082 883 --
================================================================================
Cash flow from investing activities
================================================================================
Acquisition of assets and investments -29,956 -743 -640 --
================================================================================
Sales of assets and investments 5,763 143 37 (12)
================================================================================
Change in notes receivable -5,333 -132 15 --
================================================================================
Net cash used by investing activities -29,526 -732 -588 --
================================================================================
Cash flow from financing activities
================================================================================
Increase of capital 500 12 9 (13)
================================================================================
Changes in borrowings 3,242 80 -345 --
================================================================================
Dividends -6,292 -156 -178 --
================================================================================
Net cash used by financing activities -2,550 -63 -514 --
================================================================================
Net changes in cash and cash
equivalents 11,557 286 -219 --
================================================================================
Effects of exchange rates and change in
scope 434 11 26 --
================================================================================
Cash and cash equivalents at the
beginning of the year 6,902 171 468 --
================================================================================
Cash and cash equivalents at the end of
the year 18,893 468 275 --
================================================================================
</TABLE>
Consolidated balance sheet summary
<TABLE>
<CAPTION>
================================================================================
at December 31 in millions in millions
BEF EUR
======================================
1997 1997 1998 Notes
================================================================================
<S> <C> <C> <C> <C>
Assets
================================================================================
Fixed assets 183,789 4,556 4,540 --
================================================================================
Start-up expenditures and
intangible assets 9,938 246 246 (14)
================================================================================
Consolidation differences (goodwill) 3,394 84 77 (15)
================================================================================
Tangible assets 150,583 3,733 3,513 (16)
================================================================================
Financial assets 19,874 493 704 (17)
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets 130,835 3,242 2,878 --
================================================================================
Inventories 40,933 1,014 966 (18)
================================================================================
Trade receivables 56,749 1,407 1,267 (18)
================================================================================
Other receivables 14,260 353 370 (18)
================================================================================
Cash or cash equivalents 18,893 468 275 (19)
================================================================================
Total assets 314,624 7,798 7,418 --
================================================================================
Shareholders' equity and liabilities
================================================================================
Total equity 130,547 3,235 3,293 (20)
================================================================================
Shareholders' equity 119,806 2,969 3,047 --
================================================================================
Minority equity 10,741 266 246 --
================================================================================
Provisions and deferred taxes 66,005 1,636 1,621 (21)
================================================================================
Liabilities 118,072 2,927 2,504 --
================================================================================
Financial liabilities 47,830 1,185 840 (19)
================================================================================
due in more than l year 26,418 654 649 --
================================================================================
due within one year 21,412 531 191 --
================================================================================
Trade liabilities 35,158 871 816 (18)
================================================================================
Other liabilities 35,084 871 848 (18)
================================================================================
Total liabilities and
shareholders' equity 314,624 7,798 7,418 --
================================================================================
</TABLE>
Changes in shareholders' equity
<TABLE>
<CAPTION>
===============================================================================================================================
Negative
consolidation
and equity
Issue Reevaluation method Exchange Capital Shareholders'
in Millions EUR Capital premium surplus Reserves differences differences subsidies equity
===============================================================================================================================
Book value
at the end of
<S> <C> <C> <C> <C> <C> <C> <C> <C>
the previous year 1,241 3 84 1,384 30 201 26 2,969
===============================================================================================================================
Changes during the year:
===============================================================================================================================
Adjustments from the
previous year -- -- -- 10 -- -- -- 10
===============================================================================================================================
Income for the year -- -- -- 375 -- -- -- 375
===============================================================================================================================
Proposed
<CAPTION>
============================================
Minority
in Millions EUR interests TOTAL
============================================
Book value
at the end of
<S> <C> <C>
the previous year 266 3,235
============================================
Changes during the year:
============================================
Adjustments from the
previous year -- 10
============================================
Income for the year -- 375
============================================
Proposed
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
============================================================================================================================
dividend -- -- -- 174 -- -- -- 174
============================================================================================================================
Changes during the year 3 6 11 -- 3 -- 9 8
============================================================================================================================
Changes in exchange rates -- -- -- -- -- -117 -- -117
============================================================================================================================
Changes in scope -- -- -- -- -- -8 -- -8
============================================================================================================================
Changes in minority
interests -- -- -- -- -- -- -- --
============================================================================================================================
Bookvalue at the end of
the year 1,244 9 73 1,595 33 76 17 3,047
============================================================================================================================
<S> <C> <C>
==========================================
dividend -- 174
==========================================
Changes during the year -- 8
==========================================
Changes in exchange rates -- -117
==========================================
Changes in scope -- -8
==========================================
Changes in minority
interests -20 -20
==========================================
Bookvalue at the end of
the year 246 3,293
==========================================
</TABLE>
Changes to the scope of consolidation in 1998
10 year Financial data (balance sheet)
<TABLE>
<CAPTION>
===================================================================================================================
in millions EUR 1990 1991 1992 1993 1994 1995 1996 1997 1998
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
===================================================================================================================
Fixed assets 2,803 3,271 3,859 3,967 3,779 3,693 4,023 4,556 4,540
===================================================================================================================
Startup expenditures
and intangible assets 68 95 208 233 212 194 193 246 246
===================================================================================================================
Consolidation differences
(goodwill) 63 62 79 77 64 60 60 84 77
===================================================================================================================
Tangible assets 2,106 2,638 3,254 3,355 3,179 3,113 3,432 3,733 3,513
===================================================================================================================
Financial assets 566 476 318 302 324 326 338 493 704
===================================================================================================================
Current assets 4,037 3,597 2,651 2,685 2,772 2,802 2,996 3,242 2,878
===================================================================================================================
Inventories 959 1,033 1,044 1,005 932 965 953 1,014 966
===================================================================================================================
Trade receivables 1,270 1,129 920 891 1,060 1,061 1,155 1,407 1,267
===================================================================================================================
Other receivables 525 564 415 375 372 342 717 353 370
===================================================================================================================
Cash or cash equivalents 1,283 871 272 414 408 434 171 468 275
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
<TABLE>
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total assets 6,840 6,868 6,510 6,652 6,551 6,495 7,019 7,798 7,418
===================================================================================================================
Shareholders' equity and liabilities
===================================================================================================================
Total equity 2,306 2,533 2,649 2,435 2,433 2,469 2,877 3,235 3,293
===================================================================================================================
Shareholders' equity 2,210 2,455 2,560 2,337 2,350 2,395 2,693 2,969 3,047
===================================================================================================================
Minority equity 96 78 89 98 83 74 184 266 246
===================================================================================================================
Provisions and deferred taxes 1,364 1,354 1,239 1,318 1,279 1,316 1,401 1,636 1,621
===================================================================================================================
Liabilities 3,170 2,981 2,622 2,899 2,839 2,710 2,741 2,927 2,504
===================================================================================================================
Financial liabilities 1,723 1,468 1,240 1,499 1,336 1,220 1,106 1,185 840
===================================================================================================================
due in more than l year 1,146 983 797 1,200 993 924 933 654 649
===================================================================================================================
due within one year 577 485 443 299 343 296 173 531 191
===================================================================================================================
Trade liabilities 677 784 701 709 811 759 831 871 816
===================================================================================================================
Other liabilities 770 729 681 691 692 731 804 871 848
===================================================================================================================
Total liabilities and
shareholders' equity 6,840 6,868 6,510 6,652 6,551 6,495 7,019 7,798 7,418
===================================================================================================================
Ratios
===================================================================================================================
Return on equity (%) 17.1 12.2 9.2 -7 8.1 12.6 11.7 10.5 11.5
===================================================================================================================
Net Debt to equity (%) 19 22 36 45 38 32 32 22 17
===================================================================================================================
</TABLE>
10 year Financial data (income statement)
<TABLE>
<CAPTION>
===================================================================================================================
in millions EUR 1990 1991 1992 1993 1994 1995 1996 1997 1998
(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 6,327 6,316 6,308 6,052 6,500 6,776 6,990 7,709 7,451
===================================================================================================================
Cost of sales -4,142 -4,260 -4,244 -4,192 -4,353 -4,881 -5,113 -5,747 -5,392
===================================================================================================================
Gross margin 2,185 2,056 2,064 1,860 2,147 1,895 1,877 1,962 2,059
===================================================================================================================
General and sales overhead -1,219 -1,334 -1,431 -1,455 -1,430 -986 -1,042 -1,064 -1,102
===================================================================================================================
Research expenditures -318 -319 -302 -299 -285 -293 -305 -284 -292
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other operating expenses and
income -2 12 30 -75 -84 -58 -44 -88 -69
===================================================================================================================
Operating results 646 415 361 31 348 558 486 526 596
===================================================================================================================
Financial expenses and income -46 -110 -103 -110 -93 -88 -48 -24 -41
===================================================================================================================
Current taxes -179 -57 -46 -19 -84 -160 -155 -175 -178
===================================================================================================================
Share in earnings of companies
valued according to the equity
method 21 14 0 0 1 1 3 0 0
===================================================================================================================
Net earnings before
extraordinary items 442 262 212 -98 172 311 286 327 377
===================================================================================================================
Extraordinary items, net -47 45 33 -73 25 -1 52 14 1
===================================================================================================================
Consolidated net income 395 307 245 -171 197 310 338 341 378
===================================================================================================================
Minority interests 23 19 3 6 7 5 8 11 3
===================================================================================================================
Solvay's share of earnings 372 288 242 -177 191 305 330 330 375
===================================================================================================================
Depreciation and amortization 383 434 481 473 470 453 481 498 507
===================================================================================================================
Cash flow 778 741 726 302 667 763 819 839 885
===================================================================================================================
Ratios
===================================================================================================================
Gross margin as a percentage of
sales 34.5 32.6 32.7 30.7 33 28 26.8 25.4 27.6
===================================================================================================================
Times charges earned 27.2 5.3 3.4 0.5 3 5.9 5.8 14.1 11.3
===================================================================================================================
Current taxes/Current earnings
before tax, as a % 29 18 18 17 33 34 35 35 32
===================================================================================================================
</TABLE>
(1) From 1995 the gross margin is calculated after distribution and
warehousing costs. Before that change the 1995 gross margin amounted to
EUR 2372 million.
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<PAGE> 9
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Solvay
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Notes to financial statements
- --------------------------------------------------------------------------------
The notes refer to the numbers indicated in the summaries of the consolidated
statements.
Introduction of the euro
Solvay adopted the euro (EUR) on 1 January 1999.
As a result, although the 1998 accounts were presented in Belgian francs, they
have been converted into euros at the rate of BEF 40.3399 to EUR 1, in
compliance with the royal decree of 25 December l998.
The 1997 accounts and data on earlier years have been converted into euros at
the same rate. The summarized consolidated statements, the full consolidated
statements and the summarized statements of Solvay S.A. also give the 1997
figures in Belgian francs.
In accordance with the said royal decree, the full corporate financial
statements of Solvay S.A. are shown in Belgian francs. A version incorporating
the 1998 figures converted into euros will be circulated to shareholders and
available to others on request.
- --------------------------------------------------------------------------------
The notes refer to the numbers indicated in the summaries of the consolidated
statements. The statutory annexes provide additional detail on the headings
commented on below.
Consolidated income statement
(1) SALES AND GROSS MARGINS
Sales were slightly down (-3%) from 1998's record figure. This was largely due
to a drop in selling prices in the Plastics sector in response to a decline in
the price of petrochemicals, its raw materials. In geographic terms, sales were
down in all regions, but the reduction was greatest in Asia as a result of the
crisis there; however, that region accounts for only a modest share of worldwide
sales. On balance, sales of activities (Solkatronic Chemicals Inc., Safiplast
S.p.A., Abelia S.A. and Abelia Decors S.A.) and company acquisitions (Davynil)
yielded a drop in sales compared to 1997 of nearly EUR 90 million, or a little
over 1%. The overall effect of exchange rates on sales was negligible.
The strong growth in sales in the Pharmaceuticals sector (up 11% from 1997)
should be noted.
Gross margin is calculated after distribution and warehousing costs, inventory
adjustments and license fees.
It rose for the second year in succession, largely as a result of the measures
taken to bolster
<PAGE> 11
the Group's competitiveness, which have improved control over the cost of sales.
Gross margin as a percentage of sales increased from 25.4% in 1997 to 27.6% in
1998.
(2) GENERAL AND SALES OVERHEADS
This category increased by EUR 38 million from 1997 - a rise of nearly 4%. Costs
were stable or in decline in the Chemicals, Plastics and Processing sectors as a
result of efforts to cut overheads. In the Pharmaceuticals sector, however, an
increase in the number of medical representatives drove up sales costs. In
addition, new products were launched in 1998, among them Prometrium in the US.
Write-downs of receivables and inventories of finished products fell slightly,
from EUR 18 million in 1997 to EUR 17 million in 1998.
(3) RESEARCH EXPENDITURES
At EUR 292 million this category represented 3.9% of sales, up almost 3% from
1997. Major investment in research continued in the Pharmaceuticals sector. Here
expenditure was up by around 15%, accounting for 60% of the Group's total
expenditure in 1998 and approximately 15% of the sector's sales.
(4) OTHER OPERATING EXPENSES AND INCOME
Overall this item was down 16% from its 1997 value. Nearly half the figure for
start-up costs relates to the commissioning of facilities of our German
subsidiaries.
Costs of closures, decommissioning and demolitions relate to many projects at a
number of sites designed to increase the profitability of our production
activities.
Costs of trials and tests, which increased significantly, relate mainly to
developments in the automotive field in our North American subsidiaries.
Net unallocated charges to provisions, substantially down from 1997, include:
o provisions intended to cover expenses relating to the reorganization into
subsidiaries;
o the annual adjustment expense relating to retired personnel. (It should be
noted that provision for pensions for current staff is charged to
personnel costs under gross margin, general and sales overheads and
research expenditures.)
(5) OTHER FINANCIAL EXPENSES AND INCOME
This item, down EUR 3 million, records income from investments and financial
receivables and reversals of capital subsidies. It also includes exchange
profits and losses (unrelated to sales and net debt) and miscellaneous financial
expenses (banking costs, costs linked to the creation of corporations and
increases of capital, costs of capital contribution, etc.) and financial income
(commissions, guarantees received, income from trade receivables, etc.).
Exchange profits net of losses were up 35% in 1998, from EUR 7 million to EUR 10
million.
(6) EBIT
<PAGE> 12
EBIT is the level of results recorded by the ongoing activities of the Group
before taking into account net debt expenses, taxes and elements not allocated
by sector. It was up 11% from its 1997 value.
(7) NET DEBT EXPENSES
Expenses related to net indebtedness increased by EUR 15 million (+38%) on the
1997 figure, as a result of various factors.
The net expenses for 1997 included a sizeable exchange rate gain (EUR 21
million) on the realization of a position in US dollars, while in 1998 exchange
rate differences on financial positions were negligible. The rallying of the
Thai baht in 1998 after its sharp fall in 1997 did not affect our accounts,
thanks to the accounting hedge set up in 1997, which avoided a large negative
currency conversion difference being recorded that year in excess of the
provision made. It should be noted that this mechanism also covers emerging
markets in Latin America.
Income from investments was down, as were cash and cash equivalents. It should
be noted that our cash and cash equivalents in US dollars continued to benefit
from more favorable interest rates than those in the deutschmark zone.
Borrowing costs also fell in 1998, by about 13%, reflecting the improvement in
the Group's gross borrowing - down from EUR 1,185 million at the end of 1997 to
EUR 840 million at the end of 1998 - and a very slight cut in interest rates.
Interest rates for the main European currencies were progressively aligned on a
euro rate of 3% at the end of the year, which was to our benefit as most of the
Group's debt in these currencies is at variable rates. Short-term USD rates
stabilized at 5% at the end of the year. This had no impact on us, since our
indebtedness in US dollars, although fairly substantial, almost exclusively
carries fixed interest rates, with no option of advance repayment without paying
large penalties.
(8) CURRENT TAXES
Current taxes rose 2% from 1997, less than the increase in earnings. The Group's
average tax rate improved, falling from 34.9% in 1997 to 32.1% in 1998.
(9) NET EXTRAORDINARY ITEMS
Net extraordinary items showed a positive balance of some EUR 1 million in 1998,
compared with EUR 14 million in 1997.
Extraordinary items include an exceptional profit of EUR 162 million from the
transfer of Generale de Banque shares to Fortis AG in exchange for new Fortis
shares. This figure reflects the very outdated historical value at which the
Generale de Banque shares were recorded in the books, and the conservative
valuation of the Fortis shares received in payment of the contribution. The
heading also includes EUR 54 million of profits on the sale of real estate and
activities, chiefly Solkatronic Chemicals, Inc.
In addition, extraordinary provisions and expenses on the order of EUR 265
million were recorded; these were due to the various restructuring measures
taken to improve the Group's competitiveness. These included the complete
closure of the Couillet site, the shutdown of PVC production at Ferrara, the
sale of the wallpaper business to the LPW group, the sale of the ferric chloride
business in Germany and Belgium to Kemira, the complete cessation of
<PAGE> 13
peroxygens research at the Widnes and Warrington sites, the closure of the
perborate monohydrate plant at Warrington, the shutdown of hydrogen peroxide
production at Santo Andre in Brazil, the discontinuation of the Green River
caustic business and extraordinary write-downs on various production units.
- --------------------------------------------------------------------------------
Cash flow statement
The cash flow statement shows changes in the cash and cash equivalents relating
to operations, investments and financing. Changes in working capital and
provisions account for the balance sheet differences shown in the consolidated
accounts.
The comparison explains the change in cash and cash equivalents.
(10) DEPRECIATION AND AMORTIZATION
For the purposes of determining cash flow (defined as the sum of net earnings
and depreciation) for 1998, the depreciation and amortization heading excludes
EUR 98 million of extraordinary write-downs of tangible assets, charged to
non-cash items.
(11) NON-CASH ITEMS
This heading is used to offset non-cash components of earnings.
These are essentially the gain on the Generale de Banque/Fortis transaction,
earnings on the sale of fixed assets and investments included in the proceeds of
the sale of those assets, and the extraordinary write-downs mentioned above.
(12) SALES OF ASSETS AND INVESTMENTS
Sales of assets and investments include income from the sale of Solkatronic
Chemicals, Inc., Safiplast S.p.A. and Abelia S.A. and Abelia Decors S.A.
(13) INCREASE OF CAPITAL
Capital increases are those of Solvay S.A. related to the exercise of warrants
issued to Group managers around the world.
- --------------------------------------------------------------------------------
Consolidated balance sheet
(14) START-UP EXPENDITURES AND INTANGIBLE ASSETS
These are composed principally of start-up expenses (incurred before the
commissioning of new facilities), mining leases for trona in the US and
registration and development costs related to the introduction of fluvoxamine on
the US and Japanese markets. Acquired patents and licenses are also included.
Start-up expenses are amortized over five years and intangib1e assets on the
basis of their
<PAGE> 14
economic lifetime.
Start-up expenses were down 32% after amortization. They stood at EUR 19 million
at the end of 1998.
Intangible assets rose from EUR 218 million at the end of 1997 to EUR 227
million at the end of 1998. The increase was chiefly due to the acquisition of
trona concessions in Wyoming, which extend reserves at our Green River mine from
40 years' to over 50 years' production at a rate of 3.5 million short tons/year,
using current mining techniques. Those techniques will probably be improved.
(15) POSITIVE CONSOLIDATION DIFFERENCES
This is an excess in the price paid over the value, adjusted if necessary, of
shareholders' equity in consolidated companies and those accounted for using the
equity method; this item primarily records goodwill generated in the acquisition
of companies in the fields of health, automotive products, pipes and trona, and
shares purchased from minority shareholders in Kali-Chemie AG.
Goodwill is amortized over 15 years, with the exception of goodwill relating to
trona mining activities (40 years) and human health (between 15 and 40 years,
depending on the activity acquired).
(16) TANGIBLE ASSETS
This item contains the acquisition cost, adjusted if necessary, of the Group's
fixed assets, less cumulative depreciation and extraordinary write-downs over
the year. The net value of tangible assets fell from EUR 3,733 million at the
end of 1997 to EUR 3,513 million at the end of 1998.
At the end of 1998, construction in progress amounted to EUR 330 million, down
EUR 57 million from 1997, and was related principally the Green River mine the
United States and the expansion of the Bahia Blanca plant in Argentina.
The lives generally used for the various categories of fixed assets are as
follows:
<TABLE>
<CAPTION>
================================================================================
<S> <C>
Land not depreciated
- --------------------------------------------------------------------------------
Industrial buildings 20 to 30 years
- --------------------------------------------------------------------------------
Administrative buildings 30 to 40 years
- --------------------------------------------------------------------------------
Industrial plant 10 to 17 years
- --------------------------------------------------------------------------------
Equipment and fittings approximately 10 years
- --------------------------------------------------------------------------------
Computer equipment 4 to 5 years
- --------------------------------------------------------------------------------
Rolling stock 5 to 25 years
================================================================================
</TABLE>
(17) FINANCIAL ASSETS
With the exception of interests in companies valued using the equity method,
financial assets are recorded on the balance sheet at the lower of purchase cost
or realizable value.
<PAGE> 15
This heading covers:
o interests in companies valued using the equity method;
o interests in companies that, not being significant for the Group, are
neither consolidated nor accounted for using the equity method;
o interests in newly acquired companies and activities which will be
consolidated in 1999;
o long-term loans to and receivables from these companies;
o assets relating to the Group's risk portfolio (technical reserves);
o in the Pharmaceuticals sector, the interests in ArQule (14.9%) and Cadus
(12.2%) in the United States and Innogenetics (8.15%) in Belgium in the
field of biotechnology research and development;
o the interests in Sofina (12.6%) and Fortis AG (1.4%) held by Mutuelle
Solvay.
In June 1998 Fortis AG made a public offer of new shares in exchange for shares
in Generale de Banque. Prior to that announcement, Mutuelle Solvay had, with two
other Belgian companies, traded its Generale de Banque shares with Fortis at the
rate of seven Fortis to three Generale de Banque shares. The transaction was an
indication of the three companies' intent to form a stable shareholder base for
Fortis AG.
In view of the Group's industrial vocation and the illiquid nature of the
holding, the Board of Directors valued the shares at EUR 198.31 (BEF 8,000)
each, a level which cushions the Group from stock market fluctuations.
The Generale de Banque/Fortis transaction on the one hand and the acquisition of
the Norwegian group Mabo (one of Scandinavia's leading producers of plastic
pipes) and the Zeneca group's fillers business in the United Kingdom on the
other account for the EUR 211 million increase in financial assets in 1998.
(18) CURRENT ASSETS AND LIABILITIES
Working capital consists of all inventories and trade and other receivables,
less trade and other liabilities.
The balance fell by EUR 93 million. This was due to:
o the efforts made to check the increase in working capital
o the debt related to the purchase of the Mabo group and Zeneca's fillers
business
o reclassification of Indupa's trade liabilities (EUR 78 million) -
rescheduled during the company's restructuring in preparation for its
partial acquisition by the Group - under financial indebtedness; their new
duration and legal form placed them in the category of debts rather than
liabilities.
Inventories of salable products represented an average of 24 days' sales in both
1997 and 1998. Trade receivables fell by 10%, and represent 62 days' sales, as
against 66 days in 1997.
(19) NET INDEBTEDNESS
The Group's net indebtedness is the balance between borrowings and total cash
and cash equivalents (including term and demand deposits). It fell from EUR 717
million at the end of 1997 to EUR 565 million at the end of 1998.
Cash and cash equivalents fell by EUR 193 million.
<PAGE> 16
Financial liabilities were reduced by EUR 345 million, from EUR 1,185 million at
the end of 1997 to EUR 840 million at the end of 1998. This was the result of
repaying a number of major borrowings: a private placement of USD 150 million, a
public placement of LUF 1.5 billion and a government loan of 1 billion French
Eurofrancs.
The increase of EUR 33 million in debenture loans resulting from the
reclassification of Indupa's debts (see comments on current assets and
liabilities) should be noted; this was partly offset by repayments in the US and
Belgium.
Net debt to equity
The Group's ratio of net debt to equity improved significantly in relation to
1997, from 22% to 17%.
Financing currencies
The Group's borrowings are generally effected through special financing
vehicles, which make the proceeds of their borrowings available to the Group's
operating entities. The choice of currency for a borrowing depends largely on
the opportunities offered by various markets; the currency selected is not
necessarily the currency of the country in which the funds will be invested.
However, the proceeds of borrowings are made available to operating companies in
local currencies, where necessary by means of a "currency swap" from the
currency in which the financing vehicle holds the funds. The cost of currency
swaps is included in borrowing costs.
This enables the Group to limit the foreign exchange risks for both the
financing vehicle and the final user of the funds.
In emerging markets it is not always possible to use local financial markets to
borrow in local currency, either because they are too small and the funds are
not available or for reasons of cost. In such cases strong currency borrowings
are necessary. In 1997 the Group set up provisions to cover potential exchange
losses on Asian currencies, and established an accounting hedge as protection
against the volatility of currency markets in the region and in other emerging
economies.
In addition, specific measures were taken in the case of Brazil, where forward
exchange rate cover was in place at 31 December 1998 for all indebtedness in US
dollars.
Maturity of indebtedness
For the purposes of analysis, the sum total of revolving lines of credit has
been included under permanent indebtedness.
Borrowings and facilities
The main borrowings maturing after 1999 are:
o in the US: USD 75 million maturing in equal portions from now until 2002,
at 8.16%, and USD 175 million maturing in equal portions from 2003
onwards, at 8.55%
o Our 44.9% share in the USD 241 million financing for Vinythai, a set of
borrowings maturing at regular intervals from now until 2006, at rates
ranging from 7.9 to 10.3% at 31 December 1998
o BEF 3 billion maturing in the year 2000, at 3.58% at 31 December 1998
o DEM 50 million maturing in portions from now until 2005 at 6.5%
The Group also has access to various credit facilities. These include:
<PAGE> 17
o a commercial paper program worth USD 500 million
o a standby credit facility of DEM 1 billion or its equivalent in euros a
multi-currency, multi-country program of securitization of receivables
worth the equivalent of EUR 16 million; during the 1998 fiscal year, the
Group had very limited recourse to the latter program.
Derivatives
These are used to cover clearly identified financial risks only. In practice
they are principally currency and interest swaps.
In addition to making financing available to our operating subsidiaries (see
above), currency swaps are part of our policy of insuring against transactional
exchange rate risks. Interest swaps are a means of fixing the rate for a portion
of our debt (particularly in US dollars and pounds sterling).
Interest swaps generally cover a period of years.
Interest rate management
Interest rate management operates at Group level and is applied to the balance
of net indebtedness by currency. The Group is currently on a fixed rate for the
US dollar and the pound sterling and a floating rate for the main currencies of
continental Europe. This enables it to take advantage of the differential
between the short- and long-term rates for the latter currencies.
(20) SHAREHOLDERS' EQUITY
Capital
At 31 December 1998, the issued capital of Solvay S.A. had increased to EUR
1,244 million compared with EUR 1,241 million at 31 December 1997. The capital
was represented by 84,138,380 shares without par value.
During the 1998 fiscal year, 21,310 warrants issued to senior Group executives
around the world were exercised, each representing the issuance of 10 new
shares.
During an exercise period running from 10 to 28 February 1999, 6,800 warrants
were exercised and converted into 68,000 new shares.
These entitle their holders to the balance of the dividend payable on 11 June
1999 and bring the total number of shares eligible to receive that balance to
84,206,380.
Issue premiums
The balance at the end of 1998 was EUR 9 million; EUR 6 million represented the
premium paid as a result of the exercise of warrants during the year.
Reserves
The change in reserves represents net undistributed income, as the balance sheet
is presented after distribution.
The dividend proposed to the General Shareholders' Meeting of Solvay S.A. is
recorded under the "other liabilities" heading.
Negative consolidation differences
This heading (up 10% from the 1997 figure) shows negative consolidation
differences recorded when companies are first included in the scope of
consolidation, or first recorded using the equity method.
<PAGE> 18
Conversion differences
This heading records the sum of conversion differences that arise when the
conversion of shareholders' equity at the end of the year is compared with the
value in Belgian francs of the same shareholders' equity on a historical basis.
Also included are differences resulting from the use of average rates in
expressing results. The EUR 125 million reduction results primarily from the
weaker position of certain currencies (mainly the US dollar) against the Belgian
franc at 31 December 1998 compared with 31 December 1997.
Capital subsidies
This heading covers investment subsidies granted by public authorities. It
declined when equipment grants included in the results were prorated to reflect
the depreciation recorded on the equipment to which the grants applied.
New subsidies are entered under this heading and immediately recorded in
results. At the same time, a corresponding depreciation is applied to the
subsidized assets to bring the figure into line with their actual cost to the
Group. This can be seen in the table showing changes in shareholders' equity.
In 1998, the sums concerned were insignificant.
Minority interests
This heading groups the interests of third parties in partly owned, fully
consolidated subsidiaries.
They chiefly represent the interests of Asahi Glass in the Solvay Soda Ash Joint
Venture in the US, the minority interests in Indupa S.A.I.C. and Solvay Indupa
do Brasil, and the interest of local shareholders in the Bulgarian subsidiary
Solvay Sodi JS Co.
(21) PROVISIONS AND DEFERRED TAXES
In total, provisions and deferred taxes decreased from EUR 1,636 million at the
end of 1997 to EUR 1,621 million at the end of 1998.
These concern primarily pension funds and similar commitments made by the parent
company and its subsidiaries to personnel, by way of ordinary pensions and
provisions for early retirement - a total of EUR 542 million.
The heading also includes deferred taxes totaling EUR 156 million - down EUR 43
million on from 1997.
The remainder of EUR 923 million (up EUR 27 million on from 1997) represents the
costs of major repairs and maintenance (EUR 25 million) and also a number of
risks and charges connected with:
o mining activities, the basis for a number of Group products;
o increasing constraints governing the disposal and treatment of certain
wastes, which that remain technically unavoidable in certain activities,
and an ever-growing concern with other aspects of environmental
protection;
o production and marketing activities ("product" and "country" risks, civil
liability for products);
o certain risks previously covered by insurance companies (technical
reserves); the corresponding assets are entered as financial assets;
and, finally, the Group's relations with others involved in or affected by Group
activities
<PAGE> 19
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(customers, suppliers, staff authorities, local communities, partners in
subsidiaries and participating interests, etc.)
Some of these risks cannot be insured by a third party, or can be only partially
covered (franchises, guarantee ceilings, etc.). The Group has therefore
gradually built up a provision to cover these risks and expenses as far as to
the extent that they can be assessed at a general management level. For
inventory, this provision is adjusted to an appropriate level.
Solvay Group policy on insurance
The Solvay Group's policy is to use insurance to cover all catastrophic hazards,
where insurance is compulsory, and where it is economically the best option for
allocating risk. The Group will therefore seize every new opportunity offered by
the insurance market to reduce the financial impact of accidents that could have
a major effect on its assets, profits, and civil liability.
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- --------------------------------------------------------------------------------
COPYRIGHT, 1999, Solvay S.A.
Updated 19 April 1999. Made by Qwentes, Brussels.
If you have any comments on this Website,
please contact the Webmaster.
<PAGE> 20
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Notes to financial statements
- --------------------------------------------------------------------------------
Changes to the scope of consolidation in 1998
The Group consists of Solvay S.A. and its subsidiaries and affiliated companies,
numbering 327 and located in 47 countries.
Of these, 154 are fully consolidated, 25 are proportionally consolidated and
four are accounted for using the equity method; the other 144 are too small to
be consolidated. Changes in the scope of consolidation in 1998 were in line with
the following strategies in particular:
o concentrating the Group's activities in fields where it has a
competitive advantage and a leading position
o reorganizing Group activities into subsidiaries
================================================================================
Fully consolidated companies
ADDITIONS
1. Acquisitions
o Solvay Advanced Polymers Inc., Decatur
2. Reorganization and formation of subsidiaries
o Solvay Automotive Management and Research S.N.C., Brussels
o Solvay Benvic & Cie Belgium, Brussels
o Solvay Benvic France S.A., Paris
o Solvay Sels - France S.A., Paris
o Solvay-Fluores - France S.A., Paris
o Solvay - PVC - France S.A., Paris
o Solvay Benvic - Italia S.p.A., Rosignano
o Solvay Polyolefins Europe GmbH, Hannover
o Solvay Benvic Iberica S.L., Barcelona
o Solvay Quimica S.L., Barcelona
o Solvay Information Technologies Inc., Houston, TX
o Alkor Draka Advanced Films Inc., Baltimore, MD
DELETIONS
1. Sold
o Abelia S.A., Puteaux Abelia Decors S.A., Puteaux
<PAGE> 21
o Solkatronic Chemicals, Inc., Fairfield, NJ
o Solvay Industrial Films, Inc., Baltimore, MD
2. Mergers, absorptions
o Ingetra AG, Basel
o Derivados Petroquimicos Sociedad de Inversion S.A., Buenos Aires
================================================================================
Companies consolidated by proportional consolidation
ADDITIONS
1. Acquisitions
o Davinyl A.B., Goteborg
2. Establishment of new subsidiaries
o Pipelife Sweden A.B., Goteborg
o Alventia LLC, Houston, TX
3. Growth of companies that previously did not meet the size criteria
o Pipelife International Holding GmbH, Wiener Neudorf
o Solvay Automotive Argentina S.A., Buenos Aires
DELETIONS
1. Sold
o Safiplast S.p.A., Pisticci (Matera)
================================================================================
List of consolidated companies
o Companies to be fully consolidated
o Belgium
o Grand-Duchy of Luxembourg
o Netherlands
o France
o Italy
o Germany
o Spain
o Switzerland
o Portugal
o Austria
o United Kingdom
o Denmark
o Finland
o United States
o Canada
o Mexico
o Netherlands Antilles
o Brazil
o Argentina
<PAGE> 22
o Australia
o Japan
o Thailand
o Singapore
o Cayman
o Companies to be consolidated proportionally
o Companies to be recorded using the equity method
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
BELGIUM Alkor Draka & Cie S.N.C. Oudenaarde 100
================================================================================
Mutuelle Solvay S.C.S., Brussels 99,9
================================================================================
Ondex & Cie S.N.C., Brussels 100
================================================================================
Solvay Automotive Management and 100
Research S.N.C., Brussels
================================================================================
Solvay Benvic & Cie Belgium, Brussels 100
================================================================================
Solvay Coordination Internationale 100
des Credits Commerciaux
================================================================================
(CICC) S.A., Brussels
================================================================================
Solvay Interox S.A., Brussels 100
================================================================================
Solvay Pharma & Cie S.N.C., 100
Brussels
================================================================================
Solvay Polyolefins Europe S.A., 100
Brussels
================================================================================
Solvay Polyolefins Europe - Belgium 100
S.A., Brussels
================================================================================
Solvic & Cie S.N.C., Brussels 100
================================================================================
Venilia & Cie S.N.C., Zaventem 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
GRAND-DUCHY Solvay Finance (Luxembourg) S.A., 100
OF LUXEMBOURG Luxembourg
================================================================================
<PAGE> 23
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
NETHERLANDS Boekelo Folien B.V., Enschede 100
================================================================================
Physica B.V., Weesp 100
================================================================================
Plavina Benelux B.V., Weesp 100
================================================================================
Sodufa B.V., Weesp 100
================================================================================
Solvay Chemie B.V., Linne-Herten 100
================================================================================
Solvay Draka B.V., Enkhuizen 100
================================================================================
Solvay Finance B.V., Weesp 100
================================================================================
Solvay Interox B.V., Linne-Herten 100
================================================================================
Solvay Interox Holding B.V., Weesp 100
================================================================================
Solvay Pharma B.V., Weesp 100
================================================================================
Solvay Pharmaceuticals B.V., Weesp 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
FRANCE Alkor Draka S.A., Roissypole Le Dome 100
================================================================================
Barytine de Chaillac S.A., Chaillac 100
================================================================================
Buflon S.A., Puteaux 100
================================================================================
Defense-Guynemer Participations S.A., 100
Puteaux
================================================================================
Ondex S.A., Chevigny-St-Sauveur 100
================================================================================
Saline Cerebos et de Bayonne S.A., 100
Paris
================================================================================
Solvay Automotive France S.A., Laval 100
================================================================================
Solvay Benvic France S.A., Paris 100
================================================================================
Solvay Finance France S.A., Paris 100
================================================================================
Solvay - Fluores -France S.A., 100
Paris
================================================================================
Solvay Interox S.A., Paris 100
================================================================================
Solvay Pharma S.A., Suresnes 99,9
================================================================================
Solvay Polyolefins Europe - 100
France S.A., Paris
================================================================================
Solvay - PVC - France S.A., Paris 100
================================================================================
<PAGE> 24
Solvay - Sels - France S.A., Paris 100
================================================================================
Soplachim S.A., Paris 100
================================================================================
Venilia S.A., Rueil-Malmaison 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
ITALY Adriaplast S.p.A., Monfalcone 100
================================================================================
Caleppiovinil S.p.A., Fucine di 100
Ossana
================================================================================
GOR Applicazioni Speciali S.p.A., 100
Buriasco
================================================================================
Societa Elettrochimica Solfuri e 100
Cloroderivati (ELESO) S.p.A., Milan
================================================================================
Societa Generale per l'Industria 100
della Magnesia (SGIM) S.p.A.,
Angera
================================================================================
Societa Bario e Derivati (SABED) 100
S.p.A., Massa
================================================================================
Solvay Benvic - Italia S.p.A, 100
Rosignano
================================================================================
Solvay Interox S.p.A., Milan 100
================================================================================
Solvay Pharma S.p.A., Grugliasco 100
================================================================================
Solvay Polyolefins Europe - 100
Italy S.p.A., Rosignano
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
GERMANY Alkor Deco Vertriebs GmbH, Grafelfing 100
================================================================================
Alkor Draka Handel GmbH, Wuppertal 100
================================================================================
Alkor Folien GmbH, Thansau 100
================================================================================
Alkor GmbH Kunststoffe, Munich 100
================================================================================
DMS Verwaltungs GmbH, Solingen 100
================================================================================
H & C Verwaltungs GmbH, Hannover 100
================================================================================
Kali-Chemie AG, Hannover 98,2
================================================================================
Salzgewinnungsgesellschaft Westfalen 65
mbH, Ahaus-Graes
================================================================================
<PAGE> 25
Solvay Alkali GmbH, Hannover 100
================================================================================
Solvay Arzneimittel GmbH, Hannover 100
================================================================================
Solvay Automotive GmbH, Bad Harzburg 100
================================================================================
Solvay Barium Strontium GmbH, Hannover 100
================================================================================
Solvay Deutschland GmbH, Hannover 100
================================================================================
Solvay Fluor und Derivate GmbH, 100
Hannover
================================================================================
Solvay Fluor und Derivate Holding 100
GmbH, Hannover
================================================================================
Solvay Interox GmbH, Hannover 100
================================================================================
Solvay Kali-Chemie Holding GmbH, 100
Hannover
================================================================================
Solvay Kunststoffe GmbH, Hannover 100
================================================================================
Solvay Management Support GmbH, 100
Hannover
================================================================================
Solvay Pharmaceuticals GmbH, Hannover 100
================================================================================
Solvay Polyolefins Europe GmbH, 100
Hannover
================================================================================
Solvay Salz GmbH, Hannover 100
================================================================================
Solvay Verarbeitung Holding GmbH, 100
Hannover
================================================================================
Solvay Verwaltungs- und Vermittlungs 100
GmbH, Hannover
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
SPAIN Alkor Draka Iberica S.A., Barcelona 100
================================================================================
Duphar S.A., Barcelona 100
================================================================================
Electrolisis de Torrelavega A.E.I., 100
Torrelavega
================================================================================
Hispavic Industrial S.A., Barcelona 100
================================================================================
Nezel S.A., Barcelona 100
================================================================================
Solvay Automotive Iberica S.A., 100
Gava
================================================================================
Solvay Benvic Iberica S.L., 100
Barcelona
================================================================================
<PAGE> 26
Solvay Espana S.L., Barcelona 100
================================================================================
Solvay Fluor Iberica S.A., 100
Tarragona
================================================================================
Solvay Interox S.A., Barcelona 100
================================================================================
Solvay Minerales S.A., Barcelona 100
================================================================================
Solvay Pharma S.A., Barcelona 100
================================================================================
Solvay Quimica S.L., Barcelona 100
================================================================================
Venilia S.A., Gava 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
SWITZERLAND Dutraco S.A., Delemont 100
================================================================================
Solvay (Schweiz) AG, Zurzach 100
================================================================================
Solvay Pharma AG, Bern 100
================================================================================
Soltraco AG, Basel 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
PORTUGAL Solvay Farma Lda, Lisbon 100
================================================================================
Solvay Interox - Produtos 100
Peroxidados Lda, Lisbon
================================================================================
Solvay Portugal - Participacoes (SGPS) 100
Lda, Lisbon
================================================================================
Solvay Portugal - Produtos Quimicos 100
S.A., Lisbon
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
AUSTRIA Solvay Osterreich AG, Vienna 100
================================================================================
Solvay Pharma GmbH, Klosterneuburg 100
================================================================================
<PAGE> 27
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
UNITED Alkor Draka Ltd, Watford 100
KINGDOM
================================================================================
Argentinian Stocks Investments Ltd, 100
St Peter Port
================================================================================
Asian Stocks Investments Ltd, St 100
Peter Port
================================================================================
Brazilian Stocks Investments Ltd, 100
St Peter Port
================================================================================
Korean Stocks Investments Ltd, St 100
Peter Port
================================================================================
Global Stocks Investments Ltd, St 100
Peter Port
================================================================================
Solvay Automotive Ltd, Pontypridd 100
================================================================================
Solvay Chemicals Ltd, Hemel 100
Hempstead
================================================================================
Solvay Healthcare Ltd, Southampton 100
================================================================================
Solvay Interox Ltd, Warrington 100
================================================================================
Solvay UK Holding Company Ltd, 100
Hemel Hempstead
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
DENMARK Alkor Draka Nordic K/S, Albertslund 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
FINLAND Oy Finnish Peroxides AB, Voikkaa 75
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
UNITED Alkor Draka Advanced Films, Inc., 100
STATES Baltimore MD
================================================================================
Hedwin Corporation, Baltimore, MD 100
================================================================================
Research Polymers International, 100
Inc., Grand Prairie, TX
================================================================================
<PAGE> 28
Solvay Advanced Polymers, Inc., 100
Decatur
================================================================================
Solvay Alkalis, Inc., Houston, TX 100
================================================================================
Solvay America, Inc., Houston, TX 100
================================================================================
Solvay America Funding Company, 100
Houston, TX
================================================================================
Solvay Automotive, Inc., Troy, MI 100
================================================================================
Solvay Compounding, Inc., Houston, TX 100
================================================================================
Solvay Engineered Polymers, Grand 100
Prairie, TX
================================================================================
Solvay Finance (America) Inc., 100
Houston, TX
================================================================================
Solvay Fluorides, Inc., Greenwich 100
================================================================================
Solvay Information Technologies 100
Inc., Houston, TX
================================================================================
Solvay Interox, Inc., Houston, TX 100
================================================================================
Solvay Management Services, Inc., 100
Houston, TX
================================================================================
Solvay Minerals, Inc., Houston, TX 100
================================================================================
Solvay Olefins L.P., Houston, TX 100
================================================================================
Solvay Performance Chemicals, Inc., 100
Houston, TX
================================================================================
Solvay Petrochemicals, Inc., 100
Houston, TX
================================================================================
Solvay Pharmaceuticals, Inc., 100
Marietta, GA
================================================================================
Sovay Polymers, Inc., Houston, TX 100
================================================================================
Solvay Soda Ash Joint Venture, 80
Houston, TX
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
CANADA Solvay Automotive Canada, Inc., 100
Blenheim
================================================================================
Solvay Engineered Polymers (Canada) 100
Inc., Concord
================================================================================
Solvay Pharma, Inc., Scarborough 100
================================================================================
Solvay Pharma Canada, Inc., 100
Scarborough
================================================================================
<PAGE> 29
Solvay Pharma Clinical, Inc., 100
Scarborough
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
MEXICO Solvay Quimica Y Minera S.A. de 90
C.V., Monterrey
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
NETHERLANDS Solvay Finance International
ANTILLES N.V., Curacao 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
BRAZIL CBCC - Companhia Brasileira 99,9
Carbureto de Calcio, Rio de Janeiro
================================================================================
Solvay do Brasil Ltda, Sao Paulo 100
================================================================================
Solvay Holding Ltda, Sao Paulo 51,2
================================================================================
Solvay Indupa do Brasil S.A., Sao 51,2
Paulo
================================================================================
Solvay Polietileno Ltda, Sao Paulo 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
ARGENTINA Solvay Indupa S.A.I.C., Bahia 51,2
Blanca
================================================================================
Solvay Quimica S.A., Buenos Aires 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
AUSTRALIA Solvay Interox Pty Ltd, Banksmeadow 100
================================================================================
<PAGE> 30
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
JAPAN Nippon Solvay KK, Tokyo 100
================================================================================
Solvay Seiyaku KK, Tokyo 100
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
THAILAND Peroxythai Ltd, Bangkok 66,5
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
SINGAPORE Solvay Asia Pacific Pte Ltd, 100
Singapore
================================================================================
Companies to be fully consolidated
================================================================================
%
Country Name and registered office control
================================================================================
CAYMAN Blair International Insurance 100
(Cayman) Ltd, Georgetown
================================================================================
Solvay Finance (Cayman) Ltd, 100
Georgetown
================================================================================
Companies to be consolidated proportionally
================================================================================
%
Country Name and registered office control
================================================================================
BELGIUM Polva Pipelife S.A., Kalmthout 50
================================================================================
NETHERLANDS Polva Pipelife B.V., Enkhuizen 50
================================================================================
FRANCE Pipelife France S.A., 50
Deols-Chateauroux
================================================================================
GERMANY Ciba Solvay Duromer GmbH, Bergkamen 50
================================================================================
Deutsche Baryt-Industrie Dr Rudolf 50
Alberti GmbH & Co. KG, Bad
Lauterberg
================================================================================
Pipelife Rohrsysteme GmbH, Bad 50
Zwischenahn-Ekern
================================================================================
Pipelife Rohrsyteme Golzau GmbH, 50
Golzau
================================================================================
SPAIN Pipelife Hispania S.A., Granollers 50
================================================================================
Viniclor S.A., Madrid 55
================================================================================
<PAGE> 31
AUSTRIA Pipelife International Holding 50
GmbH, Wiener Neudorf
================================================================================
Pipelife Rohrsysteme GmbH & Co. Nfg 50
KG, Wiener Neudorf
================================================================================
Solvay Sisecam Holding AG, Wien 57,5
================================================================================
SWEDEN Davinyl A.B., Goteborg 50
================================================================================
Pipelife Sweden A.B., Goteborg 50
================================================================================
BULGARIA Solvay Sodi J.S. Co, Devnya 57,5
================================================================================
HUNGARY Pannonpipe Muanyagipari KFT, 25
Budapest
================================================================================
CZECH Pipelife Fatra Spol sr.o., 33,5
REPUBLIC Otrokovice
================================================================================
GREECE Pipelife Hellas S.A., Athens 50
================================================================================
UNITED STATES Alventia LLC, Houston 50
================================================================================
BRAZIL Peroxidos do Brasil Ltda, Sao Paulo 69,4
================================================================================
ARGENTINA Solvay Automotive Argentina S.A., 60
Buenos Aires
================================================================================
JAPAN Nippon Peroxide Co. Ltd, Tokyo 25
================================================================================
THAILAND Vinythai Public Company Ltd, 44,9
Bangkok
================================================================================
SOUTH KOREA Daehan Specialty Chemicals Co. Ltd, 50
Seoul
================================================================================
Hanwha Advanced Materials Co. Ltd, 50
Seoul
================================================================================
Companies to be recorded using the equity method
================================================================================
%
Country Name and registered office control
================================================================================
FRANCE Clement - R.P.C. S.A., 49
Gennevilliers
================================================================================
SLOVENIA Belinka Perkemija D.D., Ljubljana 20
================================================================================
INDIA Duphar Interfran Ltd, Bombay 38,9
================================================================================
National Peroxide Ltd, Bombay 25,1
================================================================================
================================================================================
Valuation rules
<PAGE> 32
The following are the valuation rules adopted for these statements:
1. Start-up expenditures
Start-up expenditures are amortized over a maximum period of five years;
in all cases, fees and reimbursement premiums for borrowings are amortized
over the period of the corresponding borrowings.
2. Intangible assets
Intangible fixed assets are valued at acquisition cost. To the extent that
their utilization is limited in time, intangible fixed assets acquired
from third parties are amortized on a straight-line basis over their
expected period of utilization. Research costs are expensed in the year in
which they are incurred. Costs related to applications for or the issuance
or utilization of a patent or trademark are recorded as assets at cost, to
the extent that this does not exceed a reasonable estimate of the future
value of utilization of or return on the patent or trademark.
3. Consolidation differences
At the time of consolidation of a new subsidiary or at the time of
proportional consolidation of an interest in a new affiliate, or on
acquisition of the remainder of an interest in an entity, the book value
of the shares or interests in such companies is compared to the portion
they represent of the net assets of the company, taking into account, if
necessary, any revaluation of assets and liabilities. A consolidation
difference is established in this way; it is recorded under the heading
"consolidation differences", under liabilities if it is negative and under
assets if it is positive. A positive difference is amortized over its
anticipated economic life in accordance with a method adopted by the Board
of Directors. Amortization charges are accelerated if changes in
circumstances indicate that the asset may be overvalued.
4. Tangible assets
Tangible fixed assets are recorded at acquisition cost, which is revalued
as required by law.
Tangible fixed assets with a limited useful life are depreciated on a
straight-line basis over their estimated lives; however, they may be
subject to anticipated, accelerated or retarded depreciation.
5. Financial assets and receivables maturing in more than one year
Interests which are neither consolidated nor recorded using the equity
method, as well as receivables maturing in more than one year, are
recorded at acquisition cost. Financial fixed assets and receivables
maturing in more than one year are written down when it appears that they
are less valuable than their acquisition cost or the value recorded using
the equity method.
6. Inventories
Inventory values are generally determined using weighted-average-cost or
LIFO methods. Cost of goods sold includes, in addition to costs of
production directly attributable to products, those which are indirectly
attributable, as well as depreciation and amortization. When products from
inventory are transferred within the group, their inventory value is
carried at the cost of goods sold, as if these transfers were effected at
cost price.
<PAGE> 33
7. Orders in process
Orders in process are valued at cost, without any finance charges.
8. Receivables and liabilities
These are recorded on the balance sheet at face value.
Receivables are written down if their payment at maturity is, in whole or
in part, uncertain.
9. Provisions for risks and charges
1. Provisions for pensions and similar obligations
Provisions for pensions and similar obligations are estimated in
accordance with actuarial procedures, using standard mortality
tables and interest rates in each country.
2. Provision for taxes
This provision is intended to cover taxes which may result from
adjustments to the taxable base or to the calculation of tax.
3. Provisions for major repairs and maintenance
his lump-sum provision is intended to cover expenses of this type.
4. Provisions for other risks and charges
At the close of the fiscal year, there is a review of risks which
could justify the creation of new provisions or the use of existing
provisions.
10. Conversion into Belgian francs of financial statements of foreign
companies and assets and liabilities expressed in foreign currencies
In the statements of branches and subsidiaries, monetary assets and
liabilities recorded in foreign currencies are converted at the exchange
rate in effect at the end of the year; the exchange differences realized
in transactions in foreign currencies are recorded in the income
statement, as are unrealized exchange losses, while unrealized exchange
profits are recorded in transitory accounts on the balance sheet.
At the time of consolidation, the statements of companies located in
high-inflation countries are subject to preliminary adjustments required
or permitted by local authorities. The recorded assets and liabilities
(other than shareholders' equity), rights and commitments of such
companies are then converted into Belgian francs at year-end rates.
Shareholders' equity of affiliated companies is maintained at historical
value and conversion differences on such values are recorded in a separate
entry. Income and expenses of branches and subsidiaries abroad are
converted into Belgian francs at the average exchange rate for the year.
The principal exchange rates used for conversions in the accounts are as
follows: Value of one currency unit in Belgian francs.
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COPYRIGHT, 1999, Solvay S.A.
Updated 19 April 1999. Made by Qwentes, Brussels.
If you have any comments on this Website, please contact the Webmaster.
<PAGE> 1
Exhibit 14
UNIMED Pharmaceuticals, Inc.
2150 East Lake Cook Road
Buffalo Grove, IL 60089-1862
847-541-2525
Fax 847-541-2509
[UNIMED LOGO]
June 8, 1999
Mr. David A. Dodd
President and CEO
Solvay Pharmaceuticals, Inc.
901 Sawyer Road
Marietta, Georgia 30062
Re: Proposed Acquisition of Unimed Pharmaceuticals, Inc. by Solvay
Pharmaceuticals, Inc.
Dear David:
Please accept this letter as my indication of support for the proposed Agreement
and Plan of Merger between Solvay Pharmaceuticals and Unimed. I, along with the
other members of the Board of Directors of Unimed, have reviewed the Agreement
and we have voted unanimously in favor of it.
We understand that Solvay Pharmaceuticals is willing to proceed only with the
full participation of the directors in the tender, and so all of us on the Board
unanimously declared our intent to tender our shares in accordance with the
terms set forth in the Agreement. Accordingly, this letter will confirm that I
will, subject to my fiduciary duties as a trustee of certain trusts holding
Unimed stock, tender all shares that I own either directly or beneficially at a
price of $12.00 per share upon the announcement of the tender offer by Solvay
Pharmaceuticals.
Very truly yours,
/s/ John N. Kapoor
- -------------------------------
John N. Kapoor
Chairman
cc: Robert E. Dudley
