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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT
TO SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
UNIMED PHARMACEUTICALS, INC.
(NAME OF SUBJECT COMPANY)
UNIMED PHARMACEUTICALS, INC.
(NAMES OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.25 PER SHARE (INCLUDING THE
ASSOCIATED SHARE PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
904801 10 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
ROBERT E. DUDLEY, PH.D
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
2150 E. LAKE COOK RD.
BUFFALO GROVE, IL 60089
(847) 541-2525
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
KURT W. FLORIAN, JR., ESQ.
KATTEN MUCHIN & ZAVIS
525 WEST MONROE STREET
SUITE 1600
CHICAGO, ILLINOIS 60661-3693
(312) 902-5200
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ITEM 1. SECURITY AND SUBJECT COMPANY.
Unimed Pharmaceuticals, Inc., a Delaware corporation (the "Company"), is
the subject company. The principal executive offices of the Company are located
at 2150 East Lake Cook Road, Buffalo Grove, Illinois 60089. The title of the
class of equity securities to which this Statement relates is the common stock,
par value $0.25 per share (the "Common Stock"), of the Company, including the
associated stock purchase 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 (the
"Rights Agent"). References herein to the "Shares" mean shares of the Common
Stock and shall, unless the context requires otherwise, include the Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
The Offer. This Statement relates to a tender offer by Utah Acquisition
Corporation, a Delaware corporation ("Offeror"), which is a wholly owned
subsidiary of Solvay Pharmaceuticals, Inc., a Georgia corporation ("Solvay"), to
purchase all of the outstanding Shares at a purchase price of $12.00 per Share,
net to the seller in cash (the "Offer Price"), upon 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 with the Offer
to Purchase and any amendments or supplements thereto constitute the "Offer").
The Offer is disclosed in the Tender Offer Statement on Schedule 14D-1, dated
June 17, 1999 (the "Schedule 14D-1") as filed by Solvay and Offeror with the
Securities and Exchange Commission ("SEC"). The Schedule 14D-1 indicates that
the principal executive offices of the Offeror and Solvay are located at 901
Sawyer Road, Marietta, Georgia 30062.
The Offer is being made pursuant to an Agreement and Plan of Merger among
Offeror, Solvay and the Company, dated as of June 11, 1999 (the "Merger
Agreement"). A copy of the Merger Agreement is filed as Exhibit 1 to this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9")
and is incorporated herein by reference in its entirety. Pursuant to the Merger
Agreement, following the consummation of the Offer, upon the satisfaction or
waiver of certain conditions, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Offeror will be merged with and into the Company
(the "Merger" and, together with the Offer, the "Transaction"), with the Company
surviving the Merger (the Company following the Merger is sometimes referred to
as the "Surviving Corporation"). In the Merger, the holders of Shares as of the
effective time of the Merger (other than the Offeror) will receive an amount in
cash equal to the Offer Price. The shares of common stock of Offeror outstanding
immediately prior to the Merger shall be converted into shares of Common Stock
of the Surviving Corporation.
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.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above, and incorporated herein by
reference.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described in Annex A which is attached to this Schedule 14D-9
and incorporated herein by reference.
(c) As described in Annex A, executive officers and directors of the
Company and their affiliates own Shares and are expected to tender those Shares
to the Offeror. In addition, executive officers, directors and their affiliates
hold options and warrants to purchase Shares and those options and warrants will
be retired for cash at the effective time of the Merger. In remuneration for the
services of the members of certain special committees impaneled in connection
with the Transaction, the disinterested directors will receive service fees
ranging from $3,000 to $45,000, depending upon services rendered (Dr.
Shah -- $3,000; Mr. Lempenau -- $30,000; Mr. Dwyer -- $33,000; and Mr.
Weiser -- $45,000). In recognition of the extraordinary efforts of
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management in connection with the performance of the Company and the
Transaction, Dr. Dudley and Mr. Riggs will receive bonuses of $100,000 and
$50,000, respectively, upon consummation of the Transaction. The executive
officers of the Company expect to continue in the employ of the Company after
the closing of the Offer and the Merger.
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.
THE MERGER AGREEMENT
The following summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit 1 to
this Schedule 14D-9 and is incorporated herein by reference. The Merger
Agreement should be read in its entirety for a more complete description of the
matters summarized below.
If Offeror 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 Offeror 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, Offeror 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, Offeror will be merged into the Company. At
the Effective Time (as defined in the Merger Agreement), each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
Solvay, Offeror or any other direct or indirect subsidiary of Solvay ("Solvay
Company") or Shares that are held by Dissenting Stockholders (as defined in the
Merger Agreement) 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 (as defined in the Merger Agreement) or such greater amount
per Share as may be paid pursuant to the Offer.
Conditions to the Merger. The respective obligations of the Company, Solvay
and Offeror 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 Solvay or Offeror, 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 Offeror (or one of the Solvay Companies) of Shares
pursuant to the Offer, and (iii) there being no statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary, preliminary or
permanent) in effect that prohibits consummation of the transactions
contemplated by the Merger Agreement or imposes material restrictions on Solvay
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"). The obligations of Solvay and the Offeror to
consummate the Merger are subject to additional conditions, including (i) the
Company delivering to Solvay and Offeror 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 (ii) the Company's
representations and warranties concerning the amendment dated as of June 11,
1999 to the Rights Agreement (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).
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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 Solvay and the Company, by action of their respective
Boards of Directors; or (b) by action of the Board of Directors of either Solvay
or the Company if (i) Offeror or any Solvay 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 Solvay,
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 Offeror to purchase Shares pursuant to
the Offer on or prior to such date; or (c) by action of the Board of Directors
of Solvay 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 Solvay or Offeror its approval or
recommendation of the Offer, the Merger Agreement or the Merger or the Board of
Directors of the Company, upon request by Solvay, shall have failed to publicly
reaffirm such approval or recommendation within ten business days of such
request by Solvay 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 (c); or
(iii) 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 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 Solvay in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement to such notice
and (C) Solvay 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) Solvay 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 Solvay at or prior
to the second business day prior to the expiration of the Offer, or any
representation or warranty of Solvay set forth in the Merger Agreement shall
have been inaccurate or incomplete when made; or (iii) Offeror shall have failed
to commence the Offer within five business days of the date of the public
announcement by Solvay 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 Solvay required thereby and (y) to notify Solvay
promptly if its intention to enter into a written agreement referred to in such
notice shall change at any time after giving such notification.
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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 Securities Exchange Act of 1934, as
amended (the "Exchange Act")) other than Solvay and Offeror, any affiliate or
associate of Solvay and Offeror or any designees of Solvay and Offeror 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 Solvay 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 Solvay 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 Solvay, pay all of the charges and expenses
incurred by Solvay or Offeror 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 Solvay 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 Solvay) (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 contemplated by the Merger Agreement, and that, without
such agreements, Solvay and Offeror 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, Solvay or Offeror
commences a suit that results in a judgment against the Company for the fee
described in this paragraph, the Company shall pay to Solvay or Offeror 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 Solvay'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
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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 cancellation 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
cancellation 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 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. Solvay
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, Solvay will, to the fullest extent that the Company would have
been permitted under Delaware law (and Solvay 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 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,
Solvay 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 Solvay
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, Solvay 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 Solvay 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, Solvay will (i) cause to be waived
any pre-existing condition limitations under benefit plans of Solvay 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
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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 Solvay and its subsidiaries.
Solvay 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 Solvay, the Company will, subject to compliance with applicable
law and promptly following the purchase by Offeror of such number of Shares
pursuant to the Offer as satisfies the Minimum Condition, take all actions
necessary to cause persons designated by Solvay 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 Offeror or any affiliate of Offeror 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 Solvay'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 Solvay. 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 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 Solvay
and Offeror, any affiliate or associate of Solvay and Offeror or any designees
of Solvay and Offeror 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
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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 (the "Confidentiality Agreement"),
between the Company and Solvay. 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
(any such Acquisition Proposal made prior to the date of the Merger 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 Acquisition Proposal prior
to the date of the Merger Agreement. The Merger Agreement provides that the
Company will notify Solvay 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 Solvay informed, on a
current basis, of the status and terms of such proposals, providing copies to
Solvay 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.
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Rule 13e-3. Rule 13e-3 under the Exchange Act, which Solvay 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. As discussed below, neither the Merger Agreement nor the
consummation of the Offer and the Merger will cause the Rights to become
exercisable. 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 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 Agreement, none of Offeror, Solvay 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.
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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 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 approved by the Board of Directors are designed to protect and
maximize the value of the outstanding equity interests in the Company in the
event of a coercive attempt by an acquirer to take over the Company, in a manner
or on terms not approved by the Board of Directors. Takeover attempts frequently
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<PAGE> 11
include coercive tactics to deprive the Company's Board of Directors and its
stockholders of any real opportunity to determine the destiny of the Company.
The Rights have been declared by the Board of Directors to deter such tactics,
including a gradual accumulation of shares in the open market of a 15% or
greater position to be followed by a merger or a partial or two-tier tender
offer that does not treat all stockholders equally. These tactics unfairly
pressure stockholders, squeeze them out of their investment without giving them
any real choice and deprive them of the full value of their stock.
The Rights are not intended to prevent a takeover of the Company and will
not do so. 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. Accordingly, the Rights should not interfere with
any merger or business combination approved by the Board of Directors.
Issuance of the Rights does not in any way weaken the financial strength of
the Company or interfere with its business plans. The issuance of the Rights
themselves has no dilutive effect, will not affect reported earnings per share,
should not be taxable to the Company or to its stockholders, and will not change
the way in which the Company's stock is presently traded. The Board of Directors
believes that the Rights represent a sound and reasonable means of addressing
the complex issues of corporate policy created by corporate takeovers.
However, the Rights may have the effect of rendering more difficult or
discouraging an acquisition of the Company deemed coercive and undesirable by
the Board of Directors. The Rights may cause substantial dilution to a person or
group that attempts to acquire the Company on terms or in a manner not approved
by the Board of Directors, except pursuant to an offer conditioned upon the
negation, purchase or redemption of the Rights.
On June 11, 1999, the Company executed the Rights Amendment 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) Offeror, Solvay or any Affiliate (as defined in
the Rights Agreement) of Offeror or Solvay 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 Current
Report on Form 8-K of the Company dated June 20, 1997 and is incorporated herein
by reference. A copy of the Rights Amendment is filed as Exhibit 7 hereto. A
copy of the Rights Agreement is available to stockholders free of charge from
the Company.
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Offeror 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 Offeror'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 Solvay, Offeror and the Solvay
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 Hart Scott
Rodino Antitrust Improvements Act of 1976, as amended (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 Solvay in its reasonable
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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 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 Solvay or Offeror 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, Solvay's or Offeror'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 Solvay
or Offeror to dispose of or hold separate all or any portion of Solvay's or
Offeror'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 Offeror unable
to, or result in a delay in, or restrict, the ability of Offeror to, accept
for payment, purchase or pay for some or all of the Shares; (iv) seeking to
impose material limitations on the ability of Solvay or Offeror 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 Solvay 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 Solvay, Offeror, 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 Solvay, 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 Solvay (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
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<PAGE> 13
judgment of Solvay, 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 Solvay or Offeror 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 Solvay 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 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 Solvay or
Offeror its approval or recommendation of the Offer, the Merger Agreement
or the Merger, or, upon request by Solvay or Offeror, shall have failed to
publicly reaffirm such approval or recommendation within ten business days
of such request by Solvay or Offeror, 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 Merger Agreement shall have been terminated by the Company or
Solvay or Offeror in accordance with its terms or Solvay or Offeror 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 Solvay and Offeror, in any such case, and
regardless of the circumstances (including any action or inaction by Solvay or
Offeror) 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 Solvay and Offeror and may be asserted by Solvay or Offeror
regardless of the circumstances (including any action or inaction by Solvay or
Offeror not in violation of the Merger Agreement) giving rise to such condition
or may be waived (other than the Minimum Condition) by Solvay or Offeror, 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 Offeror 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 or waiver.
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POTENTIAL OR ACTUAL CONFLICTS OF INTEREST
Employment Agreements. Dr. Robert E. Dudley is employed by the Company
under an Employment Agreement dated as of February 4, 1999 (the "Dudley
Employment Agreement"). Because the Merger will constitute a Change of Control
(as defined in the Dudley Employment Agreement), if Dr. Dudley is terminated
without cause within 12 months after the Effective Time, Dr. Dudley will be
entitled to receive a severance package consisting of (i) a lump-sum payment
equal to two times his then current base salary (currently $225,000); (ii) a per
diem share of the bonus he was awarded the prior year; and (iii) continuation of
his health benefits.
Mr. David E. Riggs is employed by the Company under an Employment Agreement
dated as of February 19, 1999 (the "Riggs Employment Agreement"). Because the
Merger will constitute a Change of Control (as defined in the Riggs Employment
Agreement), if Mr. Riggs is terminated without cause within 12 months after the
Effective Time, Mr. Riggs will be entitled to receive a severance package
consisting of (i) a lump-sum payment equal to two times his then current base
salary (currently $175,000); (ii) a per diem share of the bonus he was awarded
the prior year; and (iii) continuation of his health benefits.
Vesting of Stock Options. All of the outstanding stock options to purchase
Shares granted by the Company under the Unimed Pharmaceuticals, Inc. 1991 Stock
Option Plan and the Unimed Pharmaceuticals, Inc. 1998 Long-Term Incentive Plan
(collectively, the "Plans") immediately vest and become exercisable upon a
"change of control." Pursuant to the Plans, as a result of the Transaction, the
options covered by the Plans will immediately vest and become exercisable and
each individual will receive the difference between $12.00 per share and the
exercise price times the number of options held and will be cashed out in the
Merger. The Plans are filed as Exhibits 8 and 10, respectively, to this Schedule
14D-9 and are incorporated herein by reference.
Except as described herein or incorporated herein by reference, to the
knowledge of the Company as of the date hereof, there are no contracts,
agreements, arrangements or understandings or any actual or potential conflicts
of interest between the Company or its affiliates and (i) the Company, its
executive officers, directors or affiliates or (ii) Solvay or its executive
officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation
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 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 greatest 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 Offeror. The Board of
Directors has resolved that all directors intend to tender the Shares that they
own directly or beneficially to Offeror and the Company expects that all
directors will tender their Shares to Offeror.
(b) (i) Background
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 to the Board 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 stockholders of the Kapoor Affiliates and the
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<PAGE> 15
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 involving
affiliates of a board member. 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 among the
Company and the Kapoor Affiliates and any other bona fide 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. Robert E. 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 Solvay met with Dr. Dudley and David E. Riggs, Senior Vice President and
Chief Financial Officer of the Company. Mr. Dodd presented an overview of Solvay
and stated that Solvay was interested in acquiring the Company. Mr. Dodd
explained Solvay'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 potentially market the Company's
products in Europe through its parent company in Belgium, Solvay, S.A. Dr.
Dudley later reported the meeting to the Special Committee.
On February 23, 1999, the members of the Special Committee, along with Dr.
Dudley, met with representatives of Solvay. The representatives of Solvay 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 Solvay's overture. The Special Committee then
instructed Dr. Dudley to advise Solvay 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 an interest in merging with the Company. 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.
The Company entered into a confidentiality agreement with Solvay on March
4, 1999. 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 Solvay stating
that Solvay was seriously interested in pursuing a transaction to purchase the
Company and that Solvay 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 4,
1999, the closing price per Share was $4.875.
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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 requested information from the Kapoor Affiliates regarding their
proposal to merge with the Company. On March 12, 1999, representatives of Solvay
came to Chicago to continue their due diligence review of the Company. On March
14, 1999, the Special Committee was advised by Dr. Dudley that representatives
of Solvay 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 stage
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.
At a meeting of the Board on March 16, 1999, Dr. Kapoor revisited 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.
On March 19, 1999, Mr. Dodd spoke with Dr. Dudley and expressed Solvay's
continued interest in pursuing a business transaction with the Company. Mr. Dodd
stated that Solvay was to submit a proposal to its parent company in Belgium on
March 23, 1999.
On March 26, 1999, Affiliate President submitted a written 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 on the Company and
certain other conditions. Affiliate President also requested that the Company
enter into a 45 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 Solvay was
prepared to make a cash offer for the outstanding Shares at a price of $9.50 per
Share. On March 31, 1999, the closing price per Share was $5.375. Mr. Dodd's
letter also stated that Solvay would be able to finance a transaction through
internal funds so that there would be no financing uncertainty. 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 Affiliates. Dr. Dudley met with
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<PAGE> 17
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, Dr. Harold Schlevin, Mr.
Jeffrey D. Linton and Mr. Joseph Feldhouse of Solvay and Mr. Phil Uhrhan, chief
financial officer of Solvay America, Inc. Dr. Dudley explained the basis for a
significantly higher valuation of the Company than the price offered by Solvay
and advised Solvay's 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 then current per Share
price.
On April 15, 1999, Mr. Solheim called Dr. Dudley to provide an update
regarding Solvay'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 Solvay's senior management and
parent company in Belgium were supportive of the transaction. Mr. Solheim
informed Dr. Dudley that a new offer 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 $5.75 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 good 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 Solvay's
interest in acquiring the Company and to amend the prior offer. Based on the
additional information presented to Solvay and further analysis of the Company,
Mr. Dodd's letter stated that Solvay 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 Solvay's offer. Dr. Dudley described in detail
the terms and conditions of the offer and briefly outlined the background that
led to Solvay's offer. A representative of Duff & Phelps then discussed the
valuation of the offer, noting the offer represented a significant premium to
the $6.875 closing price per Share on April 23, 1999 and that the multiples
represented by the offer exceeded industry median multiples. The strategic fit
of the Company with Solvay was also noted. The Special Committee then engaged in
discussions regarding Solvay's offer. The Special Committee acknowledged the
significant premium offered by Solvay, the strategic motivation of Solvay and
the expressed desire of Solvay 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
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<PAGE> 18
the Board of Directors that the Company negotiate a definitive agreement with
Solvay 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 Solvay'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 Solvay
and the expressed desire of Solvay 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 the Solvay offer, which included an
evaluation of the proposed (and withdrawn) transaction with the Kapoor
Affiliates and an analysis of the Company continuing as an independent niche
pharmaceutical company. 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. On
April 27, 1999, the closing price per Share was $7.625.
Dr. Kapoor suggested that the Board establish a process for the Company to
solicit and consider alternatives to the Solvay offer. The Board then discussed
engaging an investment banker with particular expertise in the pharmaceutical
industry to assist the Company in considering alternatives to the Solvay offer.
At 8:15 p.m., the meeting was then recessed. On April 29, 1999, the Board
meeting was reconvened. Dr. Dudley presented the history of the discussions with
Solvay and the members of the Board continued to discuss the Solvay 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 unanimously
resolved to negotiate a definitive agreement with Solvay 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 the Offer should such alternatives arise. During the next several
days, telephone conversations took place between Dr. Dudley and representatives
of Solvay in which Solvay continued to express interest in acquiring the
Company. Solvay 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, Solvay provided the Company with an initial draft of an
agreement and plan of merger. On May 26, 1999, Dr. Dudley received a letter from
Mr. Dodd stating Solvay's continued interest in acquiring the Company and that
Solvay 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 Solvay. 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 Solvay. 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
a valuation analysis of the Company, including trading multiples, merger and
acquisition premiums, comparable transactions and product acquisition multiples,
all of which supported the fairness of Solvay's offer. The Board
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<PAGE> 19
discussed the Solvay offer. On May 27, 1999, the closing price per Share was
$9.00. After extensive consideration, the Board unanimously decided to accept
Solvay'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 agreement and plan of merger. 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 acquisition
agreement. In Dr. Dudley's letter, he also agreed not to engage in discussions
with other entities regarding 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.
During the next week, representatives of the Company and Solvay 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 the Solvay offer. Dr. Dudley
reviewed the status of negotiations with Solvay. Counsel to the Company advised
the Board that Solvay's 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 Solvay 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 Solvay'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. On June 3, 1999, the closing price per Share was $9.813. 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
Solvay and their counsel finalized the Merger Agreement. Additionally, on June
8, 1999, Dr. Kapoor delivered a letter to Mr. Dodd confirming that 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 in order to clarify that the provisions of the Rights Agreement do not
apply to the Offer.
The Merger Agreement was then executed and publicly announced on June 11,
1999, pursuant to a press release, a copy of which is attached hereto as Exhibit
14.
On June 17, 1999, Solvay and the Offeror commenced the Offer.
(b) (ii) Reasons for the Recommendations
Prior to approving the Merger Agreement and the transactions contemplated
thereby, the Board held meetings at which the Transaction was considered
beginning on April 28, 1999 and continuing on April 29, May 6 and 28, and June
4, 1999. At these meetings, the Board considered presentations from and reviewed
the terms and conditions of the Transaction with the Special Committee,
executive officers of the Company and the Company's legal and financial
advisors. At the May 28, 1999 meeting, the Board directed Dr. Dudley to continue
negotiations with Solvay and to attempt to finalize the Merger. At the June 4,
1999 meeting, the Board received final reports from senior management and its
legal and financial advisers and approved the Merger Agreement. In reaching the
conclusions set forth in paragraph (a) above, the Board of Directors of the
Company considered a number of factors including, the following:
(A)The consideration to be paid in the Offer and the Merger, and, in
particular, the fact that the $12.00 per Share to be received by the
Company's stockholders in the Offer and the Merger
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represents an approximate 45% premium over the average closing stock
price per Share for the five trading days before the Company's press
release on May 28, 1999 announcing that it was engaged in sale
negotiations, an approximate 33% premium over the closing stock price
per Share on May 27, 1999, the day before the Company's announcement,
and an approximate 22% premium over the closing stock price per Share on
June 3, 1999, the day before the Board of Directors approved the Merger
Agreement;
(B)The Company's financial condition, results of operations, assets,
liabilities, liquidity, business and prospects and industry, economic
and market conditions, including the inherent risks and uncertainties in
the Company's business in each case on a historical, current and
prospective basis. The Board of Directors determined that in its view,
the acquisition of the Company by Solvay presented the best means of
achieving the greatest value for holders of its Shares;
(C)The strategic fit of the Company into the future plans of Solvay. Solvay
desires to acquire a Company with a marketing structure in place in
order to begin marketing a new product. Solvay is also interested in
continuing the development and marketing of the Company's existing
products and indicated that its European sales force may be able to
expand the market for the Company's products.
(D)Solvay's intent that after the Merger, the Company would operate as a
separate subsidiary of Solvay;
(E)Analysis of the future prospects of the Company on a stand alone basis;
(F)The historical and recent market prices for the Shares and potential
future share prices;
(G)The process undertaken by the Company and Hambrecht & Quist to solicit
third party indications of interest in the possible acquisition of, or
business combination with, the Company.
(H)The opinions of Hambrecht & Quist and Duff & Phelps, each dated June 4,
1999, to the effect that, as of such date and based upon and subject to
certain matters stated in such opinions, the $12.00 per Share cash
consideration to be received in the Offer and the Merger by holders of
Shares (other than Solvay and its affiliates) was fair, from a financial
point of view, to such holders. The full text of Hambrecht & Quist's
written opinion and Duff & Phelps' written opinion, each dated June 4,
1999, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by Hambrecht & Quist and Duff &
Phelps, is attached hereto as Annex B and Annex C, respectively, and is
incorporated herein by reference. These opinions are directed only 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 Solvay and its affiliates) and is not intended to
constitute, and does not constitute, a recommendation as to whether any
shareholder should tender Shares pursuant to the Offer. HOLDERS OF
SHARES ARE URGED TO READ SUCH OPINIONS CAREFULLY IN THEIR ENTIRETY;
(I)The availability of appraisal rights under Section 262 of the DGCL;
(J)The terms and conditions of the Merger Agreement, including provisions
that (a) although prohibiting the Company and its representatives from
soliciting or initiating submissions of Acquisition Proposals (as
defined in the Merger Agreement), permit the Company and its
representatives to provide information to, negotiate and engage in
discussions with, any third party in response to unsolicited proposals,
to the extent the Board determines based on the written opinion of its
outside legal counsel and the written advice of its financial advisors
that such unsolicited proposal would be a Superior Proposal (as defined
in the Merger Agreement) and (b) permit the Company to terminate the
Merger Agreement to accept a Superior Proposal, subject to (i) allowing
Solvay to make an offer to acquire the Shares for consideration equal to
or greater than the Superior Proposal and (ii) payment of a termination
fee of $4,000,000 plus expenses of Solvay and Offeror not to exceed
$1,000,000;
(K)The proposed structure of the Offer and the Merger involving an
immediate cash tender offer followed by a merger for the same
consideration and the fact that there is no financing or due
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diligence contingency to the Offer. In this connection, the Board also
considered the likelihood that the proposed acquisition would be
consummated, including the likelihood of satisfaction of the conditions
to the Offer and the Merger contained in the Merger Agreement, and the
risks to the Company if the acquisition was not consummated; and
(L)The recommendation of the Company's management with respect to the
proposed transaction.
The Board evaluated the factors listed above in light of the directors'
knowledge of the business and operations of the Company and in their business
judgment. In view of the variety of factors considered by the Board in
connection with its evaluation of the Merger Agreement and the Transaction, the
Board did not find it practicable to and did not quantify or otherwise assign
relative weight to the specific factors considered in reaching its
determination. In addition, individual members of the Board may have given
different weights to different factors in making their individual
determinations.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained each of Hambrecht & Quist and Duff & Phelps
(together, the "Financial Advisors") to act as its financial advisors in
connection with the proposed Offer and Merger. Pursuant to the terms of
Hambrecht & Quist's engagement, the Company has agreed to pay Hambrecht & Quist
an aggregate financial advisory fee of approximately $700,000, which amount
includes a percentage of the aggregate consideration payable in the Offer and
the Merger in excess of $11.25 per Share. Pursuant to the terms of Duff &
Phelps' engagement, the Company has agreed to pay Duff & Phelps an aggregate
financial advisory fee of $475,000. The Company also has agreed to reimburse
each of the Financial Advisors for travel and other reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of its legal counsel,
and to indemnify each of the Financial Advisors and related parties against
certain liabilities, including liabilities under the federal securities laws,
arising out of the Financial Advisors' engagement. In the ordinary course of
business, Hambrecht & Quist and its affiliates may actively trade or hold the
securities of the Company and Solvay for their own account or for the account of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to security holders of the Company on its behalf concerning the
Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, other than the transactions
disclosed in this Item 6, no transactions in Shares have been effected during
the past 60 days by the Company or by an executive officer, director, affiliate
or subsidiary of the Company.
On April 29, 1999, the Company made its annual grant of options (at an
exercise price of $7.875) to purchase 9,000 Shares to Mr. Lempenau; 9,000 Shares
to Mr. Dwyer; 8,500 Shares to Mr. Weiser; 7,500 Shares to Dr. Shah; and 7,500
Shares to Dr. Goode. On May 5, 1999, Dr. Goode exercised an option to purchase
124,773 Shares at an exercise price of $5.875. All of the aforementioned option
grants were made under the Company's 1998 Long-Term Incentive Plan.
(b) To the best of the Company's knowledge, all of its executive officers
and directors who own Shares intend to tender pursuant to the Offer all Shares
which are owned beneficially or of record by such persons. Dr. Kapoor, 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 Offeror.
Additionally, the Board of Directors has resolved that all directors intend to
tender the Shares that they own directly or beneficially to Offeror.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described under Item 3(b), the Company is not presently
engaged in any negotiation in response to the Offer which relates to or would
result in: (i) an extraordinary transaction such as a merger or
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reorganization involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described in Item 4, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Section 203. As a Delaware corporation, the Company is subject to Section
203 ("Section 203") of the DGCL. Section 203 would prevent an "Interested
Shareholder" (generally defined as a person beneficially owning 15% or more of a
corporation's voting stock) from engaging in a "Business Combination" (as
defined in Section 203) with a Delaware corporation for three years following
the date such person became an Interested Shareholder unless: (i) before such
person became an Interested Shareholder, the board of directors of the
corporation approved the transaction in which the Interested Shareholder became
an Interested Shareholder or approved the Business Combination, (ii) upon
consummation of the transaction which resulted in the Interested Shareholder
becoming an Interested Shareholder, the Interested Shareholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding for purposes of determining the number of
shares of outstanding, stock held by directors who are also officers and by
employee stock ownership plans that do not allow plan participants to determine
confidentially whether to tender shares), or (iii) following the transaction in
which such person became an Interested Shareholder, the Business Combination is
(x) approved by the board of directors of the corporation and (y) authorized at
a meeting of shareholders by the affirmative vote of the holders of at least
66 2/3% of the outstanding voting stock of the corporation not owned by the
Interested Shareholder. In accordance with the provisions of the Company's
Certificate of Incorporation and Section 203, the Board of Directors of the
Company has approved the Merger Agreement and the Offeror's acquisition of
Shares pursuant to the Offer and the Merger and the transactions contemplated
thereby and, therefore, the restrictions of Section 203 are inapplicable to the
Merger and the related transactions.
Antitrust
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 United States Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by the Offeror pursuant to the Offer is
subject to such requirements.
The parties intend, 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 Solvay.
Pursuant to the HSR Act, Solvay 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 Solvay, 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 Solvay 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. 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
21
<PAGE> 23
rights not otherwise provided for by applicable law. 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 of
transactions under U.S. antitrust laws. At any time before or after the
consummation of any such transactions, the Antitrust Division or the FTC could,
notwithstanding termination of the waiting period, take such action under U.S.
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or
seeking divestiture of the Shares so acquired or divestiture of substantial
assets of the Offeror or the Company. Private parties may also bring legal
actions under the antitrust laws. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made, or if such a challenge is made,
what the result will be.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1 Agreement and Plan of Merger dated as of June 11, 1999 among
Solvay Pharmaceuticals, Inc., Utah Acquisition Corporation
and Unimed Pharmaceuticals, Inc.
2 Employment Agreement between Unimed Pharmaceuticals, Inc.
and Robert E. Dudley, dated February 4, 1999, incorporated
by reference to Exhibit 10-N to the Annual Report on Form
10-K for the year ended December 31, 1998 (the "1998 10-K").
3 Employment Agreement between Unimed Pharmaceuticals, Inc.
and David E. Riggs, dated February 19, 1999, incorporated by
reference to Exhibit 10-V to the 1998 10-K.
4 Stock Purchase Agreement between the John N. Kapoor Trust
and Unimed, Inc. (a predecessor of Unimed Pharmaceuticals,
Inc.), dated February 15, 1991, incorporated by reference to
Exhibit 4-D to Post-Effective Amendment No. 3 to
Registration Statement No. 33-10975.
5 Stock Registration Rights Agreement between the John N.
Kapoor Trust and Unimed Pharmaceuticals, Inc., dated March
27, 1991, incorporated by reference to Post-Effective
Amendment No. 3 to Registration Statement No. 33-10975.
6 Rights Agreement between Harris Trust and Savings Bank and
Unimed Pharmaceuticals, Inc. including Form of Rights
Certificate and Summary of Rights attached thereto as
Exhibits A and B, dated June 16, 1997, incorporated by
reference to Exhibit 4.1 to Current Report on Form 8-K dated
June 20, 1997.
7 Amendment No. 1 to Rights Agreement between Unimed
Pharmaceuticals, Inc. and Harris Trust Savings Bank dated as
of June 11, 1999.
8 Unimed Pharmaceuticals, Inc. 1991 Stock Option Plan, as
amended through May 2, 1996, incorporated by reference to
Exhibit 10-K to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
9 Amendment to 1991 Stock Option Plan adopted May 26, 1998,
incorporated by reference to Appendix B to the Proxy
Statement for the 1998 Annual Meeting of the Stockholders
filed on April 29, 1998 (the "1998 Proxy").
10 1998 Long-Term Incentive Plan, incorporated by reference to
Appendix A to the 1998 Proxy.
11 Consulting Agreement between E.J. Financial Enterprises,
Inc. and Unimed, Inc. (a predecessor of Unimed
Pharmaceuticals, Inc.), dated July 23, 1996, incorporated by
reference to Exhibit 10-S to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.
12 Stock Option Agreement between John N. Kapoor and Unimed
Pharmaceuticals, Inc., dated August 7, 1992.
13 Press Release of Unimed Pharmaceuticals, Inc. issued May 28,
1999.
14 Press Release of Unimed Pharmaceuticals, Inc. issued June
11, 1999.
15 Confidentiality Agreement, effective as of March 4, 1999,
between Solvay Pharmaceuticals, Inc. and Unimed
Pharmaceuticals, Inc.
16 Letter dated June 8, 1999 from John N. Kapoor of Unimed
Pharmaceuticals, Inc. to David A. Dodd of Solvay
Pharmaceuticals, Inc.
</TABLE>
22
<PAGE> 24
SIGNATURE
AFTER REASONABLE 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.
UNIMED PHARMACEUTICALS, INC.
By: /s/ ROBERT E. DUDLEY
------------------------------------
Name: Robert E. Dudley, Ph.D.
Title: Chief Executive Officer and
President
DATED: JUNE 17, 1999
23
<PAGE> 25
ANNEX A
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about June 17, 1999 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Unimed Pharmaceuticals, Inc. (the"Company"). Capitalized
terms used herein and not otherwise defined shall have the meaning set forth in
the Schedule 14D-9. You are receiving this Information Statement in connection
with the possible election of persons designated by Solvay (the "Solvay
Designees") to the Company's Board of Directors (the "Board"). The Merger
Agreement requires the Company, following Offeror's purchase of Shares pursuant
to the Offer and upon request of Offeror, to take certain action to cause the
Solvay Designees to be elected to the Board. This Information Statement is
required by Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14f-1 promulgated thereunder. You are urged to
read this Information Statement carefully. You are not, however, required to
take any action in connection with this Information Statement.
The Offer commenced on June 17, 1999 and is schedule to expire at 12:00
midnight New York City time, on July 15, 1999, unless extended upon the terms
set forth in the Offer to Purchase.
The information contained in this Information Statement concerning Solvay
and Offeror has been furnished to the Company by Solvay. The Company assumes no
responsibility for the accuracy or completeness of such information. To the best
knowledge of the Company, none of the Solvay Designees beneficially owns any
equity securities in the Company.
DESIGNATION OF DIRECTORS
The Merger Agreement provides that, promptly following the purchase of any
Company Common Stock by Offeror which satisfies the Minimum Condition, Solvay
will be entitled to designate such number of Solvay Designees on the Board as is
equal to the product of the total number of directors on the Board (giving
effect to the directors designated by Solvay) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Offeror or any affiliate of
Offeror bears to the total number of Shares then outstanding. The Company has
agreed, upon the request of Solvay, to increase the size of the Board or use its
reasonable efforts to secure the resignations of such number of its incumbent
directors, or both, as is necessary to enable the Solvay Designees to be so
elected to the Board and shall take all actions available to the Company to
cause the Solvay Designees to be so elected; provided that at all times prior to
the Effective Time, the Company's Board shall consist of at least two members
who are neither officers nor employees of Solvay. The Company has also agreed
upon request of Solvay to use its reasonable efforts to cause directors
designated by Solvay to constitute the same percentage as such directors
represent on the Board on each committee of the Board, each board of directors
of each subsidiary of the Company and each committee of each such subsidiary
board of directors (in each case, to the extent of the Company's ability to
elect such directors).
It is expected that the Solvay Designees will assume office promptly
following the purchase by Solvay of outstanding Shares which satisfy the Minimum
Condition, which purchase cannot be earlier than July 15, 1999, and that, upon
assuming office, the Solvay Designees together with the continuing directors of
the Company will thereafter constitute the entire Board.
SOLVAY DESIGNEES
As of the date of this Information Statement, Solvay has not determined who
will be the Solvay Designees. However, the Solvay Designees will be selected
from among the following persons. The following tables set forth the name,
business address, present principal occupation and material positions held
within the
A-1
<PAGE> 26
past five years of each director and executive officer of Solvay S.A.
("Parent"), Solvay America, Inc. ("Solvay America"), Solvay Pharmaceuticals,
Inc. ("Purchaser") and Utah Acquisition Corporation ("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
Baron Jose del Marmol Director of Parent since 1990.
36 rue des Fonds
6280 Gougnies, Belgium
</TABLE>
A-2
<PAGE> 27
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME AND BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND CITIZENSHIP
- ------------------------- ------------------------------------------------------------------
<S> <C>
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-3
<PAGE> 28
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-4
<PAGE> 29
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-5
<PAGE> 30
<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>
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>
CERTAIN INFORMATION CONCERNING THE COMPANY
The shares of Common Stock constitute the only class of voting securities
of the Company. As of the close of business on June 11, 1999, there were
9,191,538 shares of Common Stock outstanding. Each share of Common Stock
entitles its record holder to one vote. Stockholders of the Company do not have
cumulative voting rights.
A-6
<PAGE> 31
THE CURRENT MEMBERS OF THE BOARD AND
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE TERM EXPIRES
---- --- -------------------- --------- ------------
<S> <C> <C> <C> <C>
John N. Kapoor, Ph.D. (1)............ 55 Chairman of the Board of Directors 1991 2000
Robert E. Dudley, Ph.D (1)........... 44 President, Chief Executive Officer 1999 2000
and Director
Roland Weiser (2)(3)................. 67 Director 1989 2000
Gilbert F. Dwyer (2)(3).............. 70 Director 1998 2002
Mahendra G. Shah, Ph.D............... 54 Director 1998 2002
James J. Lempenau (2)(3)............. 68 Director 1983 2001
Ronald L. Goode, Ph.D................ 52 Director 1997 2001
David E. Riggs....................... 47 Senior Vice President, Chief
Financial Officer, Treasurer and
Secretary
</TABLE>
- ---------------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
Dr. Kapoor has been Chairman of the Board of the Company since May 1992.
Dr. Kapoor was Chief Executive Officer of the Company from May 1992 through
October 1993. Dr. Kapoor has been Chairman of OptionCare, Inc. since October
1990. OptionCare, Inc. is a franchisor of home infusion therapy businesses. Dr.
Kapoor has been President of EJ Financial Enterprises, Inc. since 1990. EJ
Financial Enterprises is a consulting and private investment firm. Dr. Kapoor
has been Chairman of Akorn, Inc. since May 1995 and a Director since December
1991; he was Chief Executive Officer from May 1996 to 1998. Akorn, Inc. is an
ophthalmics company. Dr. Kapoor was Chairman of Lyphomed, Inc. from 1983 to
1990. Lyphomed, Inc. is a pharmaceutical company. Dr. Kapoor is the Chairman of
NeoPharm, Inc. NeoPharm, Inc. is an oncology company.
Dr. Dudley has been President, Chief Executive Officer and Director of the
Company since February 1999. Dr. Dudley was Senior Vice President of the Company
from November 1997 to February 1999, Chief Executive Officer and Interim
President of the Company from January 1997 through November 1997 and Vice
President of Clinical and Regulatory Affairs of the Company from December 1994
through December 1996. Dr. Dudley was Vice President of Clinical Development of
Bio-Technology General Corp. from August 1993 through November 1994.
Bio-Technology General Corp. is a biotechnology company. Dr. Dudley was Vice
President of Research and Development of Gynex Pharmaceuticals, Inc. from May
1989 through August 1993. Gynex Pharmaceuticals is a pharmaceutical company.
Mr. Weiser has been a Director of the Company since 1989. Mr. Weiser has
been Chairman of Intervista since 1985. Intervista is an international
pharmaceutical consulting group. Mr. Weiser has been a Director of GAM Funds,
Inc. since 1988. GAM Funds, Inc. is a diversified open end investment company.
Mr. Weiser was Senior Vice President of Schering-Plough Corp. (International)
from 1978 to 1984.
Mr. Dwyer has been a Director of the Company since May 1998. He has been
President, Chief Executive Officer and a Director of Southern Research Institute
since January 1997. The Southern Research Institute is a scientific research
organization. Mr. Dwyer was the founder and a Director of Marine Trade and
Development International, Inc. since January 1996. Marine Trade and Development
International, Inc. is a marine resources development organization. Mr. Dwyer
was President of Dwyer Consulting Group, Inc. from 1985 through 1996. Dwyer
Consulting Group, Inc. was a corporate strategy and organization consulting
firm.
Dr. Shah has been a Director of the Company since December 1998. Dr. Shah
has been Vice President of Corporate and Business Development of NeoPharm, Inc.
since October 1991. NeoPharm is an oncology
A-7
<PAGE> 32
company. Dr. Shah has been Vice President of EJ Financial Enterprises, Inc.
since October 1991. EJ Financial Enterprises, Inc. is a consulting and private
investment firm.
Mr. Lempenau has been a Director of the Company since 1983. Mr. Lempenau
has been President and a Director of The Income Builder, Inc. since 1981. The
Income Builder, Inc. is an investment advisory firm.
Dr. Goode has been a Director of the Company since November 1997. Dr. Goode
was President and Chief Executive Officer of the Company from November 1997
through February 1999. Dr. Goode was an executive officer of G.D. Searle & Co.
from 1986 through October 1997 where he held positions of increasing
responsibility including Corporate Senior Vice President.
Mr. Riggs has been the Senior Vice President of the Company since October
1994 and Vice President, Chief Financial Officer, Secretary, and Treasurer of
the Company since May 1992. Mr. Riggs was the Chief Financial Officer of
NeoPharm, Inc. from October 1995 to June 1998. From 1990 through 1991, Mr. Riggs
was the Chief Financial Officer, Secretary and Treasurer of VideoCart, Inc., a
micro-marketing media company.
DIRECTOR COMPENSATION
Employee-officers who are also Directors do not receive compensation for
their service as Directors. The non-employee Directors of the Company receive an
annual stipend of $6,000 for serving on the Board and its committees, $1,000 for
each directors' meeting which they attend (excluding meetings held by
telephone), $500 for each committee meeting they attend (excluding meetings held
by telephone) and reimbursement of out-of-pocket expenses in connection with
their attendance at directors' meetings.
In addition, the 1998 Long-Term Incentive Plan provides for a grant of
options to purchase 10,000 shares of Common Stock to each new non-employee
director on the date he or she first becomes a director and annual stock option
grants of 7,500 shares of Common Stock to non-employee directors. The 1998
Long-Term Incentive Plan also provides that each chairman of a standing
committee shall be granted an option to purchase 1,000 shares on the date he or
she first becomes a committee chairman and an option to purchase 500 shares to
each member on the date he or she first becomes a committee member.
On May 28, 1999, in remuneration for the services the members of the
Special Committee and Dr. Shah rendered to the Company in connection with
considering the Merger and alternative transactions, the Board determined to pay
service fees to the members of the Special Committee and Dr. Shah. The fees were
based in part on meetings attended and activities undertaken. The fees were
allocated as follows: Mr. Weiser (Chairman of the Special Committee) -- $45,000,
Mr. Lempenau -- $30,000 and Mr. Dwyer -- $33,000. A fee of $3,000 was allocated
to Dr. Shah for assisting in the interviewing and selection of an investment
banker for the Company.
MEETINGS
During the year ended December 31, 1998, the Board of Directors held four
meetings. Each of the Company's current directors attended or participated in at
least 75% of the aggregate of the total number of meetings held during 1998 by
the Board and the total number of meetings held during 1998 by Committees on
which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Executive Committee, an Audit Committee and a
Compensation Committee.
The Executive Committee did not meet in 1998. The primary purpose and
function of the Executive Committee is to consult with and advise the officers
of the Company in the management of its business and may exercise such powers of
the Board of Directors as may be lawfully delegated by the Board of Directors.
The Audit Committee met twice in 1998. The primary purpose and function of
the Audit Committee is to act as a liaison between the Company and its
independent auditors and to report on matters pertaining to the Company's
independent audit and the Company's accounting policies.
A-8
<PAGE> 33
The Compensation Committee met twice in 1998. The primary purpose and
function of the Compensation Committee is to evaluate and determine executive
officer compensation.
The Special Committee was impaneled in December 1998 to consider certain
business combination proposals.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires officers, directors, and persons
who own more than 10% of the Company's equity securities to file statements of
beneficial ownership (Form 3) and statements of changes in beneficial ownership
(Forms 4 or 5) with the Securities and Exchange Commission (the SEC) and to
furnish the Company with copies of all such forms they file. To the Company's
knowledge based solely on the review of the copies of such forms received by it,
the Company believes that during 1998 all filing requirements applicable to its
officers, directors, and greater than 10% beneficial owners were complied with
and were timely filed except that as a result of administrative error, the
initial statement of beneficial ownership (Form 3) for Dr. Shah was not timely
filed with the SEC.
EXECUTIVE COMPENSATION
The following table summarizes the compensation for services to the Company
for fiscal 1998, 1997 and 1996 attributed to Robert E. Dudley, Ph.D., the
current President and Chief Executive Officer of the Company, to Ronald L.
Goode, Ph.D., the President and Chief Executive Officer of the Company in 1998,
and David E. Riggs, Chief Financial Officer and Senior Vice President of the
Company (together the "1998 Named Officers"). No other person who served as an
executive officer of the Company in fiscal 1998 received more than $100,000 in
salary and bonus in fiscal 1998.
On May 28, 1999, the Board of Directors awarded bonuses to Dr. Dudley and
Mr. Riggs for the extraordinary services rendered to the Company in connection
with the performance of the Company and the negotiation and consummation of the
Offer and the Merger. The bonuses, in the amounts of $100,000 and $50,000,
respectively, will be paid upon consummation of the Transaction. The bonus
amounts are not reflected in the table below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------------------ -----------------------------------
RESTRICTED
OTHER ANNUAL STOCK OTHER
COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) $(1) $ #(2) $(3)
- --------------------------- ---- --------- -------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert E. Dudley(4) 1998 200,000 37,500 7,200 0 50,000(7) 5,000
President and 1997 204,000 50,000(6) 7,200 0 50,000(7) 4,750
Chief Executive Officer, 1996 150,000 45,000 7,200 0 75,000 4,750
Past Senior Vice President
Ronald L. Goode(5) 1998 250,000 57,600 35,773 0 400,000(7) 5,000
Past President and 1997 33,173 0 1,624 0 400,000(7) 0
Chief Executive Officer
David E. Riggs 1998 170,000 30,600 7,200 0 0 5,000
Senior Vice President, 1997 96,667 20,000(6) 7,200 0 25,000 4,750
Chief Financial Officer, 1996 76,125 18,150 7,200 0 0 4,750
Secretary and Treasurer
</TABLE>
- ---------------
(1) Represents the compensation portion of car allowances advanced to all of the
1998 Named Officers and charitable contributions and related travel and club
dues for Dr. Goode in 1998.
A-9
<PAGE> 34
(2) Except as otherwise noted in note (7), the stock options become exercisable
25% on the anniversary of the date of grant and an additional 25% on each
anniversary date thereafter until exercisable in full. Exercisability will
be accelerated in the event of a "change of control."
(3) Represents the matching contribution made by the Company to its 401(k) Plan
for each of the executive officers listed above.
(4) Dr. Dudley was elected President and Chief Executive Officer of the Company
in February 1999. During 1998, Dr. Dudley served as Senior Vice President of
the Company. In 1997, Dr. Dudley served as Chief Executive Officer for 10
months and Senior Vice President for two months. Dr. Dudley's Employment
Agreement is described under "Employment and Severance Agreements."
(5) Dr. Goode was President and Chief Executive Officer from November 13, 1997
until February 5, 1999. Dr. Goode's Employment Agreement is described under
"Employment and Severance Agreements."
(6) Includes bonuses paid in cash and bonus paid in shares of Company Common
Stock valued at market value on the date of award.
(7) The option to purchase 50,000 shares granted to Dr. Dudley and the option to
purchase 400,000 shares granted to Dr. Goode reflect the repricing of
options previously granted pursuant to the Company's repricing program
adopted by the Compensation Committee of the Board of Directors on May 28,
1998. The initial vesting date of the repriced options granted to Dr. Dudley
was deferred from November 13, 1998 to May 13, 1999. The initial vesting
dates of repriced options granted to Dr. Goode were deferred to June 14,
1998 for monthly vesting options, November 28, 1998 as to 87,080 shares
under options previously vested, and May 13, 1999 as to the remaining
options.
OPTION GRANTS IN 1998
The following table sets forth information with respect to stock options
granted during the fiscal year ended December 31, 1998 to the 1998 Named
Officers. All options were granted under the Company's 1991 Stock Option Plan
and/or the 1998 Long-Term Incentive Plan. The options shown as granted to Drs.
Dudley and Goode are repricings of options granted in 1997. (See "Repricing of
Existing Options" below.)
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
$ VALUE ASSUMING
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
NO. OF SECURITIES % OF TOTAL OPTION TERMS
UNDERLYING OPTIONS EXERCISE EXPIRATION -----------------------
NAME GRANT GRANTED PRICE$/SH DATE 5% 10%
---- ----------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Dudley............... 50,000 6.84% 5.875 11/13/07 184,750 468,150
Ronald L. Goode................ 400,000 54.68% 5.875 11/13/07 1,478,000 3,745,200
David E. Riggs................. 0 -- -- -- -- --
</TABLE>
A-10
<PAGE> 35
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to stock options
exercised during the fiscal year ended December 31, 1998, and the value at
December 31, 1998 of unexercised stock options held by the 1998 Named Officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED OPTIONS
OPTIONS AT FISCAL IN-THE-MONEY AT
YEAR-END FISCAL YEAR END*
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)
- ---- --------------- -------- ----------------- -------------------
<S> <C> <C> <C> <C>
Robert E. Dudley................ 0 0 93,750/131,250 70,313/23,438
Ronald L. Goode................. 0 0 120,223/279,777 0/0
David E. Riggs.................. 0 0 93,750/21,250 93,750/31,250
</TABLE>
- ---------------
* Represents the fair market value at December 31, 1998, of the Common Stock
underlying the options minus the exercise price.
REPRICING OF EXISTING OPTIONS
In May 1998, the Compensation Committee of the Board of Directors
determined that it would be in the best interest of the Company and its
shareholders to express confidence in the employees of the Company and in the
future activities of the Company and to incentivize the Company's employees to
continue their high quality efforts on behalf of the Company by replacing the
options granted to certain employees in 1997 with new options to purchase shares
of common stock, $0.25 par value per share, of the Company in accordance with
the terms of the Company's 1991 Stock Option Plan at a per share price of
$5.875, the market price per share on the effective date of the repricing.
The following table sets forth information with respect to stock options
granted to the 1998 Named Officers, the exercise price of which has been
repriced during fiscal year 1998 and with respect to all repricings of options
held by the 1998 Named Officers during the last ten completed fiscal years.
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF ORIGINAL
SHARES MARKET PRICE EXERCISE PRICE OPTION TERM
UNDERLYING OF SHARES AT OF SHARES AT NEW REMAINING AT
OPTIONS TIME OF TIME OF EXERCISE DATE
NAME DATE REPRICED (#) REPRICING ($) REPRICING ($) PRICE ($) OF REPRICING (YRS)
- ---- -------- ------------ ------------- -------------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
David E. Riggs 1/19/95 80,000 2.75 3.38 2.75 9.75
Senior Vice President, 10/11/94 20,000 3.38 7.75 3.38 7.83
Chief Financial Officer, 10/11/94 30,000 3.38 8.00 3.38 7.58
Secretary and Treasurer
Ronald L. Goode 5/28/98 400,000 5.875 7.50 5.875 9.50
Past President and Chief
Executive Officer
Robert E. Dudley 5/28/98 50,000 5.875 7.50 5.875 9.96
President and Chief
Executive Officer and
Past Senior Vice President
</TABLE>
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company and EJ Financial Enterprises, Inc. ("EJ Financial"), an
affiliate of Dr. John N. Kapoor and Dr. Mahendra G. Shah, are parties to an
agreement, pursuant to which EJ Financial provides independent consulting
services to the Company at a fee to be determined on a yearly basis. The
agreement may be
A-11
<PAGE> 36
terminated by either party upon 30 days' prior written notice and is subject to
annual renewal by the parties. The Company paid $50,000 to EJ Financial under
the contract with respect to fiscal 1998, $50,000 for fiscal 1997 and $50,000
for fiscal 1996. EJ Financial principally provides consulting support on
strategic corporate objectives and operations, including sales and marketing
strategies, new product strategies and key contacts within the industry and
financial community. EJ Financial is engaged in a number of business activities,
including consulting services to the Company and the payment to EJ Financial is
not intended primarily to furnish compensation to Dr. Kapoor or Dr. Shah. In
addition, for his services rendered as the Chairman of the Company, Dr. Kapoor
was granted an option to purchase 100,000 shares of Common Stock on April 24,
1997 of which 25,000 shares vest annually, commencing on the first anniversary
of such grant.
Dr. Ronald L. Goode was employed by the Company as its President and Chief
Executive Officer under an Employment Agreement from November 13, 1997 to
February 5, 1999. Under the Agreement, Dr. Goode's initial annual salary was
$250,000 plus an automobile allowance of $12,000, net of taxes. Dr. Goode was
eligible to receive incentive compensation bonuses of up to 50% of his salary
upon the achievement of specific strategic goals determined by the Board
following its consideration of recommendations from Dr. Goode. The Company was
obligated to maintain a life insurance policy for Dr. Goode with the benefits
payable to his estate, pay up to $10,000 per year of country club dues and
expenses, and make certain charitable donations at the direction of Dr. Goode.
Under the Agreement, Dr. Goode was granted options to purchase 400,000 shares of
Common Stock under the 1991 Stock Option Plan at an exercise price of $7.50 per
share, the fair market value on the date of the grant. The exercise price was
adjusted to $5.875 by the Company in the Company's May 1998 regrant program.
Under his Agreement, Dr. Goode could have requested that the Company loan to him
up to $750,000 to exercise the options, in part. Dr. Goode's employment was
terminated in February 1999 and pursuant to his Agreement he will receive his
then current base salary for 12 months, medical, dental and disability benefits
for 24 months, a per diem share of his 1998 bonus, and his unused vacation time.
Dr. Goode is obligated to maintain the confidentiality of Company information at
all times during and after termination of the Agreement.
During 1998, Dr. Robert E. Dudley was employed by the Company under an
Employment Agreement dated November 3, 1994. Under this Agreement, Dr. Dudley
received a base salary of $204,000 in 1997 and $200,000 in 1998, an automobile
allowance of $7,200 per year and bonuses based on a multiple of his annual
salary, as determined by the Board; and may participate in the Company's
insurance and retirement programs. The Agreement also provided for the grant of
options to purchase 60,000 shares of Common Stock under the 1991 Stock Option
Plan, as amended. In connection with Dr. Dudley's promotion to President and
Chief Executive Officer of the Company in February 1999, he and the Company have
entered into a new Employment Agreement that provides for a base salary of
$225,000 per year, an automobile allowance of $12,000 per year, bonuses based on
a multiple of his annual salary based on the achievement of specific strategic
goals determined by the Board, and participation in the Company's insurance and
retirement programs. Pursuant to the terms of the Agreement, the Company will
provide Dr. Dudley with a term life insurance policy with coverage of $1.5
million, the benefits of which are payable to his estate or other beneficiary,
as directed by Dr. Dudley. The Agreement also provides for the grant of an
option to purchase 100,000 shares of common stock under the 1991 Stock Option
Plan. Dr. Dudley may be terminated immediately for Cause (as defined in the
Employment Agreement) or without Cause. If Dr. Dudley is terminated without
Cause, he is to receive his then current base salary and benefits for up to 12
months after the date of termination, subject to Dr. Dudley resigning from the
Board concurrent with the termination of his employment. In the event that Dr.
Dudley is terminated without Cause within 12 months of a Change of Control (as
defined in the Employment Agreement), Dr. Dudley is entitled to receive a
severance package consisting of (i) a lump-sum payment equal to two times his
then current base salary; (ii) a per diem share of the bonus he was awarded the
prior year; and (iii) continuation of his health benefits. Dr. Dudley is
required to maintain the confidentiality of Company information at all times
during and after the termination of the Agreement.
Mr. David E. Riggs is employed by the Company under an Employment Agreement
dated as of February 19, 1999. Under this Agreement, Mr. Riggs will receive a
base salary of $175,000 in 1999 plus an automobile allowance of $10,800 per year
and bonuses based on a multiple of his annual salary as may be
A-12
<PAGE> 37
determined by the Board. Mr. Riggs may also participate in the Company's
insurance and retirement program. The Agreement also provided for the grant of
options to purchase 35,000 shares of common stock under the 1991 Stock Option
Plan, as amended. Pursuant to the terms of the Agreement, the Company will
provide Mr. Riggs with a term life insurance policy with coverage of $1 million,
the benefits of which are payable to his estate or other beneficiary, as
directed by Mr. Riggs. Mr. Riggs may be terminated immediately for Cause (as
defined in the Employment Agreement) or without Cause. If he is terminated
without Cause, Mr. Riggs is to receive his then current base salary and benefits
for up to 12 months after the date of termination. In the event that Mr. Riggs
is terminated without Cause within 12 months of a Change of Control (as defined
in the Employment Agreement), Mr. Riggs is entitled to receive a severance
package consisting of (i) a lump-sum payment equal to two times his then current
base salary; (ii) a per diem share of the bonus he was awarded the prior year;
and (iii) continuation of his health benefits. Mr. Riggs is required to maintain
the confidentiality of Company information at all times during and after the
termination of the Agreement.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information as of June 16, 1999 with respect
to the beneficial ownership of the Company's Common Stock by all directors, all
1998 Named Officers, all persons known to the Company to own beneficially 5% or
more of the Company's Common Stock, and all current officers and directors as a
group. The Company's only class of equity securities outstanding is its Common
Stock:
<TABLE>
<CAPTION>
SHARES OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
- ------------------------ -------------------- ----------
<S> <C> <C>
John N. Kapoor, Ph.D.(2).................................... 2,491,429 26.2%
EJ Financial Enterprises, Inc.
225 E. Deerpath, Suite 250
Lake Forest, IL 60045
Robert E. Dudley, Ph.D.(3).................................. 331,609 3.48%
David E. Riggs(3)........................................... 151,844 1.63%
Ronald L. Goode, Ph.D.(3)................................... 145,773 1.58%
James J. Lempenau(3)........................................ 91,328 *
Ronald Weiser(3)............................................ 84,880 *
Gilbert E. Dwyer(3)......................................... 20,500 *
Mahendra G. Shah, Ph.D.(3).................................. 20,000 *
All Directors and Executive Officers as a group (8
persons).................................................. 3,337,363(4) 32.9%
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial and Percentage Ownership have been determined pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Under this Rule, shares of Common Stock that may be acquired upon
exercise of stock options within 60 days of the measurement date are deemed
beneficially owned by the optionholder and included in calculating the
optionholder's percentage ownership of Common Stock.
(2) Includes 936,429 shares of Common Stock beneficially owned by the John N.
Kapoor Trust (the "Trust"), an affiliate of Dr. Kapoor; 485,000 shares of
Common Stock and 750,000 shares of Common Stock are held by separate limited
partnerships created for the benefit of Dr. Kapoor's family members, of
which Dr. Kapoor is the general partner; 20,000 shares held in trust for
family members of which Dr. Kapoor's spouse is the Trustee and as to which
Dr. Kapoor disclaims beneficial ownership; and 300,000 shares of Common
Stock that may be purchased under stock options exercisable within 60 days
of June 16, 1999.
(3) Includes incentive stock options and nonqualified stock options exercisable
within 60 days of June 16, 1999 to purchase shares of Common Stock as
follows: 325,000 shares by Dr. Dudley; 150,000 shares by
A-13
<PAGE> 38
Mr. Riggs; 7,500 shares by Dr. Goode; 63,000 shares by Mr. Lempenau; 62,000
shares by Mr. Weiser; 20,500 shares by Mr. Dwyer; and 17,500 shares by Dr.
Shah.
(4) Includes shares owned beneficially (including an aggregate of 945,500 shares
of Common Stock that may be purchased under stock options exercisable within
60 days of June 16, 1999) and of record by the above-named officers and
directors.
The John N. Kapoor Trust (the "Trust"), an affiliate of Dr. Kapoor, has the
right to nominate two persons to the Board of Directors as long as the Trust
owns beneficially 880,000 shares of securities of the Company entitled to vote
for the election of directors (the "Voting Securities"). The Trust may continue
to nominate one person as long as the Trust owns beneficially less than 880,000
shares, but at least 220,000 shares, plus an additional number of shares equal
to 5% of future issuances of Voting Securities (other than shares issued upon
the exercise of options and warrants outstanding on the date the Trust agreed to
purchase Common Stock of the Company). Drs. Kapoor and Shah are the Trust's
representatives on the Board of Directors.
A-14
<PAGE> 39
ANNEX B
[LETTERHEAD OF HAMBRECHT & QUIST LLC]
June 4, 1999
The Board of Directors
UNIMED Pharmaceuticals, Inc.
2150 East Lake Cook Road
Buffalo Grove, IL 60089-1862
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, par value $0.25
per share (the "Common Stock"), of UNIMED Pharmaceuticals, Inc. ("UNIMED" or the
"Company") of the consideration to be received by such holders in connection
with a proposed transaction as set forth below.
We understand that UNIMED, Solvay Pharmaceuticals, Inc. ("Solvay") and Utah
Acquisition Corporation (the "Purchaser") propose to enter into an Agreement and
Plan of Merger (the "Agreement") to be dated as of June 11, 1999. The terms of
the Agreement provide, among other things, that (i) the Purchaser will promptly
commence a tender offer (the "Offer") to purchase for cash all of the
outstanding shares of Common Stock at a purchase price of $12.00 per share, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Agreement and certain ancillary documents to be filed with the Securities
and Exchange Commission; and (ii) the Purchaser will subsequently be merged (the
"Merger") with and into the Company in a transaction which will provide all
remaining holders of shares of Common Stock (other than UNIMED, Solvay, the
Purchaser or their respective subsidiaries, and holders who have perfected their
appraisal rights, if any, under Delaware law) with $12.00 per share in cash. The
Offer and the Merger constitute the "Proposed Transaction."
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of UNIMED in connection with the Proposed Transaction, and we will
receive a fee for our services, which include the rendering of this opinion.
In the ordinary course of business, Hambrecht & Quist actively trades in
the equity and derivative securities of UNIMED for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.
In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have, among other things:
(i) reviewed the publicly available financial statements of UNIMED for
recent years and interim periods to date and certain other relevant
financial and operating data of UNIMED made available to us from published
sources and from the internal records of UNIMED;
(ii) reviewed certain internal financial and operating information,
including certain projections, relating to UNIMED prepared by the senior
management of UNIMED;
(iii) discussed the business, financial condition and prospects of
UNIMED with certain members of senior management;
B-1
<PAGE> 40
(iv) reviewed the recent reported prices and trading activity for the
common stock of UNIMED and compared such information and certain financial
information for UNIMED with similar information for certain other companies
engaged in businesses we consider comparable;
(v) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(vi) reviewed a draft of the Agreement to be dated as of June 11,
1999;
(vii) performed such other analyses and examinations and considered
such other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant; and
(viii) solicited indications of interest from certain other parties in
connection with a possible acquisition of, or business combination with,
UNIMED.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Solvay or UNIMED considered in
connection with our review of the Proposed Transaction, and we have not assumed
any responsibility for independent verification of such information. We have not
prepared any independent valuation or appraisal of any of the assets or
liabilities of UNIMED, nor have we conducted a physical inspection of the
properties and facilities of either company. With respect to the financial
forecasts and projections made available to us and used in our analysis, we have
assumed that they reflect the best currently available estimates and judgments
of the expected future financial performance of UNIMED. For purposes of this
opinion, we have assumed that UNIMED is not a party to any pending transactions,
including external financings, recapitalizations or material merger discussions,
other than the Proposed Transaction and those activities undertaken in the
ordinary course of conducting its business. Our opinion is necessarily based
upon market, economic, financial and other conditions as they exist and can be
evaluated as of the date of this letter and any change in such conditions would
require a reevaluation of this opinion. In rendering this opinion, we have
assumed that the proposed merger will be consummated substantially on the terms
discussed in the Agreement, without any waiver of any material terms or
conditions by any party thereto.
It is understood that this letter is for the information of the Board of
Directors and may not be used for any other purpose without our prior written
consent; provided, however, that this letter may be reproduced in full in the
Solicitation/Recommendation Statement. This letter does not constitute a
recommendation to any stockholder as to whether any such stockholder should
tender shares of Common Stock pursuant to the Offer.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of the Common Stock in the
Proposed Transaction is fair to such holders from a financial point of view. We
express no opinion, however, as to the adequacy of any consideration received in
the Proposed Transaction by Solvay or any of its affiliates.
Very truly yours,
HAMBRECHT & QUIST LLC
By: /s/ PAUL B. CLEVELAND
------------------------------------
Paul B. Cleveland
Managing Director
B-2
<PAGE> 41
ANNEX C
[LETTERHEAD OF DUFF & PHELPS, LLC]
June 4, 1999
The Board of Directors
Unimed Pharmaceuticals, Inc.
2150 East Lake Cook Road
Buffalo Grove, Illinois 60089-1862
Attention Board of Directors:
Duff & Phelps, LLC ("Duff & Phelps") has been retained to provide our
opinion to the Board of Directors of Unimed Pharmaceuticals, Inc. ("Unimed" or
the "Company") as to the fairness, from a financial point of view, of the
consideration to be received by the common shareholders of the Company in
connection with a proposed merger transaction (the "Merger") of a wholly-owned
subsidiary of Solvay Pharmaceuticals, Inc. ("Solvay") with and into Unimed.
Pursuant to an Agreement and Plan of Merger (the "Agreement") to be dated as of
June 11, 1999, each issued and outstanding share of Unimed common stock, par
value $.25 per share, will be converted into and represent the right to receive
cash in the amount of $12.00 (together with proceeds payable to holders of stock
options and warrants, the "Merger Consideration"). Duff & Phelps was previously
engaged by the Company on behalf of the Special Committee of the Board of
Directors to consider various strategic alternatives, including the Merger.
SUMMARY OF FINANCIAL TERMS OF THE MERGER
Pursuant to the Agreement, within five business days after the public
announcement by Solvay of the Agreement, Solvay shall commence a tender offer
for all of Unimed's shares at a price of $12.00 per share in cash. Each
outstanding stock option and warrant will entitle the holder thereof to receive
an amount in cash equal to the difference between $12.00 and the exercise price
per share of such stock option or warrant.
SCOPE OF ANALYSIS
In the course of our analysis for rendering this opinion, we have:
X Reviewed the Agreement;
X Reviewed the public financial statements of Unimed including: (i) Annual
Reports to Shareholders for the years ended December 31, 1998 and 1997;
(ii) annual filings on Form 10-K for the fiscal years ended December 31,
1998, 1997 and 1996; and (iii) quarterly filings on Form 10-Q for the
periods ending March 31, 1999 and March 31, 1998, June 30, 1998 and
September 30, 1998;
X Reviewed certain operating and financial information provided to us by
the management of Unimed including internal budgets and financial
forecasts;
X Interviewed certain members of management of Unimed and Solvay and
discussed their respective companies' operations, historical results and
future outlook and their views of the operational and strategic benefits
of the Merger;
X Reviewed the historical price and trading volume of Unimed's common
stock;
X Reviewed the financial information and market valuations of other
publicly traded companies that were deemed to be reasonably comparable to
Unimed;
X Reviewed the terms and pricing of recent merger and acquisition
transactions in the biotechnology and pharmaceutical industries; and
X Conducted other studies and analyses, inquiries and investigations which
we deemed appropriate.
C-1
<PAGE> 42
In connection with our engagement we were not requested to, and did not,
solicit third party indications of interests with respect to the acquisition of
all or part of the Company.
In arriving at our opinion, we have relied upon and assumed the accuracy
and completeness of the financial and other information considered in our
review, whether from public sources or Unimed, and have not assumed any
responsibility for independent verification of such information. Industry
information and financial data used in our analysis were obtained from regularly
published industry and investment sources. With respect to the Company's
financial forecasts, we have been advised by Company management that such
forecasts have been reasonably prepared as bases reflecting the Company's most
currently available estimates and judgements, and we express no opinion with
respect to such forecasts or the assumptions on which they are based. We have
not made any independent evaluation or appraisal of the assets or liabilities of
the Company. Our opinion is necessarily based on the economic, market and other
conditions in effect and the information available to us as of the date hereof,
and must be considered in that context.
This letter is intended for the benefit and use of the Board of Directors
of Unimed and is not to be reproduced, disseminated or referred to at any time
in whole or in part without our prior written consent.
CONCLUSION
Based on and subject to the foregoing, it is our opinion that as of the
date hereof, the Merger Consideration is fair, from a financial point of view,
to the shareholders of Unimed.
Respectfully submitted
/s/ Duff & Phelps, LLC
DUFF & PHELPS, LLC
CAG/JSS
C-2
<PAGE> 1
EXHIBIT 1
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
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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,
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<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
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<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.
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<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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<PAGE> 7
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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"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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<PAGE> 19
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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<PAGE> 20
(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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<PAGE> 21
"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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<PAGE> 22
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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<PAGE> 24
"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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<PAGE> 25
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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<PAGE> 26
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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<PAGE> 27
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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<PAGE> 28
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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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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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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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
-5-
<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.
-6-
<PAGE> 1
EXHIBIT 7
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:
"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
<PAGE> 2
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
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.
2
<PAGE> 3
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
3
<PAGE> 1
EXHIBIT 12
[UNIMED LETTERHEAD]
June 19, 1997 (August 7, 1992)
Dr. John N. Kapoor
EJ Financial Enterprises, Inc.
225 East Deerpath Road, Suite 250
Lake Forest, IL 60045
Dear Dr. Kapoor:
This letter will confirm the agreement between you and Unimed Pharmaceuticals,
Inc. (the "Company") as follows:
1. The Company hereby grants to you an option to purchase from the Company up
to an aggregate of 200,000 shares of this Company's Common Stock, par
value $.25 per share ("Common Stock"). The date of this option grant is
August 7, 1992. You may exercise 25% of this option annually on the
anniversary of the grant, prior to August 6, 2002, subject to the
repurchase provisions set forth in paragraph 4, below. The option will
terminate if not exercised on or before August 6, 2002. The option
exercise price is $7.75 per share. This option may be exercised by
forwarding to the Company, 2150 East Lake Cook Road, Suite 210, Buffalo
Grove, IL 60089, written advice stating the number of shares elected to be
purchased hereunder accompanied by the payment in full of the purchase
price therefor (i) in cash or by check, (ii) by delivery of shares of
Common Stock that have been held by you for a minimum of six months, the
then aggregate fair market value of which equals the aggregate exercise
price, or (iii) by a combination of (i) and (ii); provided, that you shall
have the right to pay up to 50% of the aggregate exercise price of the
shares with respect to which the option is being exercised at any time
by method (ii) above, but payment of more than 50% of the aggregate
exercise price of such shares shall be permitted only if and to the
extent determined by the Company. You understand and agree that the
exercise of all or any portion of this option will not be effective, and
no shares will become transferable to you, until you make appropriate
arrangements with the Company for such income and employment tax withholding
as may be required of the Company under federal, state or local law on
account of such exercise. In the event that there is any change in the
Common Stock through the declaration of stock dividends in excess of five
percent (5%) or through stock split-ups or combinations or exchanges of
shares by recapitalization or reclassification, or otherwise, the number of
shares of Common Stock deliverable upon exercise of this option and the
purchase price therefor shall be appropriately adjusted.
<PAGE> 2
2
2. The Company agrees that at all times there shall be reserved for issuance
and delivery upon exercise of this option such number of shares of Common
Stock as then constituted as may then be purchased upon the exercise of
this option.
3. You represent and warrant that you intend to acquire any shares of Common
Stock which may be purchased by you upon exercise of this option for your
own account for investment only and that you do not have any present
intention of distributing or reselling any part thereof; provided, that
such condition shall be inoperative if the offering of Common Stock
pursuant to this option is registered under the Securities Act of 1933, as
amended, or if in the opinion of counsel for the Company such Common Stock
may be resold without registration.
4. a) You agree that if you cease for any reason (including, without
limitation, voluntary or involuntary termination) prior to the first
anniversary of the effective date of this Agreement to be an employee
and/or director of the Company ("termination of service"), the Company
shall have the right to repurchase all of the shares acquired by you
pursuant to the exercise of this option (as adjusted for stock splits or
combinations and including any stock dividends thereon) at a purchase price
equal to the option exercise price stated in paragraph 1 (as it may have
been adjusted).
b) Commencing on the first anniversary date hereof and for one year
thereafter, the Company shall have the right upon your termination of
service to repurchase the number of shares acquired by you pursuant to the
exercise of this option in excess of 25% of the total number of shares
covered hereby. This right of repurchase shall diminish over the next two
years so that on the second anniversary date hereof and for one year
thereafter, the Company shall have the right upon your termination of
service to repurchase the number of shares acquired by you pursuant to the
exercise of this option in excess of 50% of the number of shares covered
hereby, and on the third anniversary date hereof and for one year
thereafter, the Company shall have the right upon your termination of
service to repurchase the number of shares acquired by you pursuant to the
exercise of this option in excess of 75% of the number of shares covered
hereby. On and after the fourth anniversary date of this option, you shall
be fully vested and the Company will have no right to repurchase any
shares. The repurchase price shall be equal to the option exercise price
stated in paragraph 1 (as it may have been adjusted).
c) Certificates for shares as to which this option has been exercised will
be retained by the Company until such times as your shares vest under this
Agreement. At the time of, and as a condition to the issuance of the shares,
you shall execute a stock power and any other documentation as may be
necessary to effect a transfer of the shares to the Company. The shares
shall be registered in your name on the books of the Company and you shall
enjoy all the rights of a stockholder of the Company with respect to such
shares, including the right to vote such shares and to receive dividends
thereon. All shares you acquire pursuant to the exercise of this option that
are not yet vested under this paragraph 4 shall be nontransferable and
nonassignable.
d) Upon notice from the Company of the exercise of its repurchase rights
hereunder, the repurchased shares shall be transferred to the Company on the
<PAGE> 3
3
books of the Company against payment by the Company to you of the purchase
price as specified above. Any stock transfer taxes shall be paid by the
Company. If the Company shall fail to exercise its rights under this
paragraph within thirty (30) days after you no longer have the right to
exercise the option as set forth in paragraph 7 hereof, the repurchase
rights with respect to the shares imposed by this paragraph shall terminate.
e) Notwithstanding any provision of this paragraph 4 to the contrary, upon
the occurrence of any event listed below prior to the date the Shares
otherwise become fully vested, all Shares shall become immediately vested
in full:
(i) the thirtieth day preceding the proposed date of consummation of a
proposed merger, proposed sale of substantially all the assets, or similar
proposed reorganization, of the Company;
(ii) the acquisition of beneficial ownership (as such term is defined
in Rule 13d-3 as promulgated under the Securities Exchange Act of 1934) by
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934), other than the Company, directly or
indirectly, of securities representing 20% or more of the total number of
votes that may be cast for the election of directors of the Company, but
excluding the acquisition of shares of Common Stock and warrants to purchase
Common Stock by the John N. Kapoor Trust pursuant to a certain Stock
Purchase Agreement as described in the Company's Proxy Statement for Annual
Meeting of Stockholders to be held March 27, 1991; provided, however, that
if the John N. Kapoor Trust at any time has aggregate direct or indirect
beneficial ownership (as so defined) of securities of the Company, assuming
exercise of the Warrants acquired in the above transaction, representing in
excess of 40% of the total number of votes that may be so cast, the
acquisition, if any, that causes such excess aggregate ownership shall
constitute an event causing all Shares to become immediately fully vested;
(iii) commencement (within the meaning of Rule 14d-2 as promulgated
under the Securities Exchange Act of 1934) of a "tender offer" for
securities representing 20% or more of the total number of votes that may be
cast for election of directors of the Company pursuant to Section 14(d)(2)
of the Securities Exchange Act of 1934, other than a self-tender by the
Company; or
(iv) failure, at any annual or special meeting of the Company's
shareholders following an "election contest" subject to Rule 14a-11 (as
promulgated under the Securities Exchange Act of 1934), of any of the
persons nominated by the Company in the proxy material mailed to
shareholders by the management of the Company to win election to seats as
directors of the Company, excluding only those who die, retire voluntarily,
are disabled or are otherwise disqualified in the interim between their
nomination and the date of the meeting.
5. The Company agrees that it shall exercise reasonable efforts to file, on or
before January 1, 1992 or, if not filed on or before January 1, 1992, as
soon thereafter as possible, a Registration Statement on Form S-3 (or any
form substituted therefor) under the Securities Act of 1933, as amended,
covering the Shares granted to you
<PAGE> 4
4
hereunder in order to permit you to offer and sell your Shares upon their
becoming fully vested; and the Company will furnish you with such number of
copies of such Registration Statement and/or any prospectus forming a part
thereof as you may need in connection with the offering for sale of your
Shares to the public; provided, however, that the Company shall have no
obligation to you under the provisions of this paragraph B to the extent
that (or for such period as), under applicable statutes or rules and
regulations of the Securities and Exchange Commission then in effect, the
filing of such a Registration Statement on Form S-3 is unavailable to the
Company.
6. This option is not transferable other than to your spouse and children, and
then only by will or pursuant to the laws of descent and distribution and is
exercisable during your lifetime only by you (or your guardian or legal
representative). This option does not entitle you to any rights whatsoever
as a stockholder of the Company, except that you shall become a stockholder
of record of the Company as of the date of receipt of the notice and payment
mentioned in paragraph 1 above by the Company, but only as the number of
shares which you elect in such notice to purchase.
7. If you cease to be an employee and/or director of the Company by reason of
discharge for cause, your right to exercise this option shall terminate
on the date you cease to be an employee and/or director of the Company. If
you cease to be an employee and/or director of the Company for any reason
other than discharge for cause, you will continue to have a right to
exercise this option until the date it terminates under paragraph 1 with
respect to the number of shares as to which the Company's repurchase rights
under paragraph 4 have lapsed as of the date of such cessation; your right
to exercise this option with respect to the number of shares as to which
the Company has repurchase rights under paragraph 4 as of the date of such
cessation shall terminate as of said date.
8. In the event of a change of the Common Stock resulting from a merger or
similar reorganization as to which the Company is the surviving entity, the
number and kind of shares then subject to this option and the price per
share thereof shall be appropriately adjusted in such manner as the Company
may deem equitable to prevent substantial dilution or enlargement of the
rights available or granted hereunder. The Company shall notify you in
writing at least thirty (30) days prior to the consummation of any merger or
similar reorganization of the Company that the Company will not survive or
any sale of all or substantially all of the assets of the Company (a
"cessation event") of such cessation event; all shares subject to this
option, to the extent not otherwise vested under paragraph 4, shall become
immediately vested in full thirty (30 days preceding the date of the
cessation event, and the Company shall assure your right to exercise this
option through the tenth day preceding the date of the cessation event.
Except as otherwise determined by the Company, the occurrence of a cessation
event shall cause this option, to the extent then outstanding, to terminate
unless any surviving entity agrees to assume the rights and obligations
hereunder.
9. Nothing contained in this agreement shall impose any obligation on the
Company or on you with respect to your continued performance of services
for the Company. The option granted hereunder is not intended to qualify
as an incentive stock option.
<PAGE> 5
5
under Section 422 of the Internal Revenue Code of 1986, as amended; the
Company makes no representation as to the tax treatment to you upon
receipt or exercise of this option or sale or other disposition of shares
covered by this option. This agreement shall be subject to and construed
in accordance with the laws of the State of New Jersey.
Sincerely,
Robert E. Dudley
Robert E. Dudley, Ph.D.
Chief Executive Officer
Accepted and Agreed:
John N. Kapoor
- --------------
Dr. John N. Kapoor
<PAGE> 1
Exhibit 13
UNIMED PHARMACEUTICALS,
INC.
2150 East Lake Cook Road
Buffalo Grove, IL
60089-1862
847-541-2525
UNIMED LOGO Fax 847-541-2569
CONTACTS:
AT UNIMED:
David E. Riggs
Senior Vice President/CFO
(847) 541-2525
AT EDELMAN WORLDWIDE:
Marissa Weber (media)
312-240-2841
Alexa Auerbach (analysts)
312-240-2699
UNIMED ANNOUNCES INTENTION TO BE ACQUIRED
BUFFALO GROVE, IL, MAY 28, 1999 - UNIMED PHARMACEUTICALS, INC. (NASDAQ: UMED)
today announced that it is actively engaged in negotiations with an unnamed
third party for the sale of the all of the outstanding shares of stock of the
company.
Unimed has engaged the firm of Hambrecht & Quist LLC to assist with the
transaction.
Unimed Pharmaceuticals is an emerging, Chicago-area pharmaceutical company that
develops and markets life-enhancing pharmaceutical products to address unmet
medical needs in patients with chronic illnesses. The company focuses on drugs
that have multiple indications and fall within the therapeutic areas of
endocrinology, urology, HIV and other infectious diseases, hematology and
oncology.
To the extent that 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's
control and are subject to various risk factors that could cause Unimed's
results to differ materially from those expressed in any forward-looking
statement. The risk factors are described in Unimed's Form 10-K and 10-Q as
filed with the SEC and include, without limitation, 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.
<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
[SOLVAY PHARMACEUTICALS LOGO]
EXHIBIT 15
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.
-Page 2-
<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
------------------------ ------------------------
- Page 3 -
<PAGE> 1
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
