<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 1998
FILE NO. 333-47927
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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BAXTER INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 2834 36-0781620
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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BAXTER INTERNATIONAL INC.
ONE BAXTER PARKWAY
DEERFIELD, ILLINOIS 60015
(847) 948-2000
(Address, including Zip Code and Telephone Number,
including area code of registrant's principal executive offices)
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J. PATRICK FITZSIMMONS
CORPORATE COUNSEL
BAXTER INTERNATIONAL INC.
ONE BAXTER PARKWAY
DEERFIELD, ILLINOIS 60015
(847) 948-3781
(Name, Address, including Zip Code and Telephone Number,
Including Area Code, of Agent for Service)
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with copies to:
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JOSEPH J. GIUNTA JAMES C.T. LINFIELD
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP COOLEY GODWARD LLP
300 SOUTH GRAND AVENUE, SUITE 3400 2595 CANYON BOULEVARD, SUITE 250
LOS ANGELES, CALIFORNIA 90071 BOULDER, COLORADO 80302
(213) 687-5000 (303) 546-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the Merger (as defined).
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If any of the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
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CALCULATION OF REGISTRATION FEE
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=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT PRICE(2) REGISTRATION FEE
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Common stock, par value $1 per share(1)........ 5,412,225 -- $205,321,575(2) $60,570(3)
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Contingent Payment Rights...................... 23,979,162 -- -- (2) -- (3)
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(1) Includes the related Baxter Rights (as defined).
(2) Pursuant to Rule 457(f) under the Securities Act of 1933, as amended,
represents (x) $8 9/16, the last sale of shares of Common Stock, par value
$.001 per share, of Somatogen, Inc., a Delaware corporation (the "Company
Common Stock"), reported on the Nasdaq National Market on March 11, 1998,
times (y) 23,979,162, the number of outstanding shares of Company Common
Stock, on a fully diluted basis, as of the most recent practicable date.
Estimated solely for the purpose of calculating the registration fee.
(3) Paid on March 12, 1998.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
[SOMATOGEN LETTERHEAD]
April 6, 1998
DEAR STOCKHOLDER:
You are cordially invited to attend a Special Meeting of Stockholders of
Somatogen, Inc. (the "Company") to be held on May 4, 1998, beginning at 9:00
A.M. MDT, at the Company's offices, located at 2545 Central Avenue, Suite FD1,
Boulder, Colorado 80301-2857.
At such Special Meeting, you will be asked to adopt the Agreement and Plan
of Merger, dated as of February 23, 1998 (the "Merger Agreement"), by and among
Baxter International Inc., a Delaware corporation ("Baxter"), RHB1 Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Baxter, and the
Company, and to approve the transactions contemplated thereby. The accompanying
Notice of Meeting and Proxy Statement/Prospectus describe this proposal. The
Board of Directors has unanimously approved the Merger Agreement and recommends
a vote "FOR" the adoption of the Merger Agreement and the approval of the
transactions contemplated thereby.
If the transactions contemplated by the Merger Agreement are consummated,
each outstanding share of Common Stock, par value $.001 per share, of the
Company, will be converted into the right to receive a fraction of a share of
common stock, par value $1 per share, of Baxter, and a Contingent Payment Right
issued by Baxter.
It is important that your shares be represented and voted, whether or not
you plan to attend the Special Meeting. Therefore, please sign, date and
promptly mail the enclosed proxy in the prepaid envelope provided.
Sincerely,
/s/ ANDRE DE BRUIN
Andre de Bruin
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 3
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 1998
TO THE STOCKHOLDERS OF SOMATOGEN, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Somatogen,
Inc., a Delaware corporation (the "Company"), will be held on Monday, May 4,
1998, beginning at 9:00 A.M. MDT, at the Company's offices, located at 2545
Central Avenue, Suite FD1, Boulder, Colorado 80301-2857, for the following
purposes:
1. To adopt the Agreement and Plan of Merger, dated as of February 23, 1998
(the "Merger Agreement"), by and among Baxter International Inc., a
Delaware corporation ("Baxter"), RHB1 Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Baxter, and the Company,
and to approve the transactions contemplated thereby;
2. To transact such other business that may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement/Prospectus accompanying this Notice.
The Board of Directors has fixed the close of business on March 31, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at such Special Meeting and at any continuation, adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ JAMES C.T. LINFIELD
James C.T. Linfield
Secretary
Boulder, Colorado
April 6, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE
YOUR REPRESENTATION AT THE SPECIAL MEETING. A RETURN ENVELOPE IS ENCLOSED FOR
THAT PURPOSE. EVEN IF YOU HAVE VOTED YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF
YOU ATTEND THE SPECIAL MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE
HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO ATTEND AND
VOTE AT THE SPECIAL MEETING, YOU MUST BRING TO THE SPECIAL MEETING A PROXY
ISSUED IN YOUR NAME FROM THE BROKER, BANK OR OTHER NOMINEE. ADDITIONALLY, IN
ORDER TO VOTE AT THE SPECIAL MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A
PROXY ISSUED IN YOUR NAME.
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SOMATOGEN, INC.
PROXY STATEMENT
FOR A SPECIAL MEETING OF ITS STOCKHOLDERS TO BE HELD ON MAY 4, 1998
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[BAXTER LOGO]
Baxter International Inc.
PROSPECTUS
COMMON STOCK, PAR VALUE $1 PER SHARE
CONTINGENT PAYMENT RIGHTS
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This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to holders of shares of Common Stock, par value $.001 per share
("Company Common Stock"), of Somatogen, Inc., a Delaware corporation (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board of Directors") for use at a special meeting
of stockholders of the Company to be held on May 4, 1998, beginning at 9:00
a.m., MDT, at the Company's offices, located at 2545 Central Avenue, Suite FD1,
Boulder, Colorado 80301-2857, and any adjournments or postponements thereof (the
"Special Meeting"). At the Special Meeting, stockholders of the Company will
consider and vote upon a proposal (the "Merger Proposal") to adopt the Agreement
and Plan of Merger, dated as of February 23, 1998 (the "Merger Agreement"), by
and among Baxter International Inc., a Delaware corporation ("Baxter"), RHB1
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Baxter ("Merger Sub"), and the Company, a copy of which is attached hereto as
Appendix A and is incorporated herein by reference, and to approve the
transactions contemplated thereby. The Merger Agreement provides, subject to the
satisfaction or waiver of certain conditions, that the Company will be merged
with and into Merger Sub (the "Merger"), with Merger Sub surviving the Merger.
Upon the consummation of the Merger, each share of Company Common Stock
(excluding (i) shares held by Baxter or by any subsidiary of Baxter and (ii)
Dissenting Shares (as defined)) shall be converted into the right to receive (A)
the fraction of a share (calculated and rounded to the nearest ten-thousandth of
one share) of common stock, par value $1 per share, of Baxter ("Baxter Common
Stock"), the numerator of which fraction shall be $9.00 and the denominator of
which shall be the Baxter Stock Price (as defined), with cash being paid in lieu
of any fractional share interests (the "Share Consideration") and (B) one
Contingent Payment Right (each a "CPR") (the consideration referred to in these
clauses (A) and (B) is hereinafter referred to as the "Merger Consideration").
Each CPR will represent the right to receive a pro rata portion of five percent
of the Net Sales (as defined) of Products (as defined), not to exceed $2.00 per
CPR. See "Description of the CPRs."
For purposes of calculating the Share Consideration, the "Baxter Stock
Price" shall be an amount equal to the average closing sale price of a share of
Baxter Common Stock, as such closing sale price shall be reported in The Wall
Street Journal or, if not available, such other authoritative publication as may
be reasonably selected by Baxter, for the ten consecutive trading days ending
on, and including, the fifth trading day prior to the consummation of the
Merger. Because the number of shares of Baxter Common Stock to be received by
holders of shares of Company Common Stock will be determined based on the
average closing price of shares of Baxter Common Stock over a period prior to
the consummation of the Merger, and because the price of Baxter Common Stock is
subject to fluctuation, the number of shares of Baxter Common Stock that holders
of shares of Company Common Stock will receive in connection with the Merger may
increase or decrease from the number of shares such holders would receive based
on the then current market price of shares of Baxter Common Stock. Moreover, the
value of the shares of Baxter Common Stock to be received by holders of shares
of Company Common Stock in connection with the Merger may fluctuate following
the consummation of the Merger. There is no minimum or maximum number of shares
of Baxter Common Stock that may be issued under the provisions of the Merger
Agreement.
FOLLOWING DETERMINATION OF THE BAXTER STOCK PRICE ON THE FIFTH TRADING DAY
PRIOR TO THE CONSUMMATION OF THE MERGER, HOLDERS OF SHARES OF COMPANY COMMON
STOCK CAN OBTAIN THE BAXTER STOCK PRICE AND THE SPECIFIC FRACTION OF A SHARE OF
BAXTER COMMON STOCK INTO WHICH EACH SHARE OF COMPANY COMMON STOCK WILL BE
CONVERTED BY CONTACTING BEACON HILL PARTNERS, INC. (THE "INFORMATION AGENT") AT
(800) 253-3814 (TOLL FREE). PROXIES AND REVOCATIONS OF PROXIES MAY BE DELIVERED
AT ANY TIME PRIOR TO THE TAKING OF THE VOTE AT THE SPECIAL MEETING, INCLUDING BY
FACSIMILE TO THE INFORMATION AGENT AT (212) 843-4384. THIS INFORMATION WILL ALSO
BE POSTED ON THE WORLD WIDE WEB SITES OF EACH OF BAXTER (http://www.baxter.com)
AND THE COMPANY (http://www.somatogen.com).
Each share of Baxter Common Stock received also includes an associated right
(each a "Baxter Right") to purchase shares of preferred stock of Baxter at a
purchase price of $70 per unit, subject to adjustment. The Baxter Rights, which
only become exercisable in certain events, were issued pursuant to a Rights
Agreement, dated as of March 20, 1989 (the "Baxter Rights Agreement"), by and
between Baxter and First National Bank of Chicago, as rights agent.
This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to holders of shares of Company Common Stock on or about
April 6, 1998. This Proxy Statement/Prospectus also constitutes Baxter's
Prospectus, filed with the Securities and Exchange Commission (the
"Commission"), as part of a Registration Statement on Form S-4 (as amended from
time to time, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to up to an aggregate of 5,412,225
shares of Baxter Common Stock and up to an aggregate of 23,979,162 CPRs to be
issued in connection with the Merger. The Company has supplied all the
information contained herein with respect to itself. Baxter has supplied all the
information contained herein with respect to itself and its subsidiaries,
including Merger Sub.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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PROXY STATEMENT/PROSPECTUS DATED APRIL 6, 1998.
<PAGE> 5
NOTE REGARDING FORWARD LOOKING INFORMATION
Statements throughout this Proxy Statement/Prospectus, the documents
incorporated herein by reference and the documents deemed to be incorporated
herein by reference that are not historical facts are forward looking
statements. These statements are based on the Company's and Baxter's respective
current expectations and involve numerous risks and uncertainties. Some of these
risks and uncertainties are factors that affect all businesses, while some are
specific to the Company, Baxter or the health care arenas in which each of them
operates.
The factors below in some cases have affected and could affect each of the
Company's and Baxter's actual results, causing results to differ, and possibly
differ materially, from those expressed in any such forward looking statements.
These factors include technological advances in the medical field, results of
clinical trials, economic conditions, demand and market acceptance risks for new
and existing products, technologies and health care services, the impact of
competitive products and pricing, manufacturing capacity, new plant start-ups,
the United States and global regulatory, trade and tax policies, continued price
competition and product development risks, including technological difficulties,
ability to enforce patents and unforeseen foreign commercialization and
regulatory factors. In particular, Baxter, as well as other companies in its
industry, is experiencing increased regulatory activity by the U.S. Food and
Drug Administration with respect to its plasma-based biologicals and its
complaint-handling systems. Additionally, upon the resolution of certain legal
matters, the Company and Baxter each may incur charges in excess of presently
established reserves. Any such charge could have a material adverse effect on
the Company's or Baxter's results of operations or cash flows in the period in
which it is recorded.
Currency fluctuations are also a significant variable for global companies,
especially fluctuations in local currencies where hedging opportunities are
unreasonably expensive or unavailable. If the United States dollar continues to
strengthen against most foreign currencies, Baxter's ability to realize
projected growth rates in its sales and net earnings outside the United States
will continue to be negatively impacted.
The Company and Baxter each believes that its expectations with respect to
forward looking statements are based upon reasonable assumptions within the
bounds of its knowledge of its business and operations, but there can be no
assurance that the actual results or performance of the Company or Baxter will
conform to any future results or performance expressed or implied by such
forward looking statements.
AVAILABLE INFORMATION
The Company and Baxter, are each subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information filed by the Company or by Baxter can be inspected and
copied at the public reference facilities maintained by the Commission, at 450
Fifth Street, N.W., Washington D.C. 20549; Seven World Trade Center, 13th Floor,
New York, New York 10048; and 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. Certain reports, proxy and information statements and other information
filed by the Company or Baxter may also be obtained at the Commission's World
Wide Web site, located at http://www.sec.gov. The Company also files reports,
proxy and information statements and other information with the National
Association of Securities Dealers, Inc., the operator of the Nasdaq National
Market (the "NMS"), which may be inspected at 1735 K Street, N.W., Washington,
D.C. 20006. Baxter also files reports, proxy and information statements and
other information with the New York Stock Exchange (the "NYSE"), the Chicago
Stock Exchange and the Pacific Stock Exchange. Such reports and other
information may be inspected at the NYSE, 20 Broad Street, New York, New York
10005; the Chicago Stock Exchange, 440 South La Salle Street, Chicago, Illinois
60605; and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104.
Baxter has filed the Registration Statement (File No. 333-47927) with the
Commission under the Securities Act, of which this Proxy Statement/Prospectus
forms a part. This Proxy Statement/Prospectus
i
<PAGE> 6
does not contain all of the information set forth in the Registration Statement,
certain portions of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained in this Proxy
Statement/Prospectus, or in any document incorporated by reference or deemed to
be incorporated by reference into this Proxy Statement/Prospectus as to the
contents of any contract or other document referred to herein or therein are not
necessarily complete, and, in each case, reference is made to the copy of such
contract or other document listed as an exhibit to the Registration Statement or
such other document, each statement being qualified in all respects by such
reference.
Questions and requests for assistance, for additional copies of the Proxy
Statement/Prospectus or for copies of documents incorporated by reference herein
may be directed to the Information Agent, as follows:
Beacon Hill Partners, Inc.
90 Broad Street
New York, New York 10004
(800) 253-3814
(212) 843-4384 Facsimile
The Information Agent will also be available to receive by facsimile
proxies and revocations of proxies from holders of shares of Company Common
Stock.
No agent or officer of the Company or Baxter, nor any other person, has
been authorized to give any information or to make any representation other than
as contained herein; and, if given or made, such information or representation
should not be relied upon as having been authorized by the Company or Baxter.
Neither the delivery of this Proxy Statement/Prospectus nor any sale or exchange
made hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs or operations of the Company or Baxter since
the date of this Proxy Statement/Prospectus, or that the information herein is
correct as of any time subsequent to such date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
under the Exchange Act are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended June
30, 1997 (File No. 0-19423);
(b) The Company's Quarterly Reports on Form 10-Q for quarters ended
September 30, and December 31, 1997 (File No. 0-19423);
(c) The Company's Current Reports on Form 8-K, dated June 5, 1997 and
February 23, 1998 (File No. 0-19423); and
(d) The Company's Registration Statements on Form 8-A (File No.
0-19423) relating to the Company Common Stock.
The following documents previously filed by Baxter with the Commission
under the Exchange Act are incorporated herein by reference:
(a) Baxter's Annual Report on Form 10-K for the year ended December
31, 1997 (File No. 1-4448);
(b) Baxter's Current Report on Form 8-K dated February 11, 1998 (File
No. 1-4448); and
(c) Baxter's Registration Statements on Form 8-A (File No. 1-4448)
relating to the Baxter Common Stock and the Baxter Rights, respectively.
All documents filed by the Company or Baxter, pursuant to Section 13(a),
13(c), 14 or 15(d) of Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference into this Proxy Statement/Prospectus and
to be a part hereof from the date of filing of such documents.
ii
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Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement herein (or in any other
subsequently filed document that is or is deemed to be incorporated by reference
herein) modifies or supersedes such previous statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof, except
as so modified or superseded.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, UPON ORAL OR WRITTEN REQUEST
BY ANY PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED, IN THE
CASE OF DOCUMENTS RELATING TO THE COMPANY, FROM SOMATOGEN, INC., 2545 CENTRAL
AVENUE, SUITE FD1, BOULDER, COLORADO 80301-2857, ATTENTION: CORPORATE SECRETARY,
TELEPHONE NUMBER (303) 440-9988; AND IN THE CASE OF BAXTER, FROM BAXTER
INTERNATIONAL INC., ONE BAXTER PARKWAY, DEERFIELD, ILLINOIS 60015, ATTENTION:
STOCKHOLDER SERVICES, TELEPHONE NUMBER (847) 948-4913. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY APRIL 23, 1998.
iii
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TABLE OF CONTENTS
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NOTE REGARDING FORWARD LOOKING INFORMATION.................. i
AVAILABLE INFORMATION....................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. ii
SUMMARY..................................................... 1
The Parties............................................... 1
The Special Meeting....................................... 1
The Merger................................................ 2
Selected Consolidated Financial Data of the Company....... 5
Selected Consolidated Financial Data of Baxter............ 6
Comparative Market Price Data............................. 7
Certain Comparative Unaudited Per Share Data.............. 8
THE SPECIAL MEETING......................................... 9
Purpose of the Special Meeting............................ 9
Date, Time and Place of the Special Meeting............... 9
Record Date; Voting Rights and Outstanding Shares......... 9
Solicitation of Proxies; Expenses......................... 9
Quorum; Vote Required..................................... 9
Effect of Abstentions and Broker Nonvotes................. 9
Voting and Revocability of Proxies........................ 10
Stock Ownership by Management............................. 10
Voting Agreement.......................................... 11
THE MERGER.................................................. 11
General................................................... 11
Background of the Merger.................................. 11
Recommendation of the Board of Directors; the Company's
Reasons for the Merger................................. 14
Opinion of Financial Advisor.............................. 16
Baxter's Reasons for the Merger........................... 20
Governmental and Regulatory Approvals..................... 20
Anticipated Accounting Treatment.......................... 21
Certain Federal Income Tax Consequences................... 21
Dissenters' Rights........................................ 24
Interests of Certain Persons in the Merger................ 26
THE MERGER AGREEMENT........................................ 29
Effective Time of the Merger.............................. 29
Conversion of Shares...................................... 30
Treatment of Company Stock Options........................ 31
Exchange of Certificates Representing Shares.............. 31
Dividends................................................. 31
No Fractional Shares...................................... 32
Unclaimed Amounts......................................... 32
Lost Certificates......................................... 32
Representations and Warranties............................ 32
Ordinary Course........................................... 32
Resales of Baxter Common Stock Received in the Merger;
Restrictions on Affiliates............................. 33
Redemption of Company Rights.............................. 33
NYSE Listing.............................................. 34
No Solicitation........................................... 34
Directors' and Officers' Indemnification and Insurance.... 35
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Employee Benefits......................................... 35
Consents and Approvals.................................... 36
Conditions to the Merger.................................. 36
Termination, Amendment and Waiver......................... 37
Fees and Expenses......................................... 38
PRINCIPAL STOCKHOLDERS OF THE COMPANY....................... 40
INFORMATION CONCERNING THE COMPANY.......................... 41
INFORMATION CONCERNING BAXTER............................... 41
COMPARISON OF THE RIGHTS OF HOLDERS OF BAXTER COMMON STOCK
AND HOLDERS OF COMPANY COMMON STOCK......................... 42
Meetings of Stockholders.................................. 42
Number and Elections of Directors......................... 42
Indemnification........................................... 43
Certain Voting Rights..................................... 44
Removal of Directors; Filling Vacancies on the Board of
Directors.............................................. 44
Amendment of Bylaws....................................... 44
Stockholders' Rights Plans................................ 44
DESCRIPTION OF THE CONTINGENT PAYMENT RIGHTS................ 47
Summary................................................... 47
Definitions Related to the CPR Agreement.................. 47
Description of the CPR Certificates....................... 48
Risk of CPRs.............................................. 51
LEGAL MATTERS............................................... 51
EXPERTS..................................................... 51
STOCKHOLDER PROPOSALS....................................... 52
APPENDICIES
Agreement and Plan of Merger..........................Appendix A
Opinion of Lehman Brothers Inc........................Appendix B
Section 262 of the General Corporation Law of the State of
Delaware...........................................Appendix C
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v
<PAGE> 10
SUMMARY
The following summary is intended only to highlight certain information
contained elsewhere in this Proxy Statement/Prospectus. This summary is not
intended to be complete and is qualified in its entirety by reference to the
more detailed information contained elsewhere in this Proxy
Statement/Prospectus, the Appendices hereto and the documents incorporated
herein by reference. The Company's stockholders are urged to review this Proxy
Statement/Prospectus carefully in its entirety, including the Appendices hereto
and such incorporated documents. All references in this Proxy
Statement/Prospectus to the Appendices hereto are qualified in all respects by
reference to the full text of such Appendices. For purposes of this Proxy
Statement/Prospectus, the term Baxter, unless the context otherwise requires,
includes Baxter and its subsidiaries.
THE PARTIES
The Company. The Company is a biopharmaceutical company developing
specialty oxygen therapeutics and other pharmacological agents utilizing its
proprietary recombinant hemoglobin technology. The Company's principal executive
offices are located at 2545 Central Avenue, Suite FD1, Boulder, Colorado
80301-2857, and its telephone number is (303) 440-9988.
Baxter. Baxter, through its subsidiaries, operates in a single industry
segment as a global developer, manufacturer and marketer of products and
technologies related to the blood and circulatory system. It has market-leading
positions in four businesses within this segment of the medical products and
services industry: Blood Therapies, which develops biopharmaceutical and blood
collection and separation products and technologies; I.V. Systems/Medical
Products, which develops technologies and systems to improve intravenous
medication delivery and distributes medical products; Renal, which develops
products and provides services to treat kidney disease; and CardioVascular,
which develops products and provides services to treat late-stage heart disease
and vascular disorders. Baxter's principal executive offices are located at One
Baxter Parkway, Deerfield, Illinois 60015, and its telephone number is (847)
948-2000.
Additional Information. For additional information regarding the business
of the Company and the business of Baxter, see "Available Information,"
"Incorporation of Certain Documents by Reference," "Information Concerning the
Company" and "Information Concerning Baxter."
THE SPECIAL MEETING
Time, Date and Place. The Special Meeting will be held beginning at 9:00
a.m., MDT on May 4, 1998, at the Company's offices, located at 2545 Central
Avenue, Suite FD1, Boulder, Colorado 80301-2857.
Record Date and Shares Entitled to Vote. Holders of record of shares of
Company Common Stock as of the close of business on March 31, 1998 (the "Record
Date") will be entitled to notice of and to vote at the Special Meeting. As of
the close of business on the Record Date there were 20,926,114 shares of Company
Common Stock outstanding and entitled to notice of and to vote at the Special
Meeting. Each outstanding share of Company Common Stock is entitled to one vote
at the Special Meeting. See "The Special Meeting -- Record Date; Voting Rights
and Outstanding Shares."
Approval of the Merger Proposal; Vote Required. Pursuant to the Company's
Amended and Restated Certificate of Incorporation (the "Company Certificate")
and the General Corporation Law of the State of Delaware (the "DGCL"), the
affirmative vote, in person or by proxy, of at least a majority of the voting
power of the Company Common Stock is required for the approval and adoption of
the Merger Proposal. See "The Special Meeting -- Quorum; Vote Required."
Voting Agreement. Eli Lilly and Company, an Indiana corporation ("Lilly"),
has entered into a voting agreement with Baxter (the "Voting Agreement").
Pursuant to the Voting Agreement, Lilly has agreed to vote, subject to certain
conditions, all of the shares of Company Common Stock owned by it in favor of
the Merger Proposal. As of the Record Date, Lilly owned 2,954,104 shares of
Company Common Stock, constituting approximately 14.1% of the outstanding shares
of Company Common Stock. The Voting
1
<PAGE> 11
Agreement is an exhibit to the Registration Statement and this description is
qualified in its entirety by reference to such exhibit.
THE MERGER
Purpose. The Merger Agreement provides for the merger of the Company with
and into Merger Sub, with the Merger Sub as the surviving corporation in the
Merger. The purpose of the Merger is to combine the Company's business with
Baxter's business.
Effect of the Merger. Upon consummation of the Merger, (a) the Company will
be merged with and into Merger Sub and the separate existence of the Company
will thereupon cease; and (b) each share of Company Common Stock issued and
outstanding immediately prior to the time the Merger becomes effective under the
DGCL (the "Effective Time"), other than (x) shares of Company Common Stock owned
by Baxter or a subsidiary of Baxter and (y) shares as to which dissenters'
rights have been perfected, shall be converted into the right to receive: (i)
the fraction of a share (calculated and rounded to the nearest ten-thousandth of
one share) of Baxter Common Stock, the numerator of which fraction shall be (A)
$9.00, and the denominator of which shall be (B) the average closing sale price
of shares of Baxter Common Stock on United States stock exchanges as reported in
The Wall Street Journal as NYSE Composite Transactions or, if not available,
such other authoritative publication as may be reasonably selected by Baxter,
for the ten consecutive trading days ending on and including the fifth trading
day prior to the date on which the Merger is consummated and (ii) one CPR. All
such shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate formerly representing any such shares (each, a "Certificate")
shall cease to have any rights with respect thereto, except to receive the
Merger Consideration, without interest thereon, upon surrender of such
Certificates. No fractional shares of Baxter Common Stock or fractional CPRs
will be issued in the Merger. All stockholders of the Company who would be
entitled to receive, as a result of the Merger, a fractional interest in a share
of Baxter Common Stock will be entitled to receive an amount in cash determined
by multiplying (1) the fraction of a share of Baxter Common Stock to which such
holder would otherwise be entitled times (2) the Baxter Stock Price.
If the Merger had been consummated on the Record Date, Baxter would have
been required to deliver, pursuant to the Merger Agreement, based upon the
number of fully diluted shares of Company Common Stock on such date,
approximately 3,416,508 shares of Baxter Common Stock, valued, using the closing
price of shares of Baxter Common Stock reported in The Wall Street Journal for
such date, at approximately $188 million in the aggregate, and approximately
23,176,896 CPRs.
Contingent Payment Rights. The CPRs will be general unsecured debt
obligations of Baxter. The contingent payments attributable to the CPRs will
equal five percent of the Net Sales of all Products in which the primary active
ingredient is human hemoglobin, or derivatives, mutants or modifications
thereof, which have been produced in culture of microbial cells (including yeast
cells) which have been modified using Somatogen Recombinant Hemoglobin
Technology (as defined), other than clinical indications of any such Products
that are in clinical trials as of the date of the Merger Agreement. The
contingent payment with respect to each CPR will not exceed $2.00. The Company
has not, to date, accrued any revenue with respect to any such products. There
are many uncertainties with respect to the Somatogen Recombinant Hemoglobin
Technology and there is no assurance that any Net Sales will be generated in the
future. See "Description of the Contingent Payment Rights."
Recommendation of the Board of Directors. At a meeting held on February 23,
1998, the Board of Directors unanimously approved the Merger Agreement and
determined that the transactions contemplated by the Merger Agreement are
advisable and in the best interests of the Company and its stockholders. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
FOR THE MERGER PROPOSAL. See "The Merger -- Recommendation of the Board of
Directors; the Company's Reasons for the Merger."
Opinion of the Company's Financial Advisor. The Board of Directors has
received the written opinion of Lehman Brothers Inc. ("Lehman Brothers"), the
Company's financial advisor, to the effect that, as of the
2
<PAGE> 12
date of such opinion and based upon and subject to the matters stated therein,
the Merger Consideration is fair, from a financial point of view, to the
stockholders of the Company. The full text of Lehman Brothers' opinion, which
sets forth the assumptions made, matters considered and limitations on the
review undertaken in connection with such opinion, is attached hereto as
Appendix B. The Company's stockholders are urged to and should read such opinion
carefully and in its entirety. See "The Merger -- Opinion of Financial Advisor."
Effect of the Merger on the Company's Outstanding Options. Each option to
purchase shares of Company Common Stock (each a "Company Stock Option"), whether
vested or unvested, will be exchanged or cancelled as follows: (i) each Company
Stock Option having an exercise price of $11 or more that is outstanding
immediately prior to the Effective Time shall be cancelled immediately prior to
the Effective Time for no consideration; (ii) each Company Stock Option (in the
case of persons who are employed by or providing services to the Company as of
the Effective Time, whether vested or unvested, and in the case of persons who
are no longer employed by or providing services to the Company, as of the
Effective Time, only to the extent such Company Stock Option was vested on the
date such person's employment or service with the Company ceased) having an
exercise price of less than $9 that is outstanding immediately prior to the
Effective Time shall be exchanged, immediately prior to the Effective Time, for
(x) payment by the Company, to the holder of such Company Stock Option, of an
amount in cash equal to (1) the product of $9 and the number of shares of
Company Common Stock subject to such Company Stock Option, less (2) the
aggregate exercise price of such Company Stock Option and (y) the right to
receive one CPR per share of Company Common Stock covered by such Company Stock
Option; and (iii) each Company Stock Option (in the case of persons who are
employed by or providing services to the Company as of the Effective Time,
whether vested or unvested, and in the case of persons who are no longer
employed by or providing services to the Company, as of the Effective Time, only
to the extent such Company Stock Option was vested on the date such person's
employment or service with the Company ceased) having an exercise price that is
greater than or equal to $9 and less than $11 that is outstanding immediately
prior to the Effective Time, shall be exchanged immediately prior to the
Effective Time for the right to receive one CPR per share of Company Common
Stock subject to such Company Stock Option.
Accounting Treatment. Baxter will account for the Merger using the purchase
method of accounting. It is expected that a substantial portion of the purchase
price will be allocated to the Company's in-process research and development
which, under generally accepted accounting principles, will be expensed by
Baxter immediately following the Effective Time.
Federal Income Tax Consequences. The Merger should be treated as a
non-taxable reorganization for Federal income tax purposes. See "The
Merger -- Certain Federal Income Tax Consequences."
Dissenters' Rights. Holders of shares of Company Common Stock who do not
vote in favor of the Merger Proposal and otherwise comply with the requirements
of the DGCL will be entitled to dissenters' rights to appraisal in connection
with the Merger. The text of Section 262 of the DGCL is attached hereto as
Appendix C. See "The Merger -- Dissenters' Rights."
Regulatory Approvals. The consummation of the Merger requires, among other
things, the expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The Company and Baxter filed the required HSR Act Notification and Report
Forms with the Antitrust Division (as defined) and the FTC (as defined) with
respect to the transactions contemplated by the Merger Agreement. The waiting
period under the HSR Act expired on April 5, 1998. See "The
Merger -- Governmental and Regulatory Approvals."
Interest of Certain Persons. In considering the recommendation of the Board
of Directors with respect to the Merger Proposal, the Company's stockholders
should be aware that certain directors and executive officers of the Company
have interests in the Merger and certain related transactions that may be in
addition to the interests of the Company's other stockholders. See "The
Merger -- Interests of Certain Persons in the Merger."
3
<PAGE> 13
Comparative Rights of Holders of Company Common Stock and Baxter's
Stockholders. As a result of the Merger, the holders of shares of Company Common
Stock will own shares of Baxter Common Stock and CPRs. The rights of the
Company's stockholders are currently governed by the Company's organizational
documents. The rights of holders of Baxter Common Stock are governed by Baxter's
organizational documents. The rights of holders of CPRs are governed by the CPRs
and the CPR Agreement (as defined). See "Comparison of the Rights of Holders of
Baxter Common Stock and Holders of Company Common Stock."
Stock Ownership by Management. The Company's directors and executive
officers and their respective affiliates beneficially owned, as of the Record
Date, an aggregate of 2,416,373 shares of Company Common Stock, representing
beneficial ownership of approximately 10.7% of the Company Common Stock on such
date. The Company's directors and executive officers are not subject to any
agreements requiring them to vote with respect to the Merger Proposal.
4
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following table sets forth selected historical financial data of the
Company and has been derived from its consolidated financial statements. Such
selected historical financial data should be read in conjunction with the
Company's audited consolidated financial statements, and unaudited interim
financial information, including the respective notes thereto. The interim
financial information has been derived from unaudited financial statements of
the Company, which, in the opinion of management, include all adjustments,
consisting only of normally recurring adjustments, necessary for fair statement
of the results for the unaudited interim periods. The Company has devoted
substantially all of its efforts and resources since 1987 to research and
development related to its recombinant hemoglobin technology and is considered
to be in the development stage. Information for the periods from July 10, 1985
(inception) to June 30, 1997 and from July 10, 1985 (inception) to December 31,
1997 have been derived from the Company's consolidated financial statements and
interim financial information as noted above. Certain items in these selected
historical financial data of the Company have been reclassified to conform to
the Baxter presentation. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED JUNE 30,
----------------------------------------------------
1993 1994(1) 1995 1996 1997(2)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS Revenue.................... $ 659 $ 11 $ -- $ -- $ --
Loss from continuing
operations................ (23,340) (50,703) (17,104) (18,023) (10,940)
Depreciation and
amortization............... 3,195 2,812 2,504 1,928 1,685
Research and development
expenses(3)............... 19,859 18,029 14,968 16,949 15,807
PER COMMON Average number of shares of
SHARE Company Common Stock
outstanding............... 9,852 13,935 18,269 20,075 20,765
Basic/diluted loss from
continuing operations per
share of Company Common
Stock(4).................. (2.37) (3.64) (0.94) (0.90) (0.53)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PERIOD FROM SIX MONTHS PERIOD FROM
JULY 10, 1985 ENDED JULY 10, 1985
(INCEPTION) DECEMBER 31, (INCEPTION) TO
TO JUNE 30, ----------------- DECEMBER 31,
1997 1996 1997 1997
------------- ------- ------- --------------
<S> <C> <C> <C> <C>
OPERATIONS Revenue.................... $ 6,588 $ -- $ -- $ 6,588
Loss from continuing
operations................ (146,970) (8,741) (7,870) (154,840)
Depreciation and
amortization............... 16,452 814 716 17,168
Research and development
expenses(3)............... 110,237 8,252 7,653 117,890
PER COMMON Average number of shares of
SHARE Company Common Stock
outstanding............... -- 20,715 20,880 --
Basic/diluted loss from
continuing operations per
share of Company Common
Stock(4).................. -- (0.42) (0.38) --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
---------------------------------------------------- DECEMBER 31,
1993 1994 1995 1996 1997 1997
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL Capital expenditures....... $ 22,394 $ 8,344 $ 2,132 $ 2,009 $ 1,256 $ 580
EMPLOYED Total assets............... 60,368 65,994 51,880 69,161 56,031 48,303
Long-term debt and capital
lease obligations......... 3,079 1,106 370 11 -- --
</TABLE>
- ------------
(1) Loss from continuing operations includes a $29.2 million writedown of
certain manufacturing facility assets.
(2) Loss from continuing operations includes the receipt of $6.0 million from
Lilly pursuant to the strategic alliance termination provisions.
(3) Expenses are net of $3.9 million, $2.9 million and $4.3 million of net
reimbursements from Lilly in fiscal years 1995, 1996 and 1997, respectively.
(4) Basic/diluted loss from continuing operations per share is computed using
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS No. 128"). All periods prior to December 31, 1997 have been restated
to conform with SFAS No. 128. Company Stock Options have been excluded from
the computation of diluted loss from continuing operations per share as
their effect is antidilutive for the periods presented. Such stock options
could potentially dilute earnings or losses per share in the future.
5
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA OF BAXTER
The following table sets forth selected historical financial data of Baxter
and has been derived from its consolidated financial statements. Such selected
historical financial data should be read in conjunction with Baxter's audited
consolidated financial statements, including the notes thereto, incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1993(1) 1994 1995(2) 1996 1997(3)
------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS Net sales............................. $4,116 $4,479 $5,048 $5,438 $6,138
Income (loss) from continuing
operations.......................... (193) 406 371 575 300
Depreciation and amortization......... 273 302 336 348 398
Research and development
expenses(4)......................... 280 303 327 340 392
PER COMMON SHARE Average number of shares of Baxter
Common Stock outstanding(5)......... 277 280 277 272 278
Income (loss) from continuing
operations per share of Baxter
Common Stock(6):
Basic................................. (0.70) 1.45 1.34 2.11 1.08
Diluted............................... (0.70) 1.44 1.32 2.07 1.06
Cash dividends declared per share of
Baxter Common Stock................. 1.00 1.025 1.11 1.17 1.139
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1993 1994 1995 1996(7) 1997
------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL EMPLOYED Capital expenditures.................. $ 332 $ 380 $ 399 $ 398 $ 496
Total assets.......................... 9,211 9,039 9,437 7,596 8,707
Long-term debt and lease
obligations......................... 2,800 2,341 2,372 1,695 2,635
</TABLE>
- ------------
(1) Loss from continuing operations includes a pretax restructuring charge of
$216 million and a pretax net litigation charge of $330 million.
(2) Income from continuing operations includes a pretax restructuring charge of
$103 million, a pretax net litigation charge of $96 million and an
in-process research and development charge of $18 million.
(3) Income from continuing operations includes an in-process research and
development charge of $352 million.
(4) Excludes in-process research and development charges of $352 million and
$18 million in 1997 and 1995, respectively.
(5) Excludes common stock equivalents.
(6) Basic and diluted income (loss) from continuing operations per share is
computed using SFAS No. 128. All periods presented have been restated to
conform with SFAS No. 128.
(7) Certain balance sheet data are significantly affected by the spin-off of
Allegiance Corporation, which occurred on September 30, 1996.
6
<PAGE> 16
COMPARATIVE MARKET PRICE DATA
Set forth below, for the calendar quarters indicated, are the reported high
and low bids for shares of the Company Common Stock on the NMS and the reported
high and low sales prices of shares of Baxter Common Stock on the NYSE.
<TABLE>
<CAPTION>
COMPANY BAXTER
COMMON COMMON
STOCK STOCK
------------ -----------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
1996
Third Quarter............................................. $14 3/8 $10 $47 7/8 $40 7/8
Fourth Quarter............................................ 12 1/4 9 1/2 46 3/4 39 3/4
1997
First Quarter............................................. 14 1/8 3 49 3/4 39 7/8
Second Quarter............................................ 6 3/8 4 7/16 56 1/8 41 9/16
Third Quarter............................................. 8 4 3/16 60 1/4 51 3/8
Fourth Quarter............................................ 8 1/2 3 13/16 57 1/8 43 5/8
1998
First Quarter (through and including February 23)......... 6 7/8 4 3/8 57 3/4 48 1/2
First Quarter (from February 24).......................... 8 13/16 8 1/4 62 7/16 54 1/4
Second Quarter (through April 2, 1998).................... 8 1/2 8 15/32 55 1/2 54 3/8
</TABLE>
On February 23, 1998, the last full trading day prior to the public
announcement of the Merger, the closing bid for shares of Company Common Stock
was $6 5/8 on the NMS and the closing price of shares of Baxter Common Stock was
$56 7/16 on the NYSE. On April 2, 1998, the closing bid for shares of Company
Common Stock and the closing price of shares of Baxter Common Stock was $8 1/2
and $54 7/8, respectively, as reported on the NMS and NYSE, respectively. THE
COMPANY'S STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET PRICE QUOTATIONS PRIOR
TO MAKING ANY DECISION WITH RESPECT TO THE MERGER PROPOSAL.
7
<PAGE> 17
CERTAIN COMPARATIVE UNAUDITED PER SHARE DATA
The following summary presents selected comparative unaudited per share
data for the Company and Baxter on an historical and equivalent per share basis.
The information listed below should be read in conjunction with the historical
financial data and statements of each of the Company and Baxter incorporated by
reference herein, including the respective notes thereto. See "Available
Information," "Incorporation of Certain Documents by Reference," "-- Selected
Consolidated Financial Data of Baxter," "-- Selected Consolidated Financial Data
of the Company" and "The Merger -- Anticipated Accounting Treatment."
The per share data set forth below are presented for comparative purposes
only and are not necessarily indicative of the future combined financial
position, the results of the future operations or the actual results or combined
financial position of the Company and Baxter that would have been achieved had
the Merger been consummated as of the date or at the beginning of the period
indicated.
The equivalent per share amounts for the Company adjust the historical
Baxter amounts to reflect the exchange ratio of shares of Baxter Common Stock
for shares of Company Common Stock as contemplated by the Merger Agreement. For
the purposes of the comparison below, the exchange ratio was assumed to be
0.1633 shares of Baxter Common Stock for each share of Company Common Stock,
using a price per share of Baxter Common Stock of $55.125, the closing price on
the Record Date. Pro forma amounts have been omitted because the effects of the
Merger on Baxter's earnings from continuing operations and book value are not
significant.
THE COMPANY
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
JUNE 30, DECEMBER 31,
1997 1997
---------- ------------
<S> <C> <C>
Per share amounts:
Loss from continuing operations........................... $(0.53) $(0.38)
Cash dividends............................................ --(1) --(1)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, 1997 1997
------------- ------------
<S> <C> <C>
Book value.................................................. $ 2.57 $ 2.20
</TABLE>
BAXTER
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
--------------------------
COMPANY
BAXTER COMMON
COMMON STOCK
STOCK EQUIVALENT
------------ ----------
<S> <C> <C>
Per share amounts:
Basic earnings from continuing operations................. $ 1.08 $ 0.18(2)
Diluted earnings from continuing operations............... 1.06 0.17(2)
Cash dividends............................................ 1.139 0.19(2)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------
COMPANY
BAXTER COMMON
COMMON STOCK
STOCK EQUIVALENT
------------ ----------
<S> <C> <C>
Book value.................................................. $ 9.34 $ 1.53(2)
</TABLE>
- ------------
(1) The Company has never paid cash dividends on shares of Company Common Stock.
(2) Baxter amounts multiplied by 0.1633, the assumed exchange ratio using a
price per share of Baxter Common Stock of $55.125, the closing price per
share of Baxter Common Stock on the Record Date. The actual exchange ratio
may be different, as it will be determined using the average closing prices
of shares of Baxter Common Stock for the ten consecutive trading days ending
on and including the fifth trading day prior to the date of consummation of
the Merger.
8
<PAGE> 18
THE SPECIAL MEETING
PURPOSE OF THE SPECIAL MEETING
The purpose of the Special Meeting is to consider and vote upon the
approval and adoption of the Merger Agreement and approve the Merger Proposal.
The Company's stockholders will also consider and vote upon such other matters,
if any, as may be properly brought before the Special Meeting.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MERGER AND HAS UNANIMOUSLY RECOMMENDED A VOTE FOR APPROVAL OF THE MERGER
PROPOSAL. CERTAIN MEMBERS OF THE BOARD OF DIRECTORS MAY BE DEEMED TO HAVE A
CONFLICT OF INTEREST IN RECOMMENDING STOCKHOLDER APPROVAL OF THE MERGER. SEE
"THE MERGER -- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The Special Meeting will be held at the Company's offices, located at 2545
Central Avenue, Suite FD1, Boulder, Colorado 80301-2857 on May 4, 1998,
beginning at 9:00 a.m., MDT.
RECORD DATE; VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Company Common Stock at the close of business on
March 31, 1998, the Record Date, will be entitled to notice of, and to vote at,
the Special Meeting. On that date, there were 1,065 stockholders of record
holding an aggregate of 20,926,114 shares of Company Common Stock outstanding
and entitled to vote. Except for the stockholders identified herein under
"Principal Stockholders of the Company," as of the Record Date, to the knowledge
of the Company, no other person beneficially owned more than five percent of the
outstanding shares of Company Common Stock. See "Principal Stockholders of the
Company." Each holder of record of shares of Company Common Stock on the Record
Date will be entitled to one vote for each share held on all matters to be voted
upon at the Special Meeting.
SOLICITATION OF PROXIES; EXPENSES
The cost of the solicitation of proxies from holders of shares of Company
Common Stock and all related costs will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Original solicitation of proxies by mail
may be supplemented by telephone, telegram or personal solicitation by
directors, officers or other regular employees of the Company or, at the
Company's request, the Information Agent. No additional compensation will be
paid to directors, officers or other regular employees for such services, but
the Information Agent will be paid its customary fee plus reasonable expenses,
estimated to be approximately $40,000, to assist in the solicitation of proxies.
QUORUM; VOTE REQUIRED
The presence, in person or by properly executed proxy, of the holders of a
majority of the issued and outstanding shares of Company Common Stock entitled
to vote at the Special Meeting is necessary to constitute a quorum. Approval of
the Merger Proposal will require approval by the affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock. The votes on
the Merger Proposal will be tabulated by an inspector of elections appointed by
the Board of Directors.
EFFECT OF ABSTENTIONS AND BROKER NONVOTES
If an executed proxy is returned and the stockholder has specifically
abstained from voting on the Merger Proposal, the shares represented by such
proxy will be considered present at the Special Meeting
9
<PAGE> 19
for purposes of determining a quorum, but will not be considered to have been
voted in favor of the Merger Proposal. Accordingly, abstentions will have the
effect of a vote against the Merger Proposal.
Brokerage firms who hold shares in street name for customers will not have
the authority to vote shares of Company Common Stock with respect to the Merger
Proposal if they have not received instructions from the beneficial owners of
such shares. If a broker fails to vote shares of Company Common Stock because
the broker has not received instructions from the beneficial owner (a "broker
nonvote"), such shares will be considered present at the Special Meeting for
purposes of determining a quorum, but will not be considered to have been voted
in favor of the Merger Proposal. Accordingly, broker nonvotes will have the
effect of a vote against the Merger Proposal.
VOTING AND REVOCABILITY OF PROXIES
All shares of Company Common Stock that are entitled to vote and are
represented at the Special Meeting, either in person or by properly executed
proxies received prior to or at the Special Meeting and not duly and timely
revoked, will be voted at the Special Meeting in accordance with the
instructions indicated on such proxies. If no such instructions are indicated,
such proxies will be voted FOR approval of the Merger Proposal.
If any other matters are properly presented for consideration at the
Special Meeting (or any adjournments or postponements thereof) including, among
other things, consideration of a motion to adjourn or postpone the Special
Meeting to another time and/or place (including, without limitation, for the
purpose of soliciting additional proxies), the persons named in the enclosed
form of proxy and voting thereunder will have the discretion to vote on such
matters in accordance with their judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company or the Information Agent, at or before the
taking of the vote at the Special Meeting, a written notice of revocation
bearing a later date than the proxy; (ii) duly executing a later-dated proxy
relating to the same shares and delivering it to the Secretary of the Company or
the Information Agent before the taking of the vote at the Special Meeting, or
(iii) attending the Special Meeting and voting in person (although attendance at
the Special Meeting will not in and of itself constitute a revocation of proxy).
Any written notice or revocation or subsequent proxy should be sent so as to be
delivered to the Company at 2545 Central Avenue, Suite FD1, Boulder, Colorado
80301-2857, Attention: Corporate Secretary, or hand-delivered to the Secretary
of the Company at such address, in each case at or before the taking of the vote
at the Special Meeting.
THE COMPANY'S STOCKHOLDERS SHOULD NOT SEND ANY CERTIFICATES REPRESENTING
SHARES OF COMPANY COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE MERGER IS
CONSUMMATED, A LETTER OF TRANSMITTAL WILL BE MAILED TO EACH PERSON WHO WAS A
HOLDER OF OUTSTANDING SHARES OF COMPANY COMMON STOCK IMMEDIATELY PRIOR TO THE
CONSUMMATION OF THE MERGER. THE COMPANY'S STOCKHOLDERS SHOULD SEND CERTIFICATES
REPRESENTING SHARES OF COMPANY COMMON STOCK TO THE EXCHANGE AGENT ONLY AFTER
THEY RECEIVE, AND IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN, THE LETTER
OF TRANSMITTAL.
STOCK OWNERSHIP BY MANAGEMENT
The Company's directors and executive officers and their respective
affiliates beneficially owned, as of the Record Date, an aggregate of 2,416,373
shares of Company Common Stock, representing beneficial ownership of
approximately 10.7% of the Company Common Stock on such date. The Company's
directors and executive officers are not subject to any agreement requiring them
to vote with respect to the Merger Proposal.
10
<PAGE> 20
VOTING AGREEMENT
On February 23, 1998, Lilly signed the Voting Agreement. Pursuant to the
Voting Agreement, Lilly has agreed to vote, subject to certain conditions, all
of the shares of the Company Common Stock owned by it in favor of the Merger
Proposal. As of the Record Date, Lilly owned 2,954,104 shares of Company Common
Stock, constituting approximately 14.1% of the outstanding shares of Company
Common Stock as of the Record Date. The Voting Agreement is an exhibit to the
Registration Statement and this description is qualified in its entirety by
reference to such exhibit. In addition, Baxter, Lilly and the Company have
entered into an agreement that, effective upon closing of the Merger, grants
Baxter and the Company the right to expanded use of certain technology currently
licensed by Lilly to the Company.
THE MERGER
GENERAL
The Board of Directors has unanimously approved the Merger Agreement, which
provides for the Merger, at the Effective Time, of the Company with and into
Merger Sub with Merger Sub as the surviving corporation in the Merger (the
"Surviving Corporation"). Pursuant to the terms of the Merger Agreement, subject
to the satisfaction or waiver of certain conditions, including, among others,
the requisite approval of the Merger Proposal by holders of Company Common
Stock, the separate existence of the Company will cease.
As a result of the Merger, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than (x) shares of
Company Common Stock owned by Baxter or a subsidiary of Baxter and (y) shares as
to which dissenters' rights have been perfected) shall be converted into the
right to receive: (i) the fraction of a share (calculated and rounded to the
nearest ten-thousandth of one share) of Baxter Common Stock, the numerator of
which fraction shall be (A) $9.00, and the denominator of which shall be (B) the
Baxter Stock Price and (ii) the right to receive one CPR. All such shares, when
so converted, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a Certificate
formerly representing any such shares shall cease to have any rights with
respect thereto, except to receive the Merger Consideration, without interest
thereon, upon surrender of such Certificates.
No shares of Baxter Common Stock or CPRs will be issued for fractional
interests. All stockholders of the Company entitled to receive, as a result of
the Merger, a fractional interest in a share of Baxter Common Stock will be
entitled to receive an amount in cash determined by multiplying (x) the fraction
of a share of Baxter Common Stock to which such holder would otherwise be
entitled times (y) the Baxter Stock Price.
BACKGROUND OF THE MERGER
On March 20, 1997, the Company and Lilly announced the termination of their
strategic alliance. At that time, the management and the Board of Directors of
the Company discussed potential strategies for the Company, including seeking a
new major corporate collaboration with a large medical products company or
attempting to continue development of the Company's products on its own. After
reviewing the status of the biopharmaceutical industry, and the substantial
development and capital costs required to commercialize products using the
Company's technology, the Company decided that it should explore a corporate
partnering strategy and began to identify potential corporate partners. During
the spring of 1997, representatives of Baxter contacted Mr. Andre de Bruin, the
Company's Chairman of the Board, President and Chief Executive Officer, to
discuss, in light of the termination of the Lilly alliance, a potential
collaboration between the Company and Baxter for the development of oxygen
carrying therapeutic products utilizing the technologies and research and
development capabilities of both companies. The Company's and Baxter's
representatives set forth their respective preliminary goals for any
collaboration with respect to the Company's research and development activities.
Such discussions continued at various intervals during the spring and early
summer of 1997. No proposal resulted from any such discussions, which did not
advance beyond the preliminary stages.
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On April 18, 1997, the management and the Board of Directors of the Company
discussed the prospects of Baxter and other companies as corporate partners and
concluded that Baxter represented a potential strategic fit. The Board of
Directors of the Company encouraged management to pursue further discussions
with Baxter while exploring opportunities with others.
On July 22, 1997, the Board of Directors of the Company held a telephonic
meeting which was attended by certain members of management and representatives
of Cooley Godward LLP, outside legal counsel for the Company ("Cooley Godward").
After discussion of the potential structures of a partnering relationship with
Baxter, including the possibility of an acquisition by Baxter, the Board of
Directors of the Company authorized the Company's management to proceed with
business and scientific due diligence as requested by Baxter while continuing to
explore opportunities with others. Over the next four weeks, representatives of
Lehman Brothers and Credit Suisse First Boston Corporation ("CSFB"), financial
advisors for the Company and Baxter, respectively, discussed structural and
valuation issues related to a potential acquisition.
On August 20, 1997, the Company and a subsidiary of Baxter entered into a
confidentiality agreement and representatives of Baxter met with representatives
of the Company, together with Baxter's and the Company's respective outside
financial and technical advisors to conduct due diligence and evaluate the
opportunities and risks associated with the development of such technologies.
The parties continued to discuss the potential of a strategic alliance,
including a potential acquisition of the Company by Baxter, but no specific
proposals were made at that time. Following such meeting, the Company provided
the outside financial advisors with financial and industry information.
Representatives of the Company, Lehman Brothers, Baxter and CSFB met to continue
to discuss their respective views of the Company's condition and prospects.
On October 21, 1997, representatives of Baxter and CSFB met in Denver with
representatives of the Company and Lehman Brothers to discuss the Company's
products in development, including products in the pre-clinical stages and the
costs that would be required to commercialize such products. On October 28,
1997, the management and the Board of Directors of the Company as well as
representatives of Cooley Godward met to discuss a number of issues, including
the status of negotiations with Baxter. The Board of Directors of the Company
agreed that management should continue such negotiations with Baxter while
exploring opportunities with others.
On November 18, 1997, members of Baxter's management team gave a brief
report on the status of discussions between the Company and Baxter to Baxter's
board of directors and the finance committee thereof.
During late November 1997, representatives of Lehman Brothers and CSFB had
discussions regarding potential valuations of the Company in the event of an
acquisition. At that time, the Company informed Lehman Brothers that an
acquisition based on the valuations being discussed by the parties' respective
financial advisors would be unacceptable.
On December 4, 1997, representatives of the Company and Baxter met again in
Boulder, Colorado. At this meeting, Mr. Harry Kraemer, President of Baxter,
provided additional details with respect to Baxter's view of the potential value
of the Company to Baxter. On December 22, 1997, representatives of Baxter and
the Company met in Chicago along with representatives of their respective
outside financial advisors to discuss their respective valuation models and the
underlying assumptions. In addition, alternative forms of merger consideration
were discussed, including contingent payment rights. Following the meeting, at
which no specific proposal was made, Baxter considered the valuation issues
raised at that meeting and the feasibility of alternative forms of
consideration.
On January 21, 1998, Mr. de Bruin called Mr. Kraemer to inquire as to
whether Baxter intended to make a proposal with respect to an acquisition of the
Company prior to the January 23, 1998 meeting of the Board of Directors of the
Company. By letter, dated January 22, 1998, Baxter expressed its interest in
discussing a proposal which reflected a revised valuation of the Company and
proposed that Baxter purchase all of the outstanding shares of Company Common
Stock for $8.50 per share in cash and a contingent payment right with a possible
aggregate payment of $2.50 per share of Company Common Stock. On January 23,
1998, the management and the Board of Directors of the Company, and
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representatives of Cooley Godward and Lehman Brothers met to discuss Baxter's
proposal. Lehman Brothers presented an analysis of the proposed transaction,
including comparisons of other similar companies and analyses of the various
potential valuations of the shares of Company Common Stock. Based on the
analyses presented, the Board of Directors of the Company recommended that
management continue to negotiate with Baxter on a number of issues, including
increasing the proposed merger consideration. On January 25, 1998, Mr. de Bruin
orally informed Mr. Kraemer that the Board of Directors of the Company requested
that the components of the consideration be modified to provide additional
initial current value to the Company's stockholders.
On January 26, 1998, the Company received a letter from Baxter with revised
terms for the acquisition, which attempted to address the Company's concerns
regarding providing initial current value to its stockholders. Specifically,
Baxter revised its proposal to purchase all of the outstanding shares of Company
Common Stock for $9.00 per share in cash and a contingent payment right with a
possible aggregate payment of $2.00 per share of Company Common Stock. On
January 28, 1998, the management and the Board of Directors of the Company,
along with representatives of Cooley Godward and Lehman Brothers, held a
telephonic meeting to discuss Baxter's revised proposal. Lehman Brothers
presented supplementary information to the comprehensive presentation it had
made on January 23, 1998 to reflect the revisions in the proposed valuation.
After extensive discussion and a review of the alternatives available to the
Company, the Board of Directors of the Company tentatively approved the Baxter
offer, contingent upon negotiation of an acceptable merger agreement.
Later that day, representatives of the Company orally informed Baxter that
the Company would favorably consider Baxter's revised proposal if it could be
restructured to provide for a stock-for-stock acquisition, in lieu of the cash
portion of the proposed consideration, so that the transaction could qualify as
a tax-free reorganization for the Company's stockholders. Representatives of
Baxter informed the Company that Baxter would be willing to negotiate a
stock-for-stock acquisition that included a contingent payment right on the
financial terms set forth in its revised letter, subject to completion of its
due diligence regarding the Company, and reaching a definitive agreement
reflecting the financial and other terms and conditions described in Baxter's
revised letter.
On February 7, 1998, counsel for Baxter, distributed a draft of the
proposed Merger Agreement to the Company and its outside advisors. On February
10, 1998, counsel for Baxter distributed a draft of the Contingent Payment
Rights Agreement (the "CPR Agreement") to the Company and its outside advisors.
From February 9, 1998 through February 11, 1998, representatives of Baxter
and its counsel met with representatives of the Company and Cooley Godward in
Boulder, Colorado to review the operations of the Company and otherwise conduct
a due diligence review of the Company's business and technology.
On February 10, 1998, the Company arranged for representatives of Baxter to
contact representatives of Lilly. Representatives of Baxter and Lilly discussed
Lilly's strategic alliance with the Company and the basis for Lilly's decision
not to proceed with its strategic alliance with the Company. On February 11,
1998, Baxter and Lilly signed a confidentiality agreement.
On February 12 and 13, 1998, representatives of Baxter and the Company, as
well as their respective counsel and representatives of CSFB, on behalf of
Baxter, negotiated the terms of the Merger Agreement, including the
representations and warranties to be made by the Company, the terms describing
when either of the parties could terminate the agreement and the "break-up" fee.
The parties also negotiated the terms of the CPR Agreement, including which
future products would be covered under the agreement and how the sales of such
products would be calculated.
On February 17, 1998, Baxter's board of directors reviewed the significant
terms of the proposed acquisition and authorized management to proceed with the
execution of a definitive agreement.
On February 18, 1998, representatives of Baxter and the Company met at
Baxter's offices in Deerfield, Illinois to discuss terms related to the
Company's employees after the proposed merger. The parties reviewed compensation
structures, methods of retaining employees prior to and after the completion of
the Merger, potential roles for certain of the Company's employees after the
Merger and severance terms for the Company's employees in the event of their
termination after the Merger.
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On February 19 and 20, 1998, representatives of Baxter and the Company and
their respective outside counsel continued to negotiate the terms of the Merger
Agreement and CPR Agreement, including issues related to treatment of the
Company's Stock Options, employee retention arrangements, the conduct of the
Company's business after the signing of the Merger Agreement, and the products
to be covered under the CPR Agreement. On February 22, 1998, counsel for Baxter
distributed revised versions of the Merger Agreement and the CPR Agreement to
the parties and the Board of Directors of the Company.
On February 23, 1998, Lilly signed the Voting Agreement and agreed in
concept to grant Merger Sub the right to expanded use of certain technology
currently licensed by the Company.
On February 23, 1998, the Board of Directors of the Company, members of
management and representatives of Cooley Godward and Lehman Brothers met and
discussed the terms of the Merger Agreement and the CPR Agreement. Lehman
Brothers presented a financial review of the transaction and implications of
alternatives for the Company. Lehman Brothers then presented its oral fairness
opinion, which it later confirmed in writing as set forth in the Opinion (as
defined). After extensive discussion, the Board of Directors of the Company
unanimously approved the Merger, the Merger Agreement and the CPR Agreement and
authorized management to finalize and execute the Merger Agreement. During the
remainder of the day of February 23, 1998, representatives of Baxter, the
Company and their respective outside legal counsel finalized the Merger
Agreement and CPR Agreement.
During the evening of Monday, February 23, 1998, the Merger Agreement was
executed and delivered, and on Tuesday, February 24, 1998, the transaction was
publicly announced.
RECOMMENDATION OF THE BOARD OF DIRECTORS; THE COMPANY'S REASONS FOR THE MERGER
The Board of Directors of the Company has determined that the terms of the
Merger Agreement and the transactions contemplated thereby are fair to, and in
the best interests of, the Company and its stockholders. Accordingly, the Board
of Directors of the Company has unanimously approved the Merger Agreement and
recommends that the stockholders of the Company vote FOR approval of the Merger
and adoption of the Merger Agreement. Certain members of the Board of Directors
may be deemed to have a conflict of interest in recommending stockholder
approval of the Merger. See "The Merger -- Interests of Certain Persons in the
Merger."
The Board of Directors believes the Merger will be beneficial for the
following principal reasons:
TECHNOLOGICAL COMPATIBILITY. Combining the Company's recombinant
hemoglobin technology with Baxter's chemically cross-linked, human derived
hemoglobin technology will provide the possibility that multiple
generations of oxygen carrying therapeutic compounds may be developed
beyond those which could be developed solely based upon the Company's
technology.
EXPANDED RESOURCES. The combination of financial, human and
technological resources resulting from the Merger may enable more
efficient, effective and rapid development of the Company's next generation
recombinant technology to produce multiple generations of oxygen carrying
therapeutic compounds for unmet clinical needs. The Company believes that
access to Baxter's financial resources is particularly important in view of
the substantial development and capital costs required to commercialize
products using the Company's technology.
SHARED RESOURCES. The Merger will provide the possibility that the
Company and Baxter may share pre-clinical and clinical data from multiple
animal and human studies and thereby accelerate the development of next
generation technologies.
MANUFACTURING RESOURCES. The Company believes that the significant
capital expenditure requirements of large-scale production of its future
products requires the resources and operational knowledge of a large
medical products company such as Baxter.
OPERATIONAL SYNERGIES. The Company believes that the greater
strategic, financial and personnel resources of the combined company should
result in operational efficiencies and synergies, enabling the combined
company to more effectively and efficiently operate and compete.
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<PAGE> 24
In reaching its conclusions to approve the Merger, the Board of Directors
of the Company considered, among other things, the following factors:
(i) Knowledge of the management and the Board of Directors of the
Company of the Company's and Baxter's respective businesses, and the
current economic, financial and business climate impacting those
businesses;
(ii) The state of the biotechnology industry, including the financing
requirements and the consolidation trend within the industry;
(iii) Limited alternatives available to the Company, either on a
stand-alone basis or with others, to fund its future capital, operating,
manufacturing and product development requirements;
(iv) The detailed financial analyses presented by Lehman Brothers and
the Company's management. See "-- Opinion of Financial Advisor;"
(v) The financial presentation made by Lehman Brothers with respect to
the Merger, including the written opinion of Lehman Brothers to the
effect that, as of February 23, 1998, and based upon and subject to the
various qualifications and assumptions described therein, the Merger
Consideration was fair, from a financial point of view, to the holders
of shares of Company Common Stock. See "-- Opinion of Financial
Advisor;"
(vi) A review with the Company's legal counsel of the terms of the
Merger Agreement and the CPR Agreement, the obligation of the Company
not to solicit or encourage other acquisition proposals, the
representations and warranties of each of the Company and Baxter, the
break-up fee provisions, the indemnification provisions, the
circumstances under which either the Company or Baxter can terminate the
Merger Agreement and the closing conditions to the Merger (including
stockholder approval requirements);
(vii) Trading history of the Company Common Stock and Baxter Common
Stock as well as research analyst coverage of Baxter and significant
forecasted events for Baxter;
(viii) The tax-free nature of the transactions contemplated by the
Merger Agreement;
(ix) The effect of the Merger on the Company's employees;
(x) The compatibility of the corporate cultures of the Company and
Baxter, which the Board of Directors believed was important for the
successful integration of the companies;
(xi) The intent of Baxter to make strategic investments in
manufacturing facilities and next generation technology development;
(xii) The clinical and regulatory experience of Baxter in the field of
biologics; and
(xiii) Baxter's strategic corporate commitment to hemoglobin based
oxygen carrying therapeutics.
The Board of Directors of the Company also considered a number of potential
risks relating to the Merger, including (i) the risk that the technological
compatibilities, synergies and other benefits expected from the Merger would not
be fully achieved, including the risk that key employees of the Company may seek
alternate employment as a result of the proposed Merger; (ii) the risk that the
Merger would not be consummated due to the failure of the parties to satisfy
conditions to the Merger; (iii) the risk that the Company's existing management
would no longer manage operations of the Company following the Merger; (iv) the
risk that certain scientific and academic collaborators of the Company may elect
to terminate or fail to renew or extend their collaborative agreements with the
Company and Baxter as a result of the Merger; and (v) the status and assumed
risks in Baxter's own internal hemoglobin program. The Board of Directors of the
Company concluded that the benefits of the transaction to the Company and its
stockholders outweighed the risks associated with the foregoing factors.
The foregoing discussion of the information and factors considered by the
Board of Directors of the Company is not intended to be exhaustive but is
believed to include all material factors considered by the
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Board of Directors of the Company. In view of the complexity and variety of
factors considered in connection with its evaluation of the Merger, the Board of
Directors of the Company did not find it practical to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. In addition, individual members of the Board of Directors of
the Company may have given different weights to different factors.
OPINION OF FINANCIAL ADVISOR
Lehman Brothers has acted as financial advisor to the Company in connection
with the Merger. As part of its role as financial advisor to the Company, Lehman
Brothers rendered to the Board of Directors an opinion as to the fairness, from
a financial point of view, to the Company's stockholders of the consideration to
be offered to such stockholders in connection with the Merger.
The full text of Lehman Brothers' written opinion, dated February 23, 1998,
is attached as Appendix B to this Proxy Statement/Prospectus (the "Opinion") and
is incorporated herein by reference. The Company's stockholders should read the
Opinion for a discussion of assumptions made, matters considered and limitations
of the review undertaken by Lehman Brothers in rendering its Opinion. The
summary of the Opinion set forth in this Proxy Statement/Prospectus is qualified
in its entirety by reference to the full text of such Opinion.
No limitations were imposed by the Company on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
the Opinion, except that the Company did not authorize Lehman Brothers to
solicit and Lehman Brothers did not solicit any indication of interest from any
third party with respect to the purchase of all or a part of the Company's
business. Lehman Brothers was not requested to and did not make any
recommendation to the Board of Directors as to the form of the consideration to
be offered to the Company's stockholders in connection with the Merger, which
was determined through arm's-length negotiations between the parties. In
arriving at the Opinion, Lehman Brothers did not ascribe a specific range of
value to the Company, but made its determination as to the fairness, from a
financial point of view, of the consideration to be offered to the Company's
stockholders in connection with the Merger on the basis of the financial and
comparative analyses described below. The Opinion is for the use and benefit of
the Board of Directors and was rendered to the Board of Directors in connection
with its consideration of the Merger. The Opinion is not intended to be and does
not constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger Proposal. Lehman Brothers was
not requested to opine to, and the Opinion does not address, the Company's
underlying business decision to proceed with or effect the Merger.
In arriving at the Opinion, Lehman Brothers reviewed and analyzed: (i) the
Merger Agreement and the specific terms of the Merger, (ii) publicly available
information concerning the Company and Baxter that Lehman Brothers believed to
be relevant to its analysis, including the Company's Form 10-K for the year
ended June 30, 1997 and Form 10-Q for the period ended December 31, 1997, and
Baxter's Form 10-K for the year ended December 31, 1996 and Form 10-Q for the
period ended September 30, 1997, (iii) financial and operating information with
respect to the business, operations and prospects of the Company furnished to
Lehman Brothers by the Company, (iv) a trading history of the shares of Company
Common Stock from February 18, 1996 to February 18, 1998 and a comparison of
that trading history with those of other companies that Lehman Brothers deemed
relevant, (v) a trading history of shares of Baxter Common Stock from February
18, 1997 to February 18, 1998 and a comparison of that trading history with
those of other companies that Lehman Brothers deemed relevant, (vi) a comparison
of the historical financial results and present financial condition of the
Company with those of other companies that Lehman Brothers deemed relevant,
(vii) a comparison of the historical financial results and present financial
condition of Baxter with those of other companies that Lehman Brothers deemed
relevant, (viii) a comparison of the financial terms of the Merger with the
financial terms of certain other transactions that Lehman Brothers deemed
relevant and (ix) alternatives available to the Company on a stand-alone basis
to fund its future capital and operating requirements. In addition, Lehman
Brothers had discussions with the management of the Company concerning the
Company's business, operations, assets, financial condition and prospects and
undertook such other studies, analyses and investigations as Lehman Brothers
deemed appropriate.
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In arriving at the Opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of management of the Company
that they were not aware of any facts or circumstances that would make such
information materially inaccurate or misleading. With respect to the financial
projections of the Company, upon advice of the Company, Lehman Brothers assumed
that such projections were reasonably prepared on a basis reflecting the best
then available estimates and judgments of the management of the Company as to
the future financial performance of the Company. However, for purposes of its
analysis, Lehman Brothers also considered certain somewhat more conservative
assumptions and estimates which resulted in certain adjustments to the
projections of the Company. Lehman Brothers discussed these adjusted projections
with the management of the Company and they agreed with the appropriateness of
the use of such adjusted projections in performing the analysis. Lehman Brothers
was not provided with, and did not have access to, any financial forecasts or
projections of Baxter. In arriving at the Opinion, Lehman Brothers did not
conduct a physical inspection of the properties and facilities of the Company or
Baxter and did not make or obtain any evaluations or appraisals of the assets or
liabilities of the Company or Baxter. In addition, the Company did not authorize
Lehman Brothers to solicit, and Lehman Brothers did not solicit, any indications
of interest from any third party with respect to the purchase of all or a part
of the Company's business. The Opinion was necessarily based upon market,
economic and other conditions as they existed on, and could be evaluated as of,
the date of the Opinion.
In connection with the preparation and delivery of its Opinion, Lehman
Brothers performed a variety of financial and comparative analyses, as described
below. The preparation of a fairness opinion involves various determinations as
to the most appropriate and relevant methods of financial and comparative
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Furthermore, in arriving at the Opinion, Lehman Brothers did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevancy of each
analysis and factor. Accordingly, Lehman Brothers believes that its analyses
must be considered as a whole and that considering any portion of such analyses
and factors, without considering all analyses and factors, could create an
incomplete or misleading view of the process underlying the Opinion. In its
analyses, Lehman Brothers made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the Company's and Baxter's control. Any estimates contained in
those analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable then
as set forth therein. Additionally, analyses relating to the value of businesses
do not purport to be appraisals or to reflect the prices at which businesses
actually may be sold.
TRANSACTION TERMS. The consideration to be offered to the stockholders of
the Company in connection with the Merger is (i) $9.00 per share of Company
Common Stock in shares of Baxter Common Stock and (ii) one CPR per share of
Company Common Stock.
HISTORICAL STOCK PRICE PERFORMANCE OF THE COMPANY AND OF BAXTER. Lehman
Brothers reviewed the Company Common Stock price performance for the twenty-four
months preceding February 18, 1998 and noted that the Company Common Stock price
had fluctuated over that period from a high of $22.50 to a low of $4.25, and was
trading on February 18, 1998 at a price of $6.3125, which was below where it
traded one year earlier. Lehman Brothers also compared the Company Common Stock
price performance to a weighted average of the stock prices of certain publicly
traded oxygen therapeutic biotechnology companies and to the AMEX Biotechnology
Index for the twelve month period prior to February 18, 1998. The companies that
Lehman Brothers considered included Alliance Pharmaceutical Corp., Enzon, Inc.,
Hemosol, Inc. and Northfield Laboratories Inc. (the "Comparable Oxygen
Therapeutic Companies"). Lehman Brothers noted that the Company Common Stock
price had declined 51.4% compared to a decline of 32.5% for the Comparable
Oxygen Therapeutic Companies and a decline of 3.5% in the AMEX Biotechnology
Index over the twelve months preceding February 18, 1998. Lehman Brothers also
reviewed the Baxter Common Stock price performance for the twelve months
preceding
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February 18, 1998 and noted that shares of Baxter Common Stock price had
fluctuated over that period from a high of $60.0625 to a low of $42.375, and was
trading on February 18, 1998 at a price of $56.8125.
COMPARABLE PUBLIC COMPANY ANALYSIS OF THE COMPANY AND OF BAXTER. Lehman
Brothers compared the historical, financial and operating performance of the
Comparable Oxygen Therapeutic Companies with the historical financial and
operating performance of the Company and of certain publicly traded comparable
medical supply companies with that of Baxter, based upon information that was
publicly available at that time and based upon information provided to Lehman
Brothers by the management of the Company. The comparable companies that Lehman
Brothers considered for Baxter included Abbott Laboratories, Allegiance
Corporation, Becton, Dickinson & Company, C.R. Bard, Inc., Guidant Corporation,
Medtronic, Inc. and United States Surgical Corporation (the "Comparable Medical
Supply Companies"). Lehman Brothers examined both the market value of the total
outstanding common equity (the "Market Value") and the Market Value minus Cash
(the "Technology Value") of such comparable companies on a primary basis. "Cash"
equals cash and cash equivalents plus marketable securities. For the Company,
Lehman Brothers noted that, at the proposed Share Consideration, the Market
Value for the Company of $187.9 million (excluding Company Stock Options) was
within the range of $23.0 million to $232.1 million, and was above the mean and
median of $147.6 million and $167.7 million, respectively, for the Comparable
Oxygen Therapeutic Companies. Lehman Brothers also noted that, at the proposed
Share Consideration, the Technology Value for the Company of $151.3 million was
within the range of $9.9 million to $176.1 million for the Comparable Oxygen
Therapeutic Companies and was above the mean and median of $108.5 million and
$124.0 million, respectively, for the Comparable Oxygen Therapeutic Companies.
Lehman Brothers also examined both the latest twelve month net burn rate ("LTM
Net Burn Rate") and the years of cash remaining ("Years of Cash") for such
comparable companies. The LTM Net Burn Rate is calculated as net loss plus
depreciation and amortization expense, less capital expenditures. Years of Cash
is calculated as Cash divided by LTM Net Burn Rate. Lehman Brothers noted that
the LTM Net Burn Rate for the Company was $9.5 million, higher than the range of
$2.5 million to $7.4 million and the mean and median of $5.6 million and $6.2
million, respectively, for the Comparable Oxygen Therapeutic Companies, and that
the Company's Years of Cash was 3.9 years, at the low end of the range of 2.3
years to 10.5 years and lower than the mean and median of 6.3 years and
6.2 years, respectively, for the Comparable Oxygen Therapeutic Companies. The
calculation of the Company's LTM Net Burn Rate and Years of Cash included the
effect of a one-time gain of $6.0 million in May 1997 related to the termination
of the strategic alliance between the Company and Lilly. Excluding such gain,
the Company's LTM Net Burn Rate and Years of Cash would have been $15.5 million
and 2.4 years, respectively.
For Baxter, Lehman Brothers examined the price/earnings multiple ("P/E
Multiple") for 1998 and 1999 for each such comparable companies. The P/E
Multiple was calculated by taking the closing stock price as of February 18,
1998 and dividing it by the calendarized consensus earnings per share estimates
for 1998 and 1999 (taken from First Call, an investor service that monitors
earnings estimates for publicly traded companies). Lehman Brothers noted that
the 1998 P/E Multiple for Baxter was 21.9x, within the range of 16.2x to 38.3x,
and below the mean and median of 24.9x and 23.0x, respectively, for the
Comparable Medical Supply Companies. Lehman Brothers also noted that the 1999
P/E Multiple for Baxter was 19.3x, within the range of 13.1x and 32.2x, and
below the mean and median of 21.3x and 20.4x, respectively, for the Comparable
Medical Supply Companies.
However, because of the inherent differences between the business,
operations and prospects of the Company and Baxter and the businesses,
operations and technology and prospects of the Comparable Oxygen Therapeutic
Companies or Comparable Medical Supply Companies, as the case may be, Lehman
Brothers believed that it was inappropriate to, and therefore did not, rely
solely on the quantitative results of the analyses but rather also made
qualitative judgments concerning differences between the financial and operating
characteristics and prospects of the Company and Baxter and the Comparable
Oxygen Therapeutic Companies or Comparable Medical Supply Companies, as the case
may be, that would affect the public trading values of each.
DISCOUNTED CASH FLOW ANALYSIS FOR THE COMPANY. Lehman Brothers performed a
discounted cash flow analysis based upon the Company's projected financial
performance under two scenarios:
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(a) using the Company's management projections through fiscal year 2008 (the
"Management Case") and (b) making certain adjustments to management's
projections (the "Sensitivity Case").
These analyses were based upon information and projections provided by the
Company's management. Lehman Brothers discounted to present value the projected
stream of after-tax cash flows and the terminal year value (the "Terminal
Value") of the business. Terminal Value was based upon multiples of projected
fiscal 2008 earnings before interest and taxes ranging from 10x to 14x. In
performing this analysis, Lehman Brothers used a range of discount rates from
35% to 45%, which were chosen based on several assumptions regarding factors
such as the inflation rate, interest rates, the inherent business risk in the
Company's operations as well as in the oxygen therapeutic and biotechnology
industry as a whole, and the cost of capital to the Company. The imputed value
per share of the Company's Common Stock resulting from this analysis ranged from
$4.85 to $15.30 under the Management Case, and ranged from $0.70 to $5.42 under
the Sensitivity Case.
COMPARABLE TRANSACTION ANALYSES FOR THE COMPANY. Lehman Brothers compared
the financial terms of certain recent merger transactions, which Lehman Brothers
considered relevant, with the financial terms of the Merger, based upon
information that was publicly available at the time and based upon information
provided to Lehman Brothers by the Company's management. The transactions that
Lehman Brothers considered comparable to the Merger included 18 merger
transactions that occurred in the biotechnology industry since 1993 (the
"Comparable Transactions"). The Comparable Transactions are: Arris
Pharmaceutical Corporation/Sequana Therapeutics, Inc., Cell Genesys,
Inc./Somatix Therapy Corporation, American Home Products Corporation/Genetics
Institute, Inc., Medarex, Inc./Houston Biotechnology Incorporated, Genzyme
Corporation/Neozyme II Corporation, Elan Corporation plc/Athena Neurosciences,
Inc., North American Biologicals, Inc./Univax Biologics, Inc., Sandoz
Ltd./Genetic Therapy, Inc., Genetics Institute, Inc./SciGenics, Inc., Cytogen
Corporation/Cellcor, Inc., Chiron Corporation/Viagene Inc., Ligand
Pharmaceuticals Incorporated/Glycomed Incorporated, Glaxo plc/Affymax N.V.,
Amgen Inc./Synergen, Inc., NeXagen, Inc./Vestar, Inc., Genzyme
Corporation/BioSurface Technology, Inc., Lilly/Sphinx Pharmaceuticals
Corporation and Bio-Technology General Corp./Gynex Pharmaceuticals, Inc. Lehman
Brothers calculated the transaction value per share for shares purchased
directly from the target company (the "Merger Purchase Price Per Share"). The
mean, median, high and low Merger Purchase Price Per Share for these
transactions was then compared to the target's stock price one day and one month
prior to the announcement of the transaction and to the target's latest twelve
month high and low stock price to calculate the premium over such stock prices
(the "Premium"). The mean, median, high and low Premiums, one day prior to the
transaction announcement, were 37.2%, 25.4%, 108.7% and (13.8%), respectively,
in the Comparable Transactions. Lehman Brothers noted that the Share
Consideration represented a 42.5% Premium over the price per share of Company
Common Stock of $6.313 on February 18, 1998 and was within the range of the
Comparable Transactions and above the mean and median of the Comparable
Transactions. The mean, median, high and low Premiums one day prior to the
transaction announcement were 37.1%, 32.0%, 100.0% and (15.8%), respectively, in
the Comparable Transactions. Lehman Brothers noted that the consideration
represented an 89.5% Premium over the price per share of Company Common Stock of
$4.75 one month prior to February 18, 1998 and was within the range of the
Comparable Transactions and above the mean and median of the Comparable
Transactions.
FINANCING ALTERNATIVES FOR THE COMPANY. Lehman Brothers also reviewed the
current financing environment for biotechnology companies, based on a review of,
among other things, public follow-on equity offerings since January 1997. Lehman
Brothers noted that the mean, median, high and low values of the discount of the
offer price per share to the share price one day before filing were (3.4%),
(5.9%), 32.6% and (38.5%), respectively. Lehman Brothers also noted that, based
on the Management Case, the Company would require approximately $300 million in
additional capital to finance its operations and capital expenditures through
fiscal 2002, and that raising this amount of additional capital would dilute the
existing stockholders' ownership interest by approximately 40%. Lehman Brothers
calculated the equity value per share of Company Common Stock using a discounted
cash flow analysis of the Management Case and the additional shares that would
be issued to raise the $300 million. The imputed value per share resulting from
this analysis ranged from $2.94 to $9.71 per share.
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However, because the reasons for and the circumstances surrounding each of
the transactions analyzed were specific to each transaction and because of the
inherent differences between the businesses, operations, technology and the
prospects of the Company and the business, operations, technology and prospects
of the selected acquired companies analyzed, Lehman Brothers believed that is
was inappropriate to, and therefore did not, rely solely on the quantitative
results of the analysis, but rather also made qualitative judgments concerning
differences between the characteristics of these transactions and the Merger
that would affect the acquisition values of the Company and such acquired
companies.
Lehman Brothers is an internationally recognized investment banking firm
and in connection with its investment banking activities is regularly engaged in
the evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities and private placements, and in
valuation for corporate and other purposes. The Board of Directors selected
Lehman Brothers because of Lehman Brothers' expertise, reputation and
familiarity with biotechnology and pharmaceutical companies and because its
investment banking professionals have substantial experience in transactions
similar to the Merger.
As compensation for its services in connection with the Merger, the Company
has agreed to pay Lehman Brothers fees of (i) $50,000 as a retainer fee, (ii)
$250,000 upon delivery of the Opinion and execution of the Merger Agreement and
(iii) an amount equal to 1.35% of the consideration involved in the Merger,
contingent upon the consummation of the Merger (approximately $2.6 million),
less amounts previously paid pursuant to clauses (i) and (ii). The Company will
also reimburse Lehman Brothers for its reasonable out-of-pocket expenses and has
agreed to indemnify Lehman Brothers against certain liabilities that may arise
in connection with its engagement. Lehman Brothers has performed various
investment banking services for each of the Company and Baxter and has received
customary fees for such services. In the ordinary course of its business, Lehman
Brothers may trade in the securities of the Company and Baxter for its own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
BAXTER'S REASONS FOR THE MERGER
Development of oxygen carrying therapeutics is currently a strategic
priority of Baxter. The acquisition of the Company is intended to provide Baxter
with significant scientific talent in recombinant hemoglobin technology and a
platform for the development of new generations of recombinant oxygen carrying
technology-based products with enhanced attributes. The acquisition of the
Company may also provide Baxter with an alternate source for hemoglobin, in the
event that it proves more difficult than expected to procure human hemoglobin in
large quantities.
GOVERNMENTAL AND REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by the United States
Federal Trade Commission (the "FTC"), the Merger may not be consummated until
notifications have been given and certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and specified waiting period requirements have been
satisfied. Baxter and the Company each filed the required HSR Act Notification
and Report Forms with the Antitrust Division and the FTC with respect to the
transactions contemplated by the Merger Agreement. The waiting period under the
HSR Act expired on April 5, 1998.
In addition, state and Federal antitrust authorities may also bring legal
action under state or Federal antitrust laws at any time before or after the
Effective Time, notwithstanding the expiration of the HSR Act waiting periods.
Such action could seek or result in termination of the Merger Agreement,
divestiture of certain assets, licensing certain proprietary technology to third
parties or acceptance of certain other conditions in order to consummate the
Merger. Private parties may also seek to take legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Merger on antitrust grounds will not be made or, if such a challenge is
made, with respect to the result thereof.
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The Company and Baxter will use reasonable efforts to take other
appropriate action with respect to any requisite approvals or other action of
any court, administrative agency or commission or other governmental authority
or instrumentality, whose consent, approval, order or authorization, or with
whom registration, declaration or filing of the Merger Agreement is required to
consummate the Merger and related transactions, subject to the provisions of the
Merger Agreement.
The Merger Agreement provides that the obligation of each of the Company
and Baxter to consummate the Merger is conditioned upon, among other things, the
expiration or termination of any applicable waiting period under the HSR Act and
the absence of any injunction restraining consummation of the Merger. See "The
Merger Agreement -- Conditions to the Merger." There can be no assurance that
any governmental agency will approve or take any other required action with
respect to the Merger, and, if approvals are received or action is taken, that
such approvals or action will not be conditioned upon matters that would cause
the parties to abandon the Merger. In addition, there can be no assurance that
an action will not be brought challenging such approvals or action, including a
challenge by the Antitrust Division or FTC, or, if such challenge is made, with
respect to the result thereof.
The Company and Baxter are not aware of any material governmental approvals
or transactions that may be required for consummation of the Merger, other than
as described above. Should any other approval or action be required, it is
presently contemplated that such approval or action would be sought. There can
be no assurance, however, that any such approval or action, if needed, could be
obtained and would not be conditioned in a manner that would cause the parties
to abandon the Merger.
ANTICIPATED ACCOUNTING TREATMENT
Baxter will account for the acquisition of the Company using the purchase
method of accounting. It is expected that a substantial portion of the purchase
price will be allocated to the Company's in-process research and development
which, under generally accepted accounting principles, will be expensed by
Baxter immediately following the Effective Time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain Federal income tax consequences to
holders of shares of Company Common Stock who, pursuant to the Merger, surrender
their shares of Company Common Stock in exchange for shares of Baxter Common
Stock and CPRs. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury regulations promulgated thereunder, and
published administrative rulings and court decisions as of the date hereof. All
of the foregoing legal authorities are subject to change, possibly with a
retroactive effect, and any such change could affect the accuracy of the
following discussion. No ruling has been or will be sought from the Internal
Revenue Service (the "Service") concerning the tax consequences of the Merger
and the tax treatment of the CPRs. This summary does not purport to be a
comprehensive description of all of the tax consequences applicable to a holder
of shares of Company Common Stock in light of such holder's particular tax
position nor does it address the tax consequences that may be relevant to
holders with a special tax status (for example, insurance companies, financial
institutions, dealers in securities, foreign persons, and tax-exempt entities),
to holders who hold shares of Company Common Stock as part of a straddle,
hedging, or conversion transaction, to holders who have acquired shares of
Company Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation, or to holders of shares of Company Stock Options,
deferred shares, or similar compensatory issuances. In addition, this summary
does not address any consequences arising under the laws of any state, local, or
foreign jurisdiction. This summary assumes that holders of shares of Company
Common Stock have held such shares of stock, and will hold their shares of
Baxter Common Stock and CPRs received in exchange therefor, as capital assets
(generally, property held for investment). Each holder of shares of Company
Common Stock is urged to consult a tax advisor regarding the tax consequences of
surrendering its shares of Company Common Stock in exchange for shares of Baxter
Common Stock and CPRs pursuant to the Merger, including the application and
effect of Federal, state, local, foreign and other tax laws.
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TAX TREATMENT OF THE MERGER. Baxter, based on the advice of its counsel,
Skadden, Arps, Slate, Meagher & Flom, LLP, and the Company, based on the advice
of its tax advisor, Price Waterhouse LLP, believe that the Merger should
constitute a tax-free "reorganization" under section 368(a) of the Code and,
consequently, intend to treat the Merger as a tax-free reorganization.
It is anticipated that, after the Effective Time, Baxter will cause the
Surviving Corporation to sell for fair value the intellectual property held by
the Surviving Corporation, which constitutes a significant portion of its
assets, to an affiliate of Baxter. Each of Baxter and the Company believes that
such transfer should not, under current published legal authorities, cause the
Merger to fail to qualify as a tax-free reorganization because the sale should
be viewed as resulting in a mere "substitution" of the assets of the Surviving
Corporation (i.e., the substitution of the intellectual property with the sale
proceeds) under such authorities. It is possible, however, that the Service may
successfully assert that the Merger fails to qualify as a tax-free
reorganization in which case holders of shares of Company Common Stock
surrendering their shares pursuant to the Merger would be treated as having
disposed of their stock in a fully taxable transaction. Accordingly, the
discussion set forth below discusses the Federal income tax treatment of the
Merger as a tax-free reorganization and, in the alternative, as a fully taxable
transaction. Each holder of shares of Company Common Stock is urged to consult a
tax advisor as to whether the consummation of the Merger would be treated as a
tax-free reorganization or a fully taxable disposition of shares of Company
Common Stock and the effect of the Merger being a fully taxable transaction in
light of such holder's tax position and financial circumstances.
Tax-free Reorganization Treatment. Assuming that the Merger is treated as a
tax-free reorganization under section 368(a) of the Code:
(i) A holder of shares of Company Common Stock will generally
recognize capital gain, upon the consummation of the Merger, in an amount
equal to the lesser of (x) the excess of the aggregate fair market value of
the shares of Baxter Common Stock and the CPRs received in the Merger over
the holder's adjusted tax basis in such holder's shares of Company Common
Stock exchanged therefor or (y) the fair market value of the CPRs received
in the Merger (which value should be equal to the excess of (a) the fair
market value of the shares of Company Common Stock, as reflected in the
public trading of such stock, immediately prior to the Effective Time over
(b) the fair market value of the shares of Baxter Common Stock received in
the Merger, as reflected in the public trading of the Baxter Common Stock,
at the Effective Time). A holder of shares of Company Common Stock will
generally not recognize a loss upon the consummation of the Merger. In
addition, a holder of shares of Company Common Stock that receives cash in
lieu of a fractional share of Baxter Common Stock will, upon consummation
of the Merger, recognize capital gain or loss equal to the difference
between the amount of such cash and the tax basis allocated to such
stockholder's fractional share of Baxter Common Stock. See "-- Tax
Treatment of CPRs" for a discussion of the tax treatment of the cash
payments, if any, received pursuant to the terms of the CPRs and
"-- Taxation of Net Capital Gain" for a discussion of the rate of tax
applicable to the recognition of capital gain.
(ii) The aggregate tax basis of the shares of Baxter Common Stock
received by a stockholder of the Company pursuant to the Merger will
generally be equal to the aggregate tax basis of such stockholder's shares
of Company Common Stock exchanged therefor, increased by any gain
recognized in connection with the Merger, and reduced by the fair market
value of the CPRs received in the Merger (determined as described above)
and any cash received in lieu of a fractional share. The tax basis of the
CPRs received by a holder of shares of Company Common Stock pursuant to the
Merger will be equal to the fair market value of the CPRs received in the
Merger (determined as described above).
(iii) The holding period of the shares of Baxter Common Stock received
pursuant to the Merger will include the holding period of the shares of
Company Common Stock exchanged therefor and the holding period of the CPRs
received pursuant to the Merger will commence on the day following the
Effective Time.
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Fully Taxable Transaction Treatment. In the event that the consummation of
the Merger is treated as a fully taxable transaction for Federal income tax
purposes, a holder of shares of Company Common Stock would, upon consummation of
the Merger, recognize capital gain or loss in an amount equal to the excess of
the aggregate fair market value of the shares of Baxter Common Stock and the
CPRs received in the Merger (determined as described above) over the adjusted
tax basis of the shares of Company Common Stock exchanged therefor. Although the
recognition of capital gain would result in a current income tax liability to
stockholders of the Company surrendering shares of Company Common Stock in the
Merger, such stockholders would not be receiving any cash in the Merger to cover
such liability. If a holder of shares of the Company Common Stock recognizes a
capital loss upon the consummation of the Merger, such loss may, depending upon
the application of certain limitations imposed upon the use of capital losses,
be deductible currently or carried over to a future taxable year and applied
against any capital gain subsequently recognized by such holder, including any
capital gain resulting from the receipt of cash pursuant to the terms of the
CPRs. See "-- Tax Treatment of CPRs" for a discussion of the tax treatment of
the cash payments, if any, received pursuant to the terms of the CPRs and
"-- Taxation of Net Capital Gain" for a discussion of the rate of tax applicable
to the recognition of capital gain.
The tax basis of the shares of Baxter Common Stock and the CPRs received in
the Merger would be equal to each of their respective fair market values
determined as of the Effective Time and the holding period for such shares of
Baxter Common Stock and the CPRs would commence on the day following the
Effective Time.
TAX TREATMENT OF CPRS. There are no published legal authorities addressing
the tax treatment of a contingent payment instrument that is substantially
similar to the CPRs. Because the payment of cash pursuant to the terms of a CPR
is wholly contingent, it is not anticipated that a CPR will be treated as a
"debt instrument" for Federal income tax purposes. Accordingly, Baxter and the
Company each believes that the payment of cash, if any, made pursuant to the
terms of the CPR should be treated as the payment of additional cash proceeds
pursuant to a contract right and subject to the application of section 483 of
the Code.
For Federal income tax purposes, a holder of a CPR will not recognize any
income with respect to any cash payment made pursuant to the terms of the CPR
until a taxable year during which such payment, if any, becomes fixed or is paid
in accordance with the holder's regular method of tax accounting. If a cash
payment is made pursuant to the terms of the CPR, a portion of the payment will,
under section 483 of the Code, be treated as interest income, subject to tax as
ordinary income, in an amount equal to the excess of (x) the amount of the
payment over (y) the present value of such payment determined by discounting the
amount of the payment from the payment date to the date of the Effective Time,
assuming annual compounding, by the applicable Federal rate prevailing for the
month within which the Merger is consummated. The amount of the cash payment in
excess of the interest component should first be treated as a tax-free return of
a holder's tax basis in the CPR, and thereafter as capital gain (although it is
possible that the Service may require the holder of a CPR to allocate the tax
basis of a CPR to the current and aggregate potential payments due pursuant to
the terms of the CPR, other than to amounts that would be attributable to an
interest component under section 483 of the Code). Upon termination of the CPR,
a holder of a CPR will recognize capital loss, if any, in an amount equal to
such holder's remaining adjusted tax basis in the CPR.
A holder of a CPR will recognize capital gain or loss upon the sale,
exchange, or redemption of a CPR in an amount equal to the difference between
(i) the cash or fair market value of other property received pursuant to the
sale, exchange, or redemption reduced by the portion of such proceeds that is
attributable to interest income (as described below) and (ii) the holder's
adjusted tax basis in the CPR disposed of. Under section 483 of the Code, a
portion of the proceeds realized in the sale, exchange, or redemption of a CPR
will be treated as interest income, subject to tax as ordinary income, which
portion will be determined on the basis of the discounted present value
principles described in the preceding paragraph.
TAXATION OF NET CAPITAL GAIN. Net capital gain (i.e., generally, capital
gain in excess of capital loss) recognized by an individual upon the surrender
of the shares of the Company Common Stock in the Merger,
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the receipt of a cash payment pursuant to the terms of the CPR, or a disposition
of the CPR that has been held for (i) more than 18 months will generally be
subject to tax at a rate not to exceed 20%, (ii) more than 12 months but for not
more than 18 months will generally be subject to tax at a rate not to exceed
28%, and (iii) 12 months or less will generally be subject to tax at ordinary
income tax rates. Net capital gain recognized by a corporation is subject to tax
at the ordinary income tax rates applicable to corporations.
DISSENTERS' RIGHTS
Under the DGCL, holders of shares of Company Common Stock ("Dissenting
Shares") who do not vote in favor of the Merger Proposal and who follow the
procedures set forth in Section 262 of the DGCL ("Section 262"), will be
entitled to have their Dissenting Shares appraised by the Delaware Court of
Chancery and to receive payment in cash of the "fair value" of such Dissenting
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, as
determined by such court ("Appraisal Rights").
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, the corporation, not less that 20 days prior to
the meeting, must notify each person who was one of its stockholders on the
record date for such meeting with respect to shares for which Appraisal Rights
are available, that Appraisal Rights are so available, and must include in such
notice a copy of Section 262. This Proxy Statement/Prospectus constitutes such
notice to the holders of shares of Company Common Stock and the applicable
statutory provisions of the DGCL are attached to this Proxy Statement/
Prospectus as Appendix C. Any stockholder of the Company who wishes to exercise
such Appraisal Rights, or who wishes to preserve the right to do so, should
review the following discussion and Appendix C carefully, because failure to
timely and properly comply with the procedures specified will result in the loss
of Appraisal Rights under the DGCL.
A HOLDER OF SHARES OF COMPANY COMMON STOCK WISHING TO EXERCISE SUCH
HOLDER'S APPRAISAL RIGHTS (a) MUST NOT VOTE IN FAVOR OF THE MERGER PROPOSAL AND
(b) MUST DELIVER TO THE COMPANY, PRIOR TO THE VOTE ON THE MERGER PROPOSAL AT THE
SPECIAL MEETING, A WRITTEN DEMAND FOR APPRAISAL OF SUCH HOLDER'S SHARES OF
COMPANY COMMON STOCK. A HOLDER OF SHARES OF COMPANY COMMON STOCK WISHING TO
EXERCISE SUCH HOLDER'S APPRAISAL RIGHTS MUST BE THE RECORD HOLDER OF SUCH SHARES
OF COMPANY COMMON STOCK ON THE DATE THE WRITTEN DEMAND FOR APPRAISAL IS MADE AND
MUST CONTINUE TO HOLD SUCH DISSENTING SHARES OF RECORD UNTIL THE CONSUMMATION OF
THE MERGER. ACCORDINGLY, A HOLDER OF SHARES OF COMPANY COMMON STOCK THAT IS THE
RECORD HOLDER OF SHARES OF COMPANY COMMON STOCK ON THE DATE THE WRITTEN DEMAND
FOR APPRAISAL IS MADE, BUT THEREAFTER TRANSFERS SUCH SHARES OF COMPANY COMMON
STOCK PRIOR TO THE CONSUMMATION OF THE MERGER, WILL LOSE ANY RIGHT TO APPRAISAL
IN RESPECT OF SUCH SHARES OF COMPANY COMMON STOCK.
Only a holder of record of shares of Company Common Stock is entitled to
assert Appraisal Rights for the shares of Company Common Stock registered in
that holder's name. A demand for appraisal should be executed by or on behalf of
the holder of record, fully and correctly, as such holder's name appears on such
holder's stock certificates. If the shares of Company Common Stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the shares of
Company Common Stock are owned of record by more than one person as in a joint
tenancy or tenancy in common, the demand should be executed by or on behalf of
all joint owners. An authorized agent, including one or more joint owners, may
execute a demand for appraisal on behalf of a holder of record; however, the
agent must identify the record owner or owners and expressly disclose the fact
that, in executing the demand, the agent is agent for such owners or owners. A
record holder such as a broker who holds shares of Company Common Stock as
nominee for several beneficial owners may exercise Appraisal Rights with respect
to the shares of Company Common Stock held for one or more beneficial owners
while not exercising such rights with respect to the shares of Company Common
Stock held for other beneficial owners; in such case, the written demand should
set forth the number of shares of Company Common Stock as to which appraisal is
sought. When no number of shares of Company Common Stock is expressly mentioned,
the demand will be presumed to cover all shares of Company
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Common Stock held in the name of the record owner. Stockholders who hold their
shares of Company Common Stock in brokerage accounts or other nominee forms and
who wish to exercise appraisal rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
such a nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED TO THE
COMPANY, 2545 CENTRAL AVENUE, SUITE FD1, BOULDER, COLORADO 80301-2857,
ATTENTION: CORPORATE SECRETARY.
Within 10 days after the consummation of the Merger, Merger Sub will notify
each stockholder who has properly asserted appraisal rights under Section 262
and has not voted in favor of the Merger Proposal of the date the Merger became
effective.
Within 120 days after the consummation of the Merger, but not thereafter,
Merger Sub or any stockholder who has complied with the statutory requirements
summarized above may file a petition in the Delaware Court of Chancery demanding
a determination of the fair value of the Dissenting Shares. Merger Sub is under
no obligation to and has no present intention to file a petition with respect to
the appraisal of the fair value of the Dissenting Shares. Accordingly, it is the
obligation of the stockholders to initiate all necessary actions to perfect
their appraisal rights within the time prescribed in Section 262.
Within 120 days after the consummation of the Merger, any stockholder who
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from Merger Sub a statement setting
forth the aggregate number of Dissenting Shares not voted in favor of adoption
of the Merger Proposal and with respect to which demands for appraisal have been
received and the aggregate number of holders of such Dissenting Shares. Such
statements must be mailed within ten days after a written request therefor has
been received by Merger Sub.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the "fair value" of their
Dissenting 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 upon the amount determined to be the fair value.
Stockholders of the Company considering seeking appraisal should be aware that
the fair value of their Dissenting Shares, as determined under Section 262,
could be more than, the same as or less than the value of the consideration they
would receive pursuant to the Merger Agreement if they did not seek appraisal of
their Dissenting Shares and that Lehman Brothers' opinion as to fairness, from a
financial point of view, of the Merger Consideration is not necessarily an
opinion as to fair value of the Dissenting Shares under Section 262. The
Delaware Supreme Court has stated that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings.
The Delaware Court of Chancery will determine the amount of interest, if
any, to be paid upon the amounts to be received by persons whose Dissenting
Shares have been appraised. The costs of the action may be determined by the
Delaware Court of Chancery and taxed upon the parties as the Delaware Court of
Chancery deems equitable. The Delaware Court of Chancery may also order that all
or a portion of the expenses incurred by any stockholder in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all the Dissenting Shares entitled to appraisal.
Any holder of Dissenting Shares who has duly demanded an appraisal in
compliance with Section 262 will not, after the consummation of the Merger, be
entitled to vote the Dissenting Shares subject to such demand for any purpose or
be entitled to the payment of dividends or other distributions on those
Dissenting Shares (except dividends or other distributions payable to holders of
record of Dissenting Shares as of a record date prior to the consummation of the
Merger).
If any stockholder of the Company who properly demands appraisal of such
holder's Dissenting Shares under Section 262 fails to perfect, or effectively
withdraws or loses, such holder's right to appraisal, as provided in the DGCL,
the Dissenting Shares of such stockholder will be converted into the right to
receive the consideration payable with respect to such Dissenting Shares in
accordance with the Merger
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Agreement. A stockholder will fail to perfect, or effectively lose or withdraw,
such stockholder's right to appraisal if, among other things, no petition for
appraisal is filed within 120 days after the consummation of the Merger, or if
such stockholder delivers to the Company a written withdrawal of such
stockholder's demand for appraisal. Any such attempt to withdraw an appraisal
demand more than 60 days after the consummation of the Merger will require the
written approval of the Company.
A holder of Dissenting Shares who perfects such stockholder's Appraisal
Rights, if any, under the DGCL will probably recognize gain or loss, for Federal
income tax purposes, at the Effective Time in an amount equal to the difference
between the "amount realized" and the stockholder's adjusted tax basis in such
Dissenting Shares. For this purpose, although there is no authority to this
effect directly on point, the amount realized should generally equal the trading
value per share of the Company Common Stock at the Effective Time. Ordinary
interest income and/or capital gain (or capital loss) should be recognized by
such stockholder at the time of actual receipt of payment, to the extent that
such payment exceeds (or is less than) the amount realized at the Effective
Time.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING
APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH EVENT A
STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE CONSIDERATION PAYABLE WITH RESPECT
TO SUCH DISSENTING SHARES IN ACCORDANCE WITH THE MERGER AGREEMENT).
INTERESTS OF CERTAIN PERSONS IN THE MERGER
OFFICERS AND DIRECTORS OF THE COMPANY. Certain members of the management
and the Board of Directors may be deemed to have certain interests in the Merger
that are in addition to their interests as stockholders of the Company
generally. The Board of Directors was aware of these interests and considered
them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby. These interests are as follows:
Retention Agreements. On July 25, 1997, the Company entered into agreements
(the "Retention Agreements") with each of Mr. de Bruin, Robert F. Caspari, Carol
L. Cech, J. William Freytag, Richard J. Gorczynski, Timothy D. Hoogheem and
Thomas A. Keuer (each an "Executive"). The Retention Agreements provide that if
within one year of (x) a change in control of the Company, or (y) a change in
the chief executive officer or chief operating officer of the Company, (a) the
Executive's employment is terminated without cause or (b) the Executive
voluntarily leaves after any of (i) a reduction in salary or benefits, (ii) a
substantial change in the nature or status of the Executive's responsibilities
or the assignment of duties to the Executive inconsistent with the Executive's
position, (iii) a relocation of the Company's principal executive offices to a
location outside Boulder County, Colorado, (iv) a material breach of any
provision of the Retention Agreement which has not been cured within 30 days or,
(v) a failure to assume the Retention Agreement by a successor to the Company
((a) and (b) together, a "Termination Event"), the Executive will receive
severance compensation equal to an annualized amount consisting of the
compensation paid to the Executive for the month preceding the Termination
Event, including the Executive's base salary amount, one twelfth of the amount
of any bonus compensation payable to the Executive during the subsequent twelve
month period and Company paid health insurance benefits for a period of twelve
months. Mr. Keuer's Employment Agreement (as defined) is expected to contain his
agreement to terminate his Retention Agreement and waive any and all benefits he
would otherwise receive under his Retention Agreement. Mr. Keuer's agreement to
terminate and waive such rights is conditioned upon execution of Mr. Keuer's
Employment Agreement.
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<PAGE> 36
After the Merger, if a Termination Event occurs to any of the Executives,
such Executive will be entitled to receive the severance benefits provided in
the Retention Agreements. The following table summarizes the compensation and
benefits that would be received by each Executive after a Termination Event:
<TABLE>
<CAPTION>
EXECUTIVE AMOUNT
--------- --------
<S> <C>
Andre de Bruin.............................................. $396,000
Robert F. Caspari........................................... 256,000
Carol L. Cech............................................... 159,000
J. William Freytag.......................................... 252,000
Richard J. Gorczynski....................................... 231,000
Timothy D. Hoogheem......................................... 213,000
Thomas A. Keuer............................................. 158,000
</TABLE>
Employment Agreement. Effective October 17, 1994, the Company entered into
an employment agreement with Dr. Freytag. The employment agreement provided for
an initial base salary of $205,000 to be reviewed annually and an employment
bonus of $100,000 payable in equal annual installments of $20,000 over five
years. In the event Dr. Freytag voluntarily terminates his employment or leaves
for cause, the unpaid portion of his employment bonus will be forfeited. If
Baxter elects to terminate Dr. Freytag after the Merger, Dr. Freytag will
receive the remaining unpaid employment bonus amount of approximately $30,000.
Indemnification and Insurance. The Merger Agreement provides that all
rights to indemnification existing in favor of any director, officer, employee
or agent of the Company as of the date of the Merger Agreement for acts or
omissions occurring prior to the Effective Time, as provided in the Company
Certificate, the Company's Bylaws, as in effect immediately prior to the
Effective Time (the "Company Bylaws"), or written indemnity agreements, will
survive the Merger, and that Baxter will cause the Surviving Corporation to
perform its obligations arising thereunder for at least six years from the
Effective Time. Subject to certain limitations, Baxter has agreed to maintain in
effect for six years after the Effective Time the policy of directors' and
officers' liability insurance in existence at the date of the Merger Agreement
(or any equivalent policy) for the benefit of persons serving as directors and
officers of the Company as of the date of the Merger Agreement. See "The Merger
Agreement -- Directors' and Officers' Indemnification and Insurance."
Success Bonuses; Retention/Consulting Agreements. On March 9, 1998, the
compensation committee of the Board of Directors authorized the following
success bonuses to be paid to the listed officers (each, a "Senior Officer") of
the Company upon the closing of the Merger:
<TABLE>
<CAPTION>
SENIOR OFFICER AMOUNT
-------------- -------
<S> <C>
Robert F. Caspari........................................... $25,000
J. William Freytag.......................................... 65,000
Richard J. Gorczynski....................................... 55,000
Timothy D. Hoogheem......................................... 85,000
Thomas A. Keuer............................................. 45,000
</TABLE>
At the same meeting, the compensation committee of the Board of Directors
also authorized the Company to enter into a Retention/Consulting Agreement (the
"R/C Agreement") with each Senior Officer. Each R/C Agreement provides that the
Senior Officer will receive a bonus payment (the "Retention Amount") on the
first anniversary of the closing of the Merger if still employed by Baxter. If
Baxter elects not to retain a Senior Officer after the Merger, or if the Senior
Officer leaves Baxter voluntarily, such Senior Officer will be eligible to
receive the Retention Amount on a quarterly basis in exchange for making certain
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<PAGE> 37
consulting services available to Baxter. The following sets forth the Retention
Amount each Senior Officer will be eligible for:
<TABLE>
<CAPTION>
SENIOR OFFICER RETENTION AMOUNT
-------------- ----------------
<S> <C>
Robert F. Caspari........................................... $ 54,000
J. William Freytag.......................................... 148,000
Richard J. Gorczynski....................................... 121,000
Timothy D. Hoogheem......................................... 175,000
</TABLE>
Mr. Keuer's Employment Agreement. Mr. Keuer is expected to execute an
employment agreement ("Mr. Keuer's Employment Agreement") with an expiration
date of June 30, 1999 with Baxter that provides (i) an annual base salary of
$146,639, (ii) a retention bonus payable on June 30, 1999 (if Mr. Keuer is still
employed with Baxter at such time) of $94,000; (iii) stock option grants to
purchase an aggregate of 6,350 shares of Baxter Common Stock, (iv) certain
compensation payable upon termination of his employment substantially equivalent
to the terms of his Retention Agreement, and (v) Baxter's standard employee
benefits, including health insurance and four weeks paid vacation per year.
Transition Employees. Dr. Cech and Conrad A. McCarty are two officers
designated by the Company to be critical to the successful transition of
ownership. As transition employees, these two officers will receive bonuses of
$30,000 and $40,000, respectively, if they continue to perform their current
functions with the Company prior to the closing of the Merger and remain as
employees of Baxter (or are terminated without cause) for at least 180 days
after the closing of the Merger.
Company Stock Options. Pursuant to the terms of the Merger Agreement and
subject to certain limitations, each option to purchase shares of Company Common
Stock, whether vested or unvested, will be exchanged or cancelled as follows:
(i) each Company Stock Option having an exercise price of $11 or more that is
outstanding immediately prior to the Effective Time shall be cancelled
immediately prior to the Effective Time for no consideration; (ii) each Company
Stock Option (in the case of persons who are employed by or providing services
to the Company as of the Effective Time, whether vested or unvested, and in the
case of persons who are no longer employed by or providing services to the
Company, as of the Effective Time, only to the extent such Company Stock Option
was vested on the date such person's employment or service with the Company
ceased) having an exercise price of less than $9 that is outstanding immediately
prior to the Effective Time shall be exchanged, immediately prior to the
Effective Time, for (x) payment by the Company, to the holder of such Company
Stock Option, of an amount in cash equal to (1) the product of $9 and the number
of shares of Company Common Stock subject to such Company Stock Option, less (2)
the aggregate exercise price of such Company Stock Option and (y) the right to
receive one CPR per share of Company Common Stock covered by such Company Stock
Option; and (iii) each Company Stock Option (in the case of persons who are
employed by or providing services to the Company as of the Effective Time,
whether vested or unvested, and in the case of persons who are no longer
employed by or providing services to the Company, as of the Effective Time, only
to the extent such Company Stock Option was vested on the date such person's
employment or service with the Company ceased) having an exercise price that is
greater than or equal to $9 and less than $11 that is outstanding immediately
prior to the Effective Time, shall be exchanged immediately prior to the
Effective Time for the right to receive one CPR per share of Company Common
Stock subject to such Company Stock Option.
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<PAGE> 38
The following table summarizes the outstanding Company Stock Options held by
each person who has served as a director or officer of the Company since July 1,
1997:
<TABLE>
<CAPTION>
NO. OF COMPANY STOCK
NO. OF COMPANY STOCK OPTIONS WITH AN
OPTIONS WITH AN WEIGHTED EXERCISE PRICE LESS THAN
EXERCISE PRICE LESS THAN AVERAGE EXERCISE $11.00 AND EQUAL TO OR
NAME $9.00 PER SHARE PRICE GREATER THAN $9.00
---- ------------------------ ---------------- ------------------------
<S> <C> <C> <C>
Andre de Bruin.......... 545,000 $ 6.62 10,000
Carlos A. Ferrer........ 19,812 4.08 10,000
Bernadine Healy......... 19,500 4.12 10,000
Gene I. Miller.......... 30,187 5.27 10,000
George B. Rathmann...... 29,500 5.35 10,000
Jack W. Schuler......... 29,875 5.31 10,000
Ralph Snyderman......... 54,500 6.45 10,000
Robert F. Caspari....... 134,000 7.29 5,000
Carol L. Cech........... 25,500 5.91 15,000
J. William Freytag...... 134,000 7.50 7,500
Richard J. Gorczynski... 124,000 6.70 7,500
Timothy D. Hoogheem..... 34,000 5.94 67,500
Thomas A. Keuer......... 24,700 5.68 16,500
Conrad A. McCarty....... 5,500 5.34 1,900
</TABLE>
THE MERGER AGREEMENT
This section of the Proxy Statement/Prospectus describes certain aspects of
the Merger Agreement. The description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which is
attached as Appendix A hereto. All holders of shares of Company Common Stock are
encouraged to read the Merger Agreement carefully and in its entirety.
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that, upon the terms and subject to the
conditions of the Merger Agreement, the Company shall be merged with and into
Merger Sub and the separate corporate existence of the Company shall thereupon
cease, and Merger Sub shall be the Surviving Corporation and all of its rights,
privileges, powers, immunities, purposes and franchises shall continue
unaffected by the Merger. The Merger shall have the effects set forth in Section
151 of the DGCL.
The Merger shall become effective when a Certificate of Merger meeting the
requirements of Section 251 of the DGCL and any other documents necessary to
effect the Merger in accordance with the DGCL are duly filed with the Secretary
of State of the State of Delaware or at such later time as the parties thereto
shall have designated in such filing as the Effective Time, which filing shall
be made on the date and time at which the closing of the Merger occurs (the
"Closing Date"). See "-- Conditions to the Merger."
The Merger Agreement also provides that (i) the certificate of
incorporation of Merger Sub as in effect immediately prior to the Effective Time
shall be the certificate of incorporation of the Surviving Corporation, (ii) the
bylaws of Merger Sub as in effect immediately prior to the Effective Time shall
be the bylaws of the Surviving Corporation, (iii) the directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation as of the Effective Time and (iv) the officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation as of the Effective Time and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the certificate of incorporation and bylaws
of the Surviving Corporation, or as otherwise provided by law. The initial
directors of Merger Sub are Brian P. Anderson, John F. Gaither, Jr. and Thomas
J. Sabatino, Jr.
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<PAGE> 39
CONVERSION OF SHARES
The Merger Agreement provides that, as of the Effective Time, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares of Company Common Stock held by Baxter, or by any
subsidiary of Baxter or Dissenting Shares) shall be converted into the right to
receive (i) the fraction of a share (calculated and rounded to the nearest
ten-thousandth of one share) of Baxter Common Stock, the numerator of which
fraction shall be $9 and the denominator of which shall be the Baxter Stock
Price and (ii) one CPR. All such shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a Certificate shall cease to have any rights with
respect thereto, except to receive Merger Consideration, without interest, upon
surrender of such Certificates.
For purposes of calculating the Share Consideration, the "Baxter Stock
Price" shall be an amount equal to the average closing sale price of a share of
Baxter Common Stock, as such closing sale price shall be reported in The Wall
Street Journal, or, if not available, such other authoritative publication as
may be reasonably selected by Baxter, for the ten consecutive trading days
ending on and including the fifth trading day prior to the Closing Date. On
April 2, 1998, the last sale price of Baxter Common Stock as reported on the
NYSE was $55.0625 per share. Because the number of shares of Baxter Common Stock
to be received by stockholders of the Company will be determined based on the
average closing price of Baxter Common Stock over the ten trading day period
ending on and including the fifth trading day prior to the Closing Date, and
because the price of Baxter Common Stock is subject to fluctuation, the number
of shares of Baxter Common Stock that stockholders of the Company will receive
in the Merger may increase or decrease from the number of shares such
stockholders would receive based on the current market price for Baxter Common
Stock.
Under the foregoing provisions of the Merger Agreement, the specific
fraction of a share of Baxter Common Stock into which each share of Company
Common Stock will be converted will not be known until shortly prior to the
Closing Date and will vary depending on the Baxter Stock Price. For example, (x)
if the Baxter Stock Price is $60, each share of Company Common Stock will be
converted into 0.150 of a share of Baxter Common Stock, (y) if the Baxter Stock
Price is $50, each share of Company Common Stock will be converted into 0.180 of
a share of Baxter Common Stock, and (z) if the Baxter Stock Price is $40, each
share of Company Common Stock will be converted into 0.225 of a share of Baxter
Common Stock. The foregoing examples are for illustrative purposes only. There
can be no assurance that the Baxter Stock Price will be equal to or near any of
the foregoing amounts. Moreover, there can be no assurance that the fraction of
a share of Baxter Common Stock into which each share of Company Common Stock is
converted will have a market value equal to $9 at the time of actual receipt of
shares of Baxter Common Stock issued pursuant to the Merger. In addition, the
value of the shares of Baxter Common Stock to be received by the Company's
stockholders in connection with the Merger may fluctuate following the Effective
Time. There is no minimum or maximum fraction or number of shares of Baxter
Common Stock that may be issued under the provisions of the Merger Agreement.
THE COMPANY'S STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET PRICE QUOTATIONS
PRIOR TO MAKING ANY DECISION WITH RESPECT TO THE MERGER PROPOSAL.
FOLLOWING DETERMINATION OF THE BAXTER STOCK PRICE ON THE FIFTH TRADING DAY
PRIOR TO THE CLOSING DATE, THE COMPANY'S STOCKHOLDERS CAN OBTAIN THE BAXTER
STOCK PRICE AND THE SPECIFIC FRACTION OF A SHARE OF BAXTER COMMON STOCK INTO
WHICH EACH SHARE OF COMMON STOCK WILL BE CONVERTED BY CONTACTING THE INFORMATION
AGENT AT (800) 253-3814 (TOLL FREE). PROXIES AND REVOCATIONS OF PROXIES MAY BE
DELIVERED AT ANY TIME PRIOR TO THE TAKING OF THE VOTE AT THE SPECIAL MEETING.
THIS INFORMATION WILL ALSO BE POSTED ON THE WORLD WIDE WEB SITES OF EACH OF
BAXTER (http://www.baxter.com) AND THE COMPANY (http://www.somatogen.com).
Based upon the number of shares of Company Common Stock and shares of
Baxter Common Stock outstanding as of the Record Date and assuming a Baxter
Stock Price of $55.125, approximately 283 million shares of Baxter Common Stock
will be outstanding immediately after the issuance of shares contemplated
30
<PAGE> 40
by the Merger, of which up to approximately 3.4 million will be held by the
former holders of shares of Company Common Stock.
TREATMENT OF COMPANY STOCK OPTIONS
The Merger Agreement also provides that each Company Stock Option will be
treated in the manner described under the caption "The Merger -- Interests of
Certain Persons in the Merger -- Company Stock Options." The Company and Baxter
have each agreed to take such actions as shall be required or necessary under
the terms of the ESPP and the Company's stock option plans and any other
agreements pursuant to which a Company Stock Option was subject immediately
prior to the Effective Time to effectuate the provisions of the Merger
Agreement.
EXCHANGE OF CERTIFICATES REPRESENTING SHARES
The Merger Agreement provides that Baxter shall deposit, or shall cause to
be deposited, with an exchange agent selected by Baxter and reasonably
satisfactory to the Company (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with the
Merger Agreement, (i) on the date of the Effective Time, certificates
representing the number of shares of Baxter Common Stock and CPRs to be issued
as part of the Merger Consideration and (ii) from time to time as requested by
the Exchange Agent, cash to be paid in lieu of the issuance of fractional
shares, dividends and other distributions payable in respect of the shares of
Baxter Common Stock (such cash, certificates for CPRs and certificates for
shares of Baxter Common Stock, if any, together with dividends or distributions
with respect thereto being hereinafter referred to collectively as the "Exchange
Fund").
Promptly after the Effective Time, Baxter has agreed to cause the Exchange
Agent to mail (or deliver at its principal office) to each holder of record, at
the Effective Time, of shares of Company Common Stock (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in customary form and (ii)
instructions for use in effecting the surrender of the Certificates. Upon
surrender of a Certificate, for cancellation, to the Exchange Agent, together
with such letter of transmittal duly executed and completed in accordance with
the instructions thereto, the holder thereof shall be entitled to receive in
exchange therefor that portion of the Exchange Fund which such holder has the
right to receive, after giving effect to any required withholding tax, and the
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash to be paid as part of the Merger Consideration. In
the event of any transfer of ownership of shares of Company Common Stock which
has not been registered in the transfer records of the Company, certificates
representing the proper number of shares of Baxter Common Stock and certificates
representing the proper number of CPRs, together with a check in an amount equal
to the cash component of the Exchange Fund, will be issued to the transferee of
the Certificate presented to the Exchange Agent, if such Certificate is
accompanied by all documents required to evidence and effect the prior transfer
thereof and to evidence that any applicable stock transfer taxes associated with
such transfer were paid. CERTIFICATES SHOULD NOT BE SURRENDERED BY THE HOLDERS
OF SHARES OF COMPANY COMMON STOCK UNTIL SUCH HOLDERS RECEIVE THE LETTER OF
TRANSMITTAL FROM THE EXCHANGE AGENT.
DIVIDENDS
The Merger Agreement provides that no dividends or other distributions with
respect to shares of Baxter Common Stock constituting part of the Merger
Consideration shall be paid to the holder of any unsurrendered Certificates
until such Certificates are surrendered. Upon such surrender, all dividends and
other distributions payable in respect of the shares of Baxter Common Stock to
be issued in exchange therefor, on a date subsequent to, and in respect of a
record date after the Effective Time, shall be paid, without interest, to the
person in whose name the certificates representing the shares of Baxter Common
Stock into which such shares of Company Common Stock were converted are
registered or as otherwise directed by that person. In no event shall the person
entitled to receive such dividends or distributions be entitled to receive
interest on any such dividends or distributions.
31
<PAGE> 41
NO FRACTIONAL SHARES
The Merger Agreement provides that no certificates or scrip representing
fractional shares of Baxter Common Stock shall be issued upon the surrender of
Certificates; no dividend, stock split or other change in the capital structure
of the Company shall relate to any fractional interest, and such fractional
interests shall not entitle the owner thereof to vote or to any rights of a
security holder. In lieu of any such fractional interest, each holder of a
Certificate who would otherwise have been entitled to a fraction of a share of
Baxter Common Stock upon surrender of Certificates shall be paid cash upon such
surrender in an amount equal to the product of such fraction multiplied by the
Baxter Stock Price.
UNCLAIMED AMOUNTS
The Merger Agreement provides that any portion of the Exchange Fund which
remains unclaimed by the former stockholders of the Company six months after the
Effective Time shall be delivered by the Exchange Agent to Baxter. Any former
stockholders of the Company who have not theretofore complied with the exchange
provisions of the Merger Agreement shall thereafter look only to Baxter for
payment of the Merger Consideration, cash in lieu of fractional shares, and
unpaid dividends and distributions in respect of the shares of Baxter Common
Stock deliverable as part of the Merger Consideration, in all cases without any
interest thereon. None of Baxter, the Surviving Corporation, the Exchange Agent
or any other person will be liable to any former holder of shares of Company
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
LOST CERTIFICATES
The Merger Agreement provides that, in the event any Certificate shall have
been lost, stolen or destroyed, upon the making and delivery of an affidavit of
that fact by the person claiming such Certificate to have been lost, stolen or
destroyed and, if required by Baxter, the posting by such person of a bond, in
such reasonable amount as Baxter may direct, as indemnity against any claim that
would be made against the Surviving Corporation or Baxter with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificate the portion of the Exchange Fund deliverable in respect
thereof pursuant to the Merger Agreement.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
Baxter, Merger Sub and the Company relating to, among other things, certain
aspects of the respective businesses and financial statements of the parties and
certain other matters. The representations and warranties expire at the closing
of the Merger.
ORDINARY COURSE
The Merger Agreement provides that, except as otherwise specifically
provided in the Merger Agreement or as otherwise consented to in writing by
Baxter and Merger Sub, from the date of the Merger Agreement to the Effective
Time, the Company will conduct its operations only in the ordinary and usual
course of business, and will preserve intact its then-present business
organization, take all reasonable efforts to keep available the services of its
then-present officers, employees and consultants and preserve its present
relationships with licensors, licensees, suppliers, employees, labor
organizations and others with whom it had a significant business relationship.
Without limiting the generality of the foregoing, and except as otherwise
specifically provided in the Merger Agreement, the Company is not permitted,
without the prior written consent of Baxter and Merger Sub, to (a) propose or
adopt any amendment to or otherwise change the Company Certificate or the
Company Bylaws; (b) issue, sell, pledge, dispose of or encumber (except pursuant
to the exercise of Company Stock Options outstanding on the date of the Merger
Agreement) any of its shares or any of its other securities or any interest
relating to or whose value is dependent on the value of any equity interest in
the Company or issue any securities convertible into or exchangeable for,
options, warrants to purchase,
32
<PAGE> 42
scrip, rights to subscribe for, calls or commitments of any character whatsoever
relating to, or enter into any contract, understanding or arrangement with
respect to the issuance of, any of its shares or any of its other securities, or
enter into any arrangement or contract with respect to the purchase or voting of
shares of its capital stock, or adjust, split, reacquire, redeem, combine or
reclassify any of its securities, or make any other changes in its capital
structure; (c)(i) except in the ordinary course of business, incur (contingently
or otherwise) any material liability or other material obligation including,
without limitation, any indebtedness for borrowed money, enter into any
guarantee of any such obligation of another person or mortgage, pledge or
subject to any lien, charge or other encumbrance of their assets, properties or
business, or (ii) make any loans, advances or capital contributions to, or
investments in, any other person other than advances to employees in the
ordinary course of business; (d) enter into, amend or affirmatively renew any
contract, commitment, lease or other transaction (whether of real or personal
property) except such contracts, commitments, leases or other transactions that
are not material or are in the ordinary course of business and do not involve
affiliates of the Company; (e) sell or otherwise dispose of or lease any part of
its properties or assets, including but not limited to the sale or license of
any real estate or intellectual property, or purchase or otherwise acquire or
lease properties or assets (including real estate), except sales or purchases in
the ordinary course of business, or acquire or agree to acquire by merging or
consolidating with, or by purchasing all, or substantially all, of the assets
of, or by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof; (f)
declare, set aside or pay any dividends on, or make any distributions in respect
of, its outstanding shares of capital stock; (g) (i) make any change in the
compensation payable or to become payable to (A) any of its officers or
directors and (B) except in the ordinary course of business, any of its
employees, agents or consultants; (ii) enter into or amend any employment,
consulting, severance, termination or similar agreement; (iii) adopt any new
employee benefit plan or amend any existing such plan; (iv) make any loans to
any of its officers, directors, employees, agents or consultants or any changes
in its existing borrowing or lending arrangements for or on behalf of any of
such persons, whether contingent on the closing of the transactions contemplated
by the Merger Agreement or otherwise; or (v) take any action to cause to be
exercisable any otherwise unexercisable stock option; (h) make any material
changes in the type or amount of its insurance coverages; (i) make any material
tax election (unless required by law) or settle or compromise any material
income tax liability of the Company except if such action is taken in the
ordinary course of business and Baxter or its affiliate shall have been provided
reasonable prior notice thereof; (j) cancel any debts or waive, release or
relinquish any material contract rights or other material rights other than in
the ordinary course of business; (k) knowingly take or agree or commit to take
any action that would result in any of the Company's representations or
warranties being untrue in any material respect; or (l) make, or commit to make,
any capital expenditure in excess of $100,000 including, without limitation, for
the purchase of real estate.
RESALES OF BAXTER COMMON STOCK RECEIVED IN THE MERGER; RESTRICTIONS ON
AFFILIATES
All shares of Baxter Common Stock received by the Company's stockholders in
the Merger will be freely transferable under the Federal securities laws, except
that shares of Baxter Common Stock and the CPRs received by persons who are
deemed to be "affiliates" (as such term is defined under the Securities Act) of
the Company or Baxter prior to the consummation of the Merger may be resold by
such affiliates only in transactions permitted by the resale provisions of Rule
145 promulgated under the Securities Act (or Rule 144 in the case of such
persons who become affiliates of Baxter) or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of the Company or
Baxter generally include individuals or entities that control, are controlled
by, or are under common control with, such party and may include certain
officers and directors of such party as well as principal stockholders of such
party.
REDEMPTION OF COMPANY RIGHTS
The Merger Agreement provides that the Company will, prior to the Effective
Time, cause the Company Rights to be redeemed at a price of $.01 per Company
Right (as defined) pursuant to the terms of the Company Rights Agreement.
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<PAGE> 43
NYSE LISTING
Baxter will obtain listed trading privileges for the shares of Baxter
Common Stock to be issued in the Merger on the NYSE, the Chicago Stock Exchange
and the Pacific Stock Exchange. It is a condition to the consummation of the
Merger that the shares of Baxter Common Stock to be issued pursuant to the
Merger Agreement be approved for listed trading on the NYSE, subject only to
official notice of issuance. Baxter does not intend to list the CPRs on any
national securities exchange or cause the CPRs to be included in any interdealer
quotation system. It is not likely that any secondary market for the CPRs will
develop.
NO SOLICITATION
The Company agreed in the Merger Agreement (x) that neither the Company,
nor any of its directors, officers, legal counsel, or financial advisors, will,
and that the Company will make reasonable efforts to cause its other affiliates,
employees and agents not to, directly or indirectly, (i) solicit or initiate
(including by way of furnishing or disclosing non-public information) any
inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination involving the Company or the
acquisition of all or a substantial part of the assets or capital stock of the
Company (an "Acquisition Proposal") or (ii) negotiate, knowingly encourage or
otherwise engage in discussions with any person (other than Baxter and its
representatives) with respect to any Acquisition Proposal and (y) that the
Company will not enter into any agreement, arrangement or understanding with
respect to any such Acquisition Proposal which would require it to abandon,
terminate or fail to consummate the Merger or any other transaction contemplated
by the Merger Agreement; provided, however, that (a) the Company may, in
response to an unsolicited written proposal from a third party regarding a
Superior Proposal (as defined below), furnish information to (and enter into a
confidentiality or similar agreement with) and negotiate or otherwise engage in
discussions with, such third party, if the Board of Directors determines in good
faith, after consultation with its outside counsel that such action is required
for the Board of Directors to comply with its fiduciary duties under applicable
law and (b) concurrent with compliance with the termination provisions of the
Merger Agreement, the Company, upon three days prior written notice to Baxter,
may accept and enter into any definitive agreement relating to such Superior
Proposal.
As used in the Merger Agreement, "Superior Proposal" means a bona fide,
written and unsolicited proposal or offer made by any person (or group) (other
than Baxter or any of its representatives) with respect to an Acquisition
Proposal on terms which the Board of Directors determines in good faith (based
on the written advice of independent financial advisors), to be more favorable
to the Company and its stockholders than the transactions contemplated by the
Merger Agreement; provided, however, that such a proposal or offer shall not be
deemed to be a "Superior Proposal" unless the Board of Directors reasonably
determines that any financing required to consummate the transaction
contemplated by such proposal or offer is capable of being obtained.
The Company also agreed in the Merger Agreement that the Company, and its
directors, officers, legal counsel, or financial advisors will, and the Company
will make reasonable efforts to cause its other affiliates, employees and agents
to, immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person (other than Baxter and its
representatives) conducted before the date of the Merger Agreement with respect
to any Acquisition Proposal. The Company agreed to promptly advise Baxter of (i)
any inquiries or proposals received by, any non-public information requested
from, or any negotiations or discussions sought to be initiated or continued
with, the Company and (ii) any inquiries or proposals known by the Company to
have been received by, any non-public information known by the Company to have
been requested from, or any negotiation or discussions known by the Company to
have been sought to be initiated or continued with, its affiliates or any of the
respective directors, officers, employees, agents or representatives of the
foregoing, in each case from a person (other than Baxter and its
representatives) with respect to an Acquisition Proposal, and (iii) the terms
thereof, including the identity of such third party and the general terms of any
financing arrangement or commitment in connection with such Acquisition
Proposal, and the Company agreed to promptly update Baxter on an ongoing basis
of the status thereof.
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<PAGE> 44
Notwithstanding the aforementioned restrictions, the Merger Agreement does
not prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to the Company's stockholders if, in
the good faith judgment of the Board of Directors, after consultation with
outside counsel, failure so to disclose would be inconsistent with its
obligations under any applicable law, rule or regulation or any duty of the
Board of Directors.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that Baxter and Merger Sub each acknowledge
that all rights to indemnification or exculpation existing in favor of the
directors, officers, employees and agents of the Company as provided in the
Company Certificate, the Company Bylaws, the Company's indemnification
agreements or otherwise in effect, as of the date of the Merger Agreement, with
respect to matters occurring prior to the Effective Time shall survive the
Merger and shall continue in full force and effect. The Merger Agreement also
provides that, after the Effective Time, Baxter shall indemnify, defend and hold
harmless the present and former officers, directors, employees and agents of the
Company (each an "Indemnified Party") against all losses, claims, damages,
liabilities, fees and expenses (including reasonable fees and disbursements of
counsel and judgments, fines, losses, claims, liabilities and amounts paid in
settlement; provided that any such settlement is effected with the prior written
consent of Baxter) arising out of actions or omissions occurring at or prior to
the Effective Time to the full extent permitted under Delaware law, the Company
Certificate or the Company Bylaws, including provisions therein relating to the
advancement of expenses incurred in the defense of any action or suit; provided,
that nothing in the Merger Agreement shall impair any rights or obligations of
any present or former directors or officers of the Company.
The Merger Agreement provides that Baxter shall maintain in effect for not
fewer than six years from and after the Effective Time the policies of
directors' and officers' liability insurance most recently maintained by the
Company (provided that Baxter may substitute its self-insurance program and/or
policies with reputable and financially sound carriers of at least the same
coverage and containing terms and conditions no less advantageous as long as
such substitution does not result in gaps or lapses in coverage with respect to
claims arising from or related to matters occurring prior to the Effective Time,
and with respect to any such substituted program or insurance, Baxter shall
ensure that such program or insurance does not contain limitations of the type
contained in Section 145(b) of the DGCL, public policy limitations or any other
limitations in excess of the limitations contained in the insurance maintained
by the Company); provided that in no event shall Baxter be required to expend
more than an amount per year equal to 200% (the "Premium Amount") of the current
annual premiums paid by the Company to maintain or procure such insurance
coverage; provided, further, that if Baxter is unable to obtain such insurance,
Baxter shall obtain as much comparable insurance as is available for the Premium
Amount each year.
The Merger Agreement also provides that Baxter and Merger Sub shall pay all
expenses, including attorneys' fees, that may be incurred by the Indemnified
Party in enforcing the rights to which the Indemnified Party is entitled under
the Merger Agreement or the Surviving Corporation's certificate of incorporation
or bylaws or is otherwise entitled.
The Merger Agreement also provides that, in the event Baxter or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of Baxter shall
assume its indemnification and insurance obligations as described above.
EMPLOYEE BENEFITS
The Merger Agreement provides that Baxter will cause the Surviving
Corporation to offer employment to certain employees of the Company (the "Key
Employees") and it is a condition to Baxter's obligation to
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<PAGE> 45
consummate the Merger that a substantial number of such employees have accepted
such offers. See "-- Conditions to the Merger -- Conditions to Baxter's
Obligations."
In the Merger Agreement, Baxter expressed its intent to, after the closing
of the transactions contemplated by the Merger Agreement, provide employees of
the Company who become and continue to be employed by Baxter with total
compensation and benefits comparable to similarly situated Baxter employees.
Each employee of the Company who becomes an employee of Baxter will receive full
credit (A) under the applicable welfare benefit plans of Baxter in which such
employee is eligible to participate for his or her time of service to the
Company, (B) for eligibility and vesting (but not for benefit accrual) under
Baxter's qualified retirement plans for his or her time of service to the
Company and (C) under the vacation, sick leave and paid-time off policies of
Baxter applicable to such employee, for all accrued and unused vacation, sick
leave and paid-time off to which such employee is entitled as of the Closing
Date. Notwithstanding the foregoing, employees will begin to receive service
credit for retiree medical benefits as of the Closing Date. Baxter will waive
any pre-existing condition limitations or waiting periods under such employee
benefit plans.
CONSENTS AND APPROVALS
The Merger Agreement provides that each of the Company, Baxter and Merger
Sub will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to the Merger Agreement and
the transactions contemplated thereby (which actions shall include, without
limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other governmental or
regulatory entity) and will promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon any of them or
any of Baxter's subsidiaries in connection with the Merger Agreement and the
transactions contemplated thereby. The Merger Agreement also provides that each
of the Company, Baxter and Merger Sub will take all reasonable actions necessary
to obtain (and will cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by, any governmental or
regulatory entity or other public or private third party required to be obtained
or made by Baxter, Merger Sub, the Company or any of Baxter's subsidiaries in
connection with the Merger or the taking of any action contemplated by the
Merger Agreement.
CONDITIONS TO THE MERGER
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES. The respective obligations of
each party to effect the Merger is subject to the satisfaction or waiver of the
following conditions: (a) all authorizations, consents, orders or approvals of,
or declarations or filings with, or expiration of waiting periods imposed by,
any Federal, state, local or foreign governmental or regulatory authority
necessary for the consummation of the Merger and the transactions contemplated
by the Merger Agreement shall have been filed, occurred or been obtained and
shall be in effect at the Effective Time; (b) no temporary restraining order,
preliminary injunction or permanent injunction or other order precluding,
restraining, enjoining, preventing or prohibiting the consummation of the Merger
shall have been issued by any Federal, state or foreign court or other
governmental or regulatory authority and remain in effect; (c) no Federal,
state, local or foreign statute, rule or regulation shall have been enacted
which prohibits the consummation of the Merger or would make the consummation of
the Merger illegal; (d) the Merger Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote of the
stockholders of the Company in accordance with and subject to applicable law;
(e) the Registration Statement shall have been declared effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order; (f) the CPR Agreement shall have been duly qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"); (g)
there shall have occurred no amendment to the Code or promulgation of a Treasury
Regulation thereunder or a judicial interpretation thereof published, after the
date of the Merger Agreement, by a Federal Court (a "Change in Tax Law") that
would cause the Merger, if consummated after the effective date of such Change
in Tax Law, to fail to qualify as a reorganization under
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<PAGE> 46
Section 368 of the Code; and (h) the shares of Baxter Common Stock to be issued
pursuant to the Merger Agreement shall have been listed on the NYSE, subject to
official notice of issuance.
CONDITIONS TO BAXTER'S OBLIGATIONS. The obligation of Baxter and Merger Sub
to effect the Merger is further subject to the satisfaction at or prior to the
Closing Date of the following conditions, unless waived by Baxter and Merger
Sub: (a) the representations and warranties of the Company set forth in the
Merger Agreement shall be true and correct in all material respects as if made
as of the Closing Date (unless such representation or warranty is, by its terms,
made only as of a specific other date and time), except as would not be
reasonably expected to have a Material Adverse Effect (as defined in the Merger
Agreement); (b) the Company shall have performed and complied, in all material
respects, with all obligations and covenants required to be performed or
complied with by it under the Merger Agreement at or prior to the Closing Date;
(c) the Company shall have obtained all consents, approvals, authorizations and
permits required from third parties and any governmental or regulatory entity
(applicable to the Company) necessary for the consummation by the Company of the
transactions contemplated by the Merger Agreement; (d) Baxter and Merger Sub
shall have received from the Company an officer's certificate, executed on
behalf of the Company by an authorized officer confirming, to such officers'
knowledge, that the conditions set forth in clauses (a) and (b), above, have
been complied with; (e) from the date of the Merger Agreement through the
Effective Time, no event shall have occurred which shall be reasonably likely to
result or shall have resulted in a Material Adverse Effect; (f) Baxter and
Merger Sub shall have received an opinion from special counsel to the Company,
in the forms contemplated by the Merger Agreement; (g) the Key Employees shall
have entered into employment or other agreements for the periods and on such
other terms substantially as contemplated by the Merger Agreement; and (h) the
aggregate number of shares of Company Common Stock constituting Dissenting
Shares shall be less than seven percent of the outstanding shares of Company
Common Stock immediately prior to the Effective Time.
CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of the Company to
effect the Merger are further subject to the satisfaction at or prior to the
Closing Date of the following conditions, unless waived by the Company: (a) the
representations and warranties of Baxter and Merger Sub set forth in the Merger
Agreement shall be true and correct in all material respects as of the date of
the Merger Agreement as if made as of the Closing Date (unless such
representation or warranty is, by its terms, made only as of a specific other
date and time) except as would not be reasonably expected to have a Baxter
Material Adverse Effect (as defined in the Merger Agreement); (b) Baxter and
Merger Sub shall have performed and complied with, in all material respects, all
obligations and covenants required to be performed or complied with by it under
the Merger Agreement at or prior to the Closing Date; (c) Baxter and Merger Sub
shall have obtained all consents, approvals, authorizations and permits required
from third parties and any governmental or regulatory entity (applicable to
Baxter and Merger Sub and Baxter's subsidiaries) necessary for the consummation
by Baxter and Merger Sub of the transactions contemplated by this Agreement; (d)
the Company shall have received from Baxter and Merger Sub an officer's
certificate executed on behalf of each of Baxter and the Merger Sub by an
authorized officer confirming, to such officer's knowledge, that the conditions
set forth in clauses (a) and (b), above, have been complied with; (e) the
Company shall have received opinions from counsel to Baxter substantially in the
form contemplated by the Merger Agreement; and (f) from the date of the Merger
Agreement through the Effective Time, no event shall have occurred which shall
be reasonably likely to result or shall have resulted in a Baxter Material
Adverse Effect.
TERMINATION, AMENDMENT AND WAIVER
The Merger Agreement provides that the Merger Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after shareholder approval thereof: (a) by mutual consent of the board
of directors of Baxter and the Board of Directors; or (b) by either the board of
directors of Baxter or the Board of Directors: (i) if the Merger shall not have
been consummated on or prior to July 31, 1998; provided, however, that the right
to terminate the Merger Agreement shall not be available to any party whose
failure to fulfill any material obligation under the Merger Agreement has been
the cause of or resulted in, the failure of the Merger to be consummated on or
prior to such date; or (ii) if a court of competent jurisdiction or other
governmental or regulatory authority shall have issued an order,
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<PAGE> 47
decree or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable efforts to lift), in each
case permanently restraining, enjoining, or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree, ruling
or other action shall have become final and nonappealable; (iii) if (a) the
Special Meeting (including any adjournments thereof) shall have been held and
completed and the Company's stockholders shall have taken a final vote on a
proposal to approve and adopt the Merger Agreement and to approve the Merger,
and (b) the adoption and approval of the Merger Agreement and the approval of
the Merger by the holders of a majority of the shares of Company Common Stock
outstanding on the Record Date shall not have been obtained.
The Merger Agreement may also be terminated by the Board of Directors: (i)
if, prior to the Effective Time, the Company shall have (A) accepted a Superior
Proposal in compliance with the Merger Agreement and (B) paid or caused to be
paid the fees provided for in the Merger Agreement; or (ii) if, prior to the
Effective Time, (A) the Company is not in material breach of this agreement, (B)
Baxter or Merger Sub breaches or fails in any material respect to perform or
comply with any of its covenants and agreements or breaches its representations
and warranties and (C) such breach or failure, if curable, shall not have been
cured in all material respects by Baxter or Merger Sub within thirty days
following receipt by Baxter of written notice from the Company describing such
breach or failure.
The board of directors of Baxter may also terminate the Merger Agreement:
(i) if (A) neither Baxter nor Merger Sub is in material breach of the Merger
Agreement and (B) prior to the Effective Time, the Board of Directors shall have
withdrawn or modified or changed (including by amendment to the Proxy Statement/
Prospectus) in a manner adverse to Baxter or Merger Sub its approval or
recommendation of the Merger or this Agreement, or shall have recommended a
Superior Proposal; or (ii) if prior to the Effective Time, (A) neither Baxter
nor Merger Sub is in material breach of the Merger Agreement, (B) the Company
breaches or fails in any material respect to perform or comply with any of its
covenants and agreements contained herein or breaches its representations and
warranties and (C) such breach or failure, if curable, shall not have been cured
in all material respects by the Company within thirty days following receipt by
the Company of written notice from Baxter or Merger Sub describing such breach
or failure.
Subject to applicable law, the Merger Agreement may be amended, modified
and supplemented in any and all respects, whether before or after any vote of
the stockholders of the Company contemplated thereby, by written agreement of
the parties, by action taken by their respective boards of directors, at any
time prior to the Effective Time with respect to any of the terms contained
therein; provided, however, that after the approval of the Merger Agreement by
the stockholders of the Company, no such amendment, modification or supplement
shall reduce or change the Merger Consideration. Under applicable law, any
amendment subsequent to the adoption of the Merger Agreement by the Company's
stockholders that alters any contractual rights of the Company's stockholders in
connection with the Merger, such as a change in the amount or kind of securities
to be received in exchange for Company Common Stock in the Merger, or that
otherwise adversely affects the Company's stockholders would require the further
approval of the Company's stockholders.
FEES AND EXPENSES
All costs and expenses incurred in connection with the Merger Agreement and
the consummation of the transactions contemplated thereby shall be paid by the
party incurring such expenses, except:
(i) if the Merger Agreement is validly terminated by the Company
because the Company accepted a Superior Proposal, and at the time of such
termination, neither Baxter nor Merger Sub shall have been in breach of the
Merger Agreement in any material respect and there shall not have occurred
and continue to exist a Baxter Material Adverse Effect, then, concurrently
with such termination, the Company shall pay or cause to be paid to Baxter
(by wire transfer) an amount equal to $5.0 million; or
(ii) if the Merger Agreement is validly terminated by Baxter because
the Board of Directors shall have withdrawn, or modified or changed
(including by amendment to the Proxy Statement/Prospectus) in a manner
adverse to Baxter or Merger Sub its approval or recommendation of the
Merger or the Merger Agreement, or shall have recommended a Superior
Proposal, and at the time of such
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<PAGE> 48
termination, neither Baxter nor Merger Sub shall have been in breach in any
material respect of the Merger Agreement and there shall not have occurred
and continue to exist a Baxter Material Adverse Effect, then, within three
business days after such termination, the Company shall pay or cause to be
paid to Baxter (by wire transfer) an amount equal to $5.0 million; or
(iii) if the Merger Agreement is validly terminated by the Company or
by Baxter because (a) (x) the Special Meeting shall have been held and
completed and the Company's stockholders shall have taken a final vote on a
proposal to approve and adopt the Merger Agreement and to approve the
Merger, and (y) the adoption and approval of the Merger Agreement and the
approval of the Merger by the holders of a majority of the shares of
Company Common Stock outstanding on the Record Date shall not have been
obtained (the "Negative Stockholder Vote"), (b) an Acquisition Proposal
shall have been made and publicly announced at or prior to the Special
Meeting, (c) an Acquisition Proposal shall have been consummated within six
months of the date of such termination and (d) at the time of termination
of the Merger Agreement due to a Negative Stockholder Vote, neither Baxter
nor Merger Sub shall have been in breach in any material respect of the
Merger Agreement and there shall not have occurred and continue to exist a
Baxter Material Adverse Effect, then, upon consummation of such Acquisition
Proposal, the Company shall pay or cause to be paid to Baxter (by wire
transfer) an amount equal to $5.0 million.
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<PAGE> 49
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth certain information regarding beneficial
ownership of shares of Company Common Stock as of the Record Date by (i) each
director of the Company; (ii) each executive officer; (iii) all executive
officers and directors as a group; and (iv) all those known by the Company to be
beneficial owners of more than five percent of the Company Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIAL
NUMBER OF SHARES(1) OWNED(2)
------------------- ----------
<S> <C> <C>
Eli Lilly and Company............................... 2,954,104(3) 14.1%
Lilly Corporate Center
Indianapolis, Indiana 46285
Andre de Bruin...................................... 556,829 2.6
Carlos A. Ferrer.................................... 47,107 *
Bernadine Healy..................................... 40,836 *
Gene I. Miller(4)................................... 492,558 2.3
George B. Rathmann(5)............................... 107,719 *
Jack W. Schuler(6).................................. 291,649 1.4
Ralph Snyderman..................................... 130,469 *
Robert F. Caspari................................... 142,443 *
Carol L. Cech(7).................................... 76,142 *
J. William Freytag.................................. 168,623 *
Richard J. Gorczynski............................... 136,023 *
Timothy D. Hoogheem................................. 146,857 *
Thomas A. Keuer..................................... 66,181 *
Conrad A. McCarty................................... 12,937 *
All directors and executive officers as a group (14
persons)(2), (4)-(7).............................. 2,416,373 10.7
</TABLE>
- ------------
* Less than one percent
(1) This table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the footnotes to this
table and subject to community property laws where applicable, each of the
stockholders named in this table has sole voting and investment power with
respect to the shares indicated as beneficially owned. Percentage of
ownership is based on 20,926,114 shares of Company Common Stock outstanding
as of the Record Date adjusted as required by rules promulgated by the
Commission.
(2) Shares of Company Common Stock subject to options currently exercisable
within 60 days of the Record Date, options subject to acceleration based
upon the terms of the Merger Agreement, options subject to acceleration
based upon the terms of the respective stock option plan, and options
subject to acceleration based upon an agreement with the executive officer
are deemed to be outstanding for computing the percentage of the person or
entity holding such securities but are not outstanding for computing the
percentage of any other person or entity. Except as indicated by footnote,
and subject to community property laws where applicable, the persons named
in the table above have sole voting and investment power with respect to
all shares of Company Common Stock shown as beneficially owned by them.
Includes an aggregate number of shares that may be issuable upon exercise
of Company Stock Options for each individual as follows: Mr. Miller,
58,406; Mr. Schuler, 58,094; Dr. Healy, 37,836; Dr. Rathmann, 57,719; Dr.
Snyderman, 82,719; Mr. Ferrer, 37,107; Mr. de Bruin, 555,000; Dr. Caspari,
139,000; Dr. Cech, 51,000; Dr. Freytag, 146,500; Dr. Gorczynski, 133,500;
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<PAGE> 50
and Mr. Hoogheem, 141,500; Mr. Keuer, 54,700; Mr. McCarty, 11,900; all
directors and executive officers as a group (14 persons), 1,564,981.
(3) Lilly has entered into the Voting Agreement with Baxter. See "The Special
Meeting -- Voting Agreement."
(4) Includes 433,952 shares held of record by Peregrine Ventures II, L.P.
("Peregrine"). Mr. Miller is a General Partner of Miller and LaHaye, L.P.,
the General Partner of Peregrine. Mr. Miller shares voting and investment
power with respect to such shares and may be deemed to be the beneficial
owner of such shares. Also includes 200 shares held by Mr. Miller's spouse
as to which he disclaims beneficial ownership.
(5) Includes 12,500 shares owned by Falcon Technology Partners, a Limited
Partnership of which Dr. Rathmann is a Limited Partner.
(6) Includes 7,000 shares owned by Mr. Schuler's spouse and an aggregate of
2,200 shares owned by Mr. Schuler's spouse as joint tenant with or as
custodian for Mr. Schuler's children.
(7) Includes 250 shares held by Dr. Cech's spouse and 543 shares which will be
issued to Dr. Cech under the terms of the Somatogen, Inc. Custom 401(k)
Plan resulting from a reconciliation of the Company's matching
contributions.
INFORMATION CONCERNING THE COMPANY
The Company is a biopharmaceutical company developing specialty oxygen
therapeutics and other pharmacological agents utilizing its proprietary
recombinant hemoglobin technology. The Company's lead development compound
rHb1.1, is a recombinant variant of human hemoglobin. The Company's first
proposed application of rHb1.1 is as an oxygen carrying pharmaceutical for use
in surgery to reduce or eliminate the requirement for allogeneic (donor) blood
transfusions. The Company proposes to market rHb1.1 under the registered
trademark "Optro(R)."
Other therapeutic applications under investigation for recombinant
hemoglobin include the treatment or prevention of hypoxia (lack of oxygen)
observed with severe hemorrhage (trauma), acute cerebral ischemia (stroke) and
acute myocardial ischemia (myocardial infarction). The Company's discovery
research program is focused on designing recombinant hemoglobin molecules which
are targeted for these and other hypoxia indications. See "Incorporation of
Certain Documents by Reference."
INFORMATION CONCERNING BAXTER
Baxter was incorporated under Delaware law in 1931 and is engaged in the
worldwide development, distribution and manufacture of a diversified line of
products, systems and services used primarily in the health care field. Products
are manufactured by Baxter in 25 countries and sold in approximately 100
countries. Health care is concerned with the preservation of health and with the
diagnosis, cure, mitigation and treatment of disease and body defects and
deficiencies. Baxter's products are used by hospitals, clinical and medical
research laboratories, blood and dialysis centers, nursing homes, doctors'
offices and at home under physician supervision.
Baxter operates in a single industry segment as a global developer,
manufacturer and marketer of products and technologies related to the blood and
circulatory system. It has market-leading positions in four businesses within
this segment of the medical products and services industry: Blood Therapies,
which develops biopharmaceutical and blood collection and separation products
and technologies; I.V. Systems/ Medical Products, which develops technologies
and systems to improve intravenous medication delivery and distributes medical
products; Renal, which develops products and services to treat kidney disease;
and CardioVascular, which develops products and provides services to treat
late-stage heart disease and vascular disorders. See "Incorporation of Certain
Documents by Reference."
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<PAGE> 51
COMPARISON OF THE RIGHTS OF HOLDERS OF BAXTER COMMON STOCK
AND HOLDERS OF COMPANY COMMON STOCK
As a consequence of the Merger and the transactions contemplated thereby,
stockholders of the Company will become stockholders of Baxter. The following is
a summary of certain similarities and material differences between the rights of
holders of shares of Company Common Stock and the rights of holders of Baxter
Common Stock. Because each of the Company and Baxter is organized under the laws
of the State of Delaware, these differences arise solely from various provisions
of the certificate of incorporation and bylaws of each of the Company and
Baxter, as well as from the Baxter Rights Agreement and the Rights Agreement,
dated as of June 5, 1997, between the Company and ChaseMellon Shareholder
Services, L.L.C., as rights agent (the "Company Rights Plan").
The following summary does not purport to be a complete statement of the
rights of stockholders under the provisions of the Company Certificate, the
Company Bylaws and the Company Rights Plan as compared with the rights of
Baxter's stockholders under the provisions of Baxter's amended and restated
certificate of incorporation (the "Baxter Certificate"), the amended and
restated bylaws of Baxter (the "Baxter Bylaws") and the Baxter Rights Agreement,
or a complete description of the specific provisions referred to herein. The
summary is qualified in its entirety by reference to the governing corporate
instruments, including the aforementioned instruments, of the Company and
Baxter, copies of which have been filed as exhibits to documents incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
MEETINGS OF STOCKHOLDERS
Under Delaware law, special meetings of stockholders may be called by the
board of directors or such other persons as may be authorized by the certificate
of incorporation or bylaws. The Company Bylaws provide that special meetings of
the Company's stockholders for any purpose may be called by (i) the Chairman of
the Board of Directors, (ii) the President, (iii) a majority of the Board of
Directors or (iv) any other person upon written request to the Chairman of the
Board of Directors, the President or Secretary of the corporation. The Baxter
Bylaws provide that a special meeting may be called only by (i) the Chairman of
the board of directors and Chief Executive Officer or Secretary, and shall be
done so upon a request in writing therefor signed by a majority of the members
of the board of directors or (ii) by resolution of the board of directors.
NUMBER AND ELECTION OF DIRECTORS
NUMBER OF DIRECTORS. Under Delaware law, the number of directors shall be
fixed by or in the manner provided in the bylaws, unless the certificate of
incorporation fixes the number of directors, in which case a change in the
number of directors shall be made only by amendment to the certificate. The
Company Certificate and the Company Bylaws provide that the number of directors
shall be determined by one or more resolutions adopted by the Board of
Directors. The Baxter Certificate and the Baxter Bylaws provide for a variable
number of directors between 12 and 20, as fixed from time to time by the board
of directors. The Baxter Bylaws provide that no person shall be eligible for
reelection or appointment as a director who, at the time of his election or
appointment is 72 years old, or older.
ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS OF DIRECTORS. Under the Company
Bylaws, nominations of persons for election to the Board of Directors may be
made at a meeting of stockholders by any stockholder entitled to vote, provided
that the Secretary of the Company receives written notice not less than 120 days
prior to the date specified in the Company's proxy statement released to
stockholders in connection with the previous year's annual meeting; provided,
however, that in the event that no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than 30 days from the
date contemplated at the time of the previous year's proxy statement, notice to
be timely must be received a reasonable time before solicitation is made.
Stockholder notices must state, among other things, a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, the name and record address of
the stockholder proposing the business, the class and number of shares of
Company stock beneficially owned
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by the stockholder, any material interest in such business and any other
information relating to the stockholder or the proposal required to be disclosed
in solicitations for proxies for the election of directors pursuant to
Regulation 14A under the Exchange Act.
Under the Baxter Bylaws nominations of persons for election may be made at
a meeting of stockholders by any stockholder entitled to vote, provided that the
Secretary of Baxter receives written notice (i) in the case of an annual
meeting, not less than sixty days nor more than ninety days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure of
the date of the annual meeting was made, whichever occurs first, and (ii) in the
case of a special meeting of stockholders called for the purpose of electing
directors, not later than the close of business on the tenth day following the
day on which notice of the date of the special meeting was mailed or public
disclosure of the date of the special meeting was made, whichever occurs first.
Stockholder notices must state, among other things, a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, the name and record address of
the stockholder proposing the business, the class and number of shares of Baxter
Stock beneficially owned by the stockholder, any material interest in such
business and any other information relating to the stockholder or the proposal
required to be disclosed in solicitations for proxies for the election of
directors pursuant to Regulation 14A under the Exchange Act. As to each person
that the stockholder proposed to nominate, the notice must state: the name, age,
business address and record address of the person; that person's occupation or
employment; the class and number of shares of capital stock of Baxter which are
owned by the person and any other information required to be disclosed pursuant
to Section 14 of the Exchange Act.
CLASSIFICATION OF BOARD OF DIRECTORS. Delaware law permits (but does not
require) a certificate of incorporation to provide that a board of directors be
divided into classes, with each class having a term of office longer than one
year but not longer than three years. Neither the Company Certificate nor the
Company Bylaws provide for a classified board. Accordingly, all members of the
Board of Directors are elected at each annual meeting. The Baxter Certificate
provides that Baxter's board of directors shall be divided into three classes,
each to be elected at every third meeting.
INDEMNIFICATION
The Company Certificate and the Company Bylaws generally provide that the
Company shall indemnify directors and executive officers to the fullest extent
permitted by Delaware law. Such indemnification may be limited by individual
contracts with directors and executive officers. The Company is not required to
indemnify any director or officer in connection with any proceeding initiated by
such person against the corporation or its directors, officers, employees or
other agents unless (i) such indemnification is required by law, (ii) the
proceeding was authorized by the Board of Directors or (iii) such
indemnification is provided by the corporation, in its sole discretion. The
Company has entered into indemnification agreements with its directors and
certain officers. The form of such agreements has been listed as an exhibit to a
document incorporated by reference. See "Incorporation of Certain Documents by
Reference." The Company has the power to indemnify its other officers, employees
and other agents pursuant to Delaware law. The liability of the directors for
money damages shall be eliminated to the fullest extent permitted by Delaware
law. The Baxter Certificate provides that, to the fullest extent permitted under
Delaware law, a director of Baxter shall not be liable to Baxter or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Baxter Certificate provides that Baxter shall indemnify its officers and
directors to the fullest extent permitted by Delaware law, except with respect
to an action commenced by such director or officer against Baxter or by such
director or officer as a derivative action by or in the right of the Baxter
stockholders.
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CERTAIN VOTING RIGHTS
The Baxter Bylaws require the affirmative vote of the holders of not less
than a majority of the voting stock of Baxter before Baxter may purchase any
outstanding shares of Baxter Common Stock at a price above the market price from
a selling stockholder, except with respect to purchases made as a part of a
tender or exchange offer by Baxter or any purchaser or acquisition made pursuant
to an open market purchase program approved by the board of directors of Baxter.
The Company Certificate provides that certain transactions between the
Company and an interested stockholder (generally a person holding more than 15%
of the outstanding voting stock of the Company) require the approval of the
holders of two-thirds of all outstanding shares of capital stock not
beneficially owned by any interested stockholder or any affiliate of any
interested stockholder, voting together as a single class, including (i) the
merger or consolidation of the Company with an interested stockholder or any
other corporation which is, or after the merger would be, an affiliate of an
interested stockholder; (ii) any sale of assets having a fair market value equal
to or greater than 15% of the Company's assets to or with any interested
stockholder or any affiliate of an interested stockholder; (iii) issuance or
transfer by the Company of any securities of the Company to any interested
stockholder or any affiliate of an interested stockholder in exchange for cash,
securities or other property having a fair market value equal to or greater than
15% of the Company's assets; (vi) adoption of a plan of liquidation or
dissolution of the Company proposed by an interested stockholder or an affiliate
of an interested stockholder; and (v) reclassification of securities or
recapitalization of the Company, or any other transaction which has the effect
of increasing the proportionate share of the outstanding shares of any class of
equity or convertible securities of the Company which is beneficially owned by
any interested stockholder or any affiliate of an interested stockholder equal
to or greater than 15% of the Company's assets.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under Delaware law, any or all directors of a corporation which does not
have cumulative voting or a classified board may be removed, with or without
cause, by the holders of a majority of the shares entitled to vote at an
election of directors, unless such corporation's certificate of incorporation
provides otherwise. The Company Certificate provides that any director or the
entire Board of Directors may be removed from office at any time (i) with cause
by the affirmative vote of the holders of at least a majority of the voting
power of all of the then-outstanding shares entitled to vote, voting together as
a single class; or (ii) without cause by the affirmative vote of the holders of
80% of the voting power of all of the then-outstanding shares entitled to vote.
Under Delaware law, a director of a corporation, such as Baxter, with a
classified board of directors may be removed only for cause unless the
certificate of incorporation provides otherwise. The Baxter Certificate does not
alter the statutory means by which directors may be removed by stockholders.
AMENDMENT OF BYLAWS
Under Delaware law, the power to adopt, amend or repeal bylaws is vested in
the stockholders unless the certificate of incorporation confers the power to
adopt, amend or repeal bylaws upon the directors as well. Both the Company
Certificate and the Baxter Certificate grant such power to their respective
boards of directors. The Company Bylaws provide that, with the exception of
bylaws regarding indemnification of directors and executive officers, for which
repeal or modification is only prospective, the Company Bylaws may be amended or
repealed by the stockholders with the approval of the holders of two-thirds of
the voting Stock of the Company. The Baxter Bylaws provide that a majority vote
of stockholders, or a majority vote of the directors present at any meeting, may
amend or alter any of the Bylaws.
STOCKHOLDERS' RIGHTS PLANS
BAXTER RIGHTS PLAN. On March 20, 1989, the board of directors of Baxter
declared a dividend distribution of one right (each a "Baxter Right") for each
outstanding share of the Baxter Common Stock, to stockholders of record at the
close of business on April 6, 1989. Each Baxter Right entitles the registered
holder to purchase from Baxter a unit consisting of one-hundredth of a share (a
"Unit") of Series A Junior
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Participating Preferred Stock, without par value, of Baxter (the "Preferred
Stock"), at a Purchase Price of $70 per Unit, subject to adjustment. The
description and terms of the Baxter Rights are set forth in the Baxter Rights
Agreement. The Baxter Rights are not exercisable until the Distribution Date (as
defined) and will expire at the close of business on March 20, 1999, unless
earlier redeemed by Baxter as described below. No fractional Units will be
issued and, in lieu thereof, an adjustment in cash will be based on the market
price of the Preferred Stock on the last trading date prior to the date of
exercise.
Initially, the Baxter Rights are attached to all Baxter Common Stock
certificates representing shares then outstanding, and no separate Baxter Rights
certificates will be distributed. The Baxter Rights will be separate from the
Baxter Common Stock and a distribution date (the "Distribution Date") will occur
upon the earlier of (i) ten days following a public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding shares of Baxter Common Stock (the "Stock Acquisition Date")
or (ii) ten business days following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owing 20% or
more of such outstanding shares of Baxter Common Stock.
Until the Distribution Date, (i) the Baxter Rights will be evidenced by the
Baxter Common Stock certificates and will be transferred with and only with such
Baxter Common Stock certificates and (ii) the surrender for transfer of any
certificates for Baxter Common Stock outstanding will also constitute the
transfer of the Baxter Rights associated with the Baxter Common Stock
represented by such certificate. The shares of Baxter Common Stock constituting
the Share Consideration will be issued with Baxter Rights attached.
Pursuant to the Baxter Rights Agreement, Baxter reserves the right to
require, prior to the occurrence of a Triggering Event (as defined) that, upon
any exercise of Baxter Rights, a number of Baxter Rights be exercised so that
only whole shares of Preferred Stock will be issued.
As soon as practicable after the Distribution Date, Baxter Rights
certificates will be mailed to holders of record or the Baxter Common Stock as
of the close of business on the Distribution Date and, thereafter, the separate
Baxter Rights certificates alone will represent the Baxter Rights. Except as
otherwise determined by the board of directors of Baxter, only shares of Baxter
Common Stock issued prior to the Distribution Date will be issued with Baxter
Rights.
In general, Baxter may redeem the Baxter Rights in whole, but not in part,
at a price of $.01 per Baxter Right (payable in cash, shares of Baxter Common
Stock or other consideration deemed appropriate by the board of directors of
Baxter) at any time until ten days following the Stock Acquisition Date.
Immediately upon the action of the board of directors of Baxter ordering
redemption of the Baxter Rights, the Baxter Rights will terminate and the only
right of the holders of Baxter Rights will be to receive the $.01 redemption
price.
Until a Baxter Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of Baxter, including, without limitation, the right
to vote or to receive dividends. Stockholders of Baxter may, depending upon the
circumstances, recognize taxable income in the event that the Baxter Rights
become exercisable for shares of Baxter Common Stock (or other consideration) of
Baxter or for common stock of the acquiring company as set forth below.
Other than those provisions relating to the principal economic terms of the
Baxter Rights, any of the provisions of the Baxter Rights Agreement may be
amended by the board of directors of Baxter prior to the Distribution Date.
After the Distribution Date, the provisions of the Baxter Rights Agreement may
be amended by the board of directors of Baxter in order to cure any ambiguity,
to make changes which do not adversely affect the interests of holders of Baxter
Rights (excluding the interests of any Acquiring Person), or to shorten or
lengthen any time period under the Baxter Rights Agreement; provided, however,
that no amendment to adjust the time period governing redemption shall be made
at such time as the Baxter Rights are not redeemable.
The Baxter Rights have certain anti-takeover effects. The Baxter Rights
will cause substantial dilution to a person or group that attempts to acquire
Baxter without conditioning the offer on a substantial number of
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Baxter Rights being acquired. The Baxter Rights, however, should not affect any
prospective offeror willing to make an offer for all shares of Baxter which is
fair to and otherwise in the best interests of Baxter and its stockholders as
determined by a majority of the independent directors. The Baxter Rights should
not interfere with any merger or other business combination approved by the
board of directors of Baxter since the board of directors of Baxter may, at its
option, at any time until ten days following the Stock Acquisition Date redeem
all but not less than all the then outstanding Baxter Rights at $.01 per Baxter
Right.
In the event that, at any time following the Distribution Date, a person
becomes the beneficial owner of 20% or more of the then outstanding shares of
Baxter Common Stock (except pursuant to an offer for all outstanding shares of
Baxter Common Stock which the independent directors determine to be fair to and
otherwise in the best interests of Baxter and its stockholders), each holder of
a Baxter Right will thereafter have the right to receive, upon payment of the
exercise price of the Baxter Right, Baxter Common Stock having a value equal to
two times the exercise price of the Baxter Right. If an insufficient number of
shares of Baxter Common Stock is authorized for issuance (as would currently be
the case for Baxter), Baxter would be required to substitute cash, property or
other securities of Baxter for the Baxter Common Stock. Notwithstanding any of
the foregoing, following the occurrence of the event set forth in this
paragraph, all Baxter Rights that are, or (under certain circumstances specified
in the Baxter Rights Agreement) were, beneficially owned by any Acquiring Person
will be null and void. However, Baxter Rights are not exercisable following the
occurrence of the event set forth in this paragraph until such time as the
Baxter Rights are no longer redeemable by Baxter as set forth below.
For example, at an exercise price of $70 per Baxter Right, each Baxter
Right not owned by an Acquiring Person (or by certain related parties) following
an event set forth in the preceding paragraph, would entitle its holder to
purchase $140 worth of Baxter Common Stock (or other consideration, as noted
above) for $70. Assuming that the Baxter Common Stock has a per share value of
$20 at such time, the holder of each valid Baxter Right would be entitled to
purchase seven shares of Baxter Common Stock for $70.
In the event that, at any time following the Stock Acquisition Date, (i)
Baxter is acquired in a merger or other business combination transaction in
which Baxter is not the surviving corporation (other than a merger which follows
an offer described in the second preceding paragraph), or (ii) 50% or more of
Baxter's assets or earning power is sold or transferred, each holder of a Baxter
Right (except Baxter Rights which previously have been voided as set forth
above) shall thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a value equal to two times the exercise price of
the Baxter Right.
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Baxter Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) if holders of the Preferred Stock are granted certain
rights or warrants to subscribe for Preferred Stock or convertible securities at
less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, an adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock on the last
trading date prior to the date of the exercise.
COMPANY RIGHTS PLAN. In the event that any person becomes the beneficial
owner of 15% or more of the outstanding shares of Company Common Stock, proper
provision is required to be made so that each holder of a right (a "Company
Right"), entitling the holder to purchase from the Company one one-hundredth of
a share of Series A Junior Participating Preferred Stock, par value $.001 per
share, of the Company, other than Company Rights beneficially owned by the
acquiring person, will thereafter have the right to receive upon exercise that
number of shares of Company Common Stock having a market value equal to two
times the exercise price of the Company Right. In the event that, at any time
following such acquisition of 15% or more of the outstanding shares, the Company
is acquired in a merger or other business combination transaction or 50% or more
of its consolidated assets or earning power are sold (with
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certain exceptions), proper provision will be made so that each holder of a
Company Right will thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the Company Right, that number of
shares of Common Stock of the acquiring company, which at the time of such
transaction will have a market value equal to two times the exercise price of
the Company Right. The Merger Agreement provides that the Company will, prior to
the Effective Time, cause the Company Rights to be redeemed at a price of $.01
per Company Right, pursuant to the terms of the Company Rights Agreement.
DESCRIPTION OF THE CONTINGENT PAYMENT RIGHTS
SUMMARY
Set forth below is a summary of certain provisions of the CPRs. The CPRs
will be issued under a CPR Agreement, between Baxter and First Trust National
Association, as trustee (the "Trustee"). The following summary of the CPRs and
the CPR Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all of the provisions of the CPR
Agreement, including the definitions therein. The terms of the CPRs include
those stated in the CPR Agreement and those made part of the CPR Agreement by
reference to the Trust Indenture Act. The definitions of certain terms used in
the following summary are set forth below under "Certain Definitions Related to
the CPR Agreement." Capitalized terms used herein without definition have the
respective meanings ascribed to them in the CPR Agreement.
CONTINGENT PAYMENT RIGHTS AGREEMENT. Immediately prior to the Effective
Time, Baxter and the Trustee will enter into the CPR Agreement substantially in
the form filed as an exhibit to the Registration Statement. The CPRs are general
unsecured obligations of Baxter.
DESCRIPTION OF THE CPR CERTIFICATES. Each CPR Certificate will represent a
CPR and will entitle the holder of such CPR to receive the Contingent Payment
with respect to the Payment Measuring Period (as defined) ended immediately
preceding such Payment Date, plus any amounts previously deferred. The holders
of the CPRs will be responsible for withholding or other taxes payable with
respect to the CPRs and the Trustee shall withhold all amounts required to be
withheld under applicable law.
CONTINGENT PAYMENT. The Contingent Payment, with respect to any Payment
Measuring Period, equals five percent of the Net Sales that are attributable to
the commercial sale of Products.
THE CPR CERTIFICATE DISTRIBUTION. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with a letter of transmittal, duly
executed and completed in accordance with the instructions thereto, the holder
thereof shall be entitled to receive one CPR Certificate for each Certificate
surrendered.
RIGHTS OF HOLDERS OF THE CPR CERTIFICATES. Until March 15, 2008, Baxter
shall pay to the holder of an outstanding CPR on March 15 and September 15 of
each year (or if such day is not a Business Day, without accruing any interest,
on the next succeeding Business Day), beginning March 15, 1999, or if such day
is not a Business Day, without accruing any interest, on the next Business Day
(as the same may be extended, each a "Payment Date"), for each CPR represented,
a pro rata portion of the Contingent Payment with respect to the Payment
Measuring Period ended immediately prior to such Payment Date, unless the CPRs
shall have been redeemed as provided for in the CPR Agreement; provided, that in
no event shall the aggregate of all Contingent Payments with respect to each CPR
exceed $2.00 and, provided, further, that in no event shall Baxter be required
to a make a payment on any Payment Date in an amount less than $0.05 per CPR and
such amounts which would otherwise be payable on such Payment Date shall (x) be
aggregated with the amount payable with respect to the next Payment Measuring
Period and (y) not bear interest except on a Default Payment Date.
DEFINITIONS RELATED TO THE CPR AGREEMENT
"Net Sales" means the actual gross amount invoiced by Baxter, its
affiliates, licensees or distributors for the sale of Products to any third
parties during a Payment Measuring Period less: (a) direct transportation
charges, including insurance; (b) trade, quantity and other discounts and
rebates actually allowed and taken to the extent customary in the trade; and (c)
allowances or credits, including but not limited to, allowances or
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credits to customers on account of rejection or return of the Products; provided
that (i) a sale or transfer to an affiliate of Baxter for resale by such
affiliate shall not be considered a sale for the purpose of this provision, but
the resale by such affiliate shall be a sale for such purposes, and the term
"sale" shall include a transfer or other disposition to a customer; (ii) Net
Sales shall not include reserves for bad debts or allowances, credits or rebates
not covered above; and (iii) a sale of Products shall occur at the earlier of
(a) the transfer of title in such Products to a third party or (b) the shipment
of such Products from the manufacturing or warehouse facilities of the
manufacturer of such Products to a third party.
Net Sales shall not include license fees or other advance payments received
by Baxter from a licensee or distributor of the Products which is not derived
from sales of Products, but shall include the Net Sales of such licensee or
distributor.
"Payment Measuring Period" means (i) the period from the Effective Date to
December 31, 1998 and (ii) each six month period ended June 30 and December 31
thereafter, through and including December 31, 2007.
"Products" shall mean all products in which the primary active ingredient
is human hemoglobin, or derivatives, mutants or modifications thereof, which
have been produced in culture of microbial cells (including yeast cells) which
have been modified using Somatogen Recombinant Hemoglobin Technology (other than
clinical indications of any such Products that are in clinical trials as of the
date of the Merger Agreement).
"Redemption Price" means, with respect to each CPR, the difference between
(x) $2.00 and (y) the aggregate Contingent Payments made, or provided for in
accordance with the terms hereof, from the Effective Date through and including
the Redemption Date.
"Somatogen Recombinant Hemoglobin Technology" shall mean all technology
owned by or licensed to the Company on or prior to the Effective Date, which
involves the use of recombinant DNA techniques.
DESCRIPTION OF THE CPR CERTIFICATES
GENERAL. Each CPR Certificate will represent an assignable and transferable
pro rata portion of the Contingent Payment with respect to the Payment Measuring
Period ended immediately prior to such Payment Date. Such period's Contingent
Payment equals five percent of the Net Sales that are attributable to the
commercial sale of Products.
PAYMENT OF CONTINGENT PAYMENT. Baxter shall, on or prior to any Payment
Date, pay, to each holder of a CPR on the March 15 or September 15 immediately
prior to such Payment Date, the Contingent Payment with respect to the Payment
Measuring Period ended immediately preceding such Payment Date, plus any amounts
deferred. In the event that the Contingent Payment (plus any amount deferred) is
less than $0.05 per CPR, then such amount shall not be payable on such Payment
Date but shall be deferred (without any accrual of interest thereon) until the
next following Payment Date. In no event shall the aggregate of all Contingent
Payments payable, from the Effective Time to and including the Final Payment
Date, with respect to any CPR, exceed $2.00.
PAYMENT PROCEDURES. Payment of any amounts pursuant to the CPRs shall be
made only upon presentation by the holder thereof, at the office or agency of
Baxter maintained for that purpose in the Borough of Manhattan, The City of New
York, and at any other office or agency maintained by Baxter for such purpose in
coin or currency of the United States of America. However, Baxter may pay such
amounts by wire transfer or check.
TIMING OF PAYMENTS. The CPR Agreement provides that the first Payment Date
is March 15, 1999 and thereafter each succeeding March 15 and September 15,
through and including March 15, 2008.
REDEMPTION. Baxter shall have the right to redeem, in whole or in part, at
any time or from time to time, the CPRs. Nothing in the CPR Agreement prohibits
Baxter from acquiring CPRs in the open market, in privately negotiated
transactions or otherwise.
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If Baxter elects to redeem any CPRs, it shall notify the Trustee in writing
of the Redemption Date at least thirty days before the Redemption Date and the
aggregate number of CPR Certificates to be redeemed and whether it wants the
Trustee to give notice of redemption to the holders of CPRs. Any such notice may
be conditional and may be cancelled at any time prior to notice of such
redemption being mailed to any holder of CPRs and shall thereby be void and of
no effect.
If less than all of the CPR Certificates are to be redeemed, the Trustee
shall select the CPR Certificates to be redeemed by lot or by such other method
as the Trustee shall determine to be appropriate and fair. At least twenty days
but not more than sixty days before a Redemption Date, the Trustee shall mail a
notice of redemption by first class mail, postage prepaid, to each holder whose
CPR Certificates are to be redeemed. Each notice for redemption shall identify
the CPR Certificates to be redeemed and shall state, among other things, the
Redemption Date and the Redemption Price.
Unless Baxter defaults in its obligation to deposit with the Trustee cash
in an amount to fund the Redemption Price or such redemption payment is
otherwise prohibited, Contingent Payments on CPR Certificates called for
redemption ceases to accrue on and after the Redemption Date.
If any CPR Certificate is being redeemed in part, the portion of such CPR
Certificate to be redeemed and that, after the Redemption Date, and upon
surrender of such CPR Certificate, a new CPR Certificate or CPR Certificates
equal to the CPR Certificates unredeemed portion thereof will be issued.
EVENTS OF DEFAULT AND REMEDIES. An "Event of Default" with respect to the
CPRs, means each one of the following events which shall have occurred and be
continuing: (i) default in the payment of all or any part of the amounts payable
in respect of any of the CPRs; (ii) default in the performance, or breach, of
any covenant or warranty of Baxter in respect of the CPRs and continuance of
such default or breach; or (iii) certain events of bankruptcy or insolvency of
Baxter.
If an Event of Default occurs and is continuing, either the Trustee may or
if the holders of CPRs holding an aggregate of at least fifty percent of the
outstanding CPRs, by notice to Baxter and to the Trustee, shall bring suit to
recover all amounts then due and payable, with interest at the Default Interest
Rate from the Default Payment Date through the date payment is made or duly
provided for.
Except for a default in the payment of all or any part of the amounts
payable in respect of any of the CPRs, the holders of a majority of all
outstanding CPRs may waive any such default or Event of Default, and its
consequences except a default in respect of a covenant or provisions which
cannot be modified or amended without the consent of the holder of each CPR
affected.
The Trustee shall transmit to the holders of CPRs notice by mail of all
defaults which have occurred and are known to the Trustee, unless such defaults
shall have been cured before the giving of such notice.
LIMITATION ON MERGER, SALE OR CONSOLIDATION. The CPR Agreement will provide
that Baxter will not merge or consolidate with or into any other person or sell
or convey all or substantially all of its assets to any person, unless (i)
Baxter is the continuing corporation, or the successor person or the person
which acquires by sale or conveyance substantially all the assets of Baxter
shall be a person organized under the laws of the United States of America or
any State thereof and shall expressly assume the obligations under the CPRs and
the CPR Agreement pursuant to a supplemental agreement in a form reasonably
satisfactory to the Trustee and (ii) immediately after such transaction, be in
default in the performance of any such covenant or condition.
REPORTS BY BAXTER. The CPR Agreement will provide that within sixty days
after the end of each Payment Measuring Period, Baxter shall furnish to the
Trustee a written report showing (i) the gross sales of all Products sold by
Baxter, its Affiliates, licensees and distributors during the immediately
preceding Payment Measuring Period; and (ii) the reconciliation of gross sales
to Net Sales. Payments shown to have accrued by each report shall be due and
payable to the holders of CPRs on the next succeeding Payment Date.
The CPR Agreement will provide that Baxter shall file with the Trustee
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the
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Commission may from time to time by rules and regulations prescribe) which
Baxter may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act (such required information, documents and
other reports, generally, the "Exchange Act Documents"); or, if Baxter is not
required to file its Exchange Act Documents, quarterly and annual financial
information that would be required pursuant to Section 13 of the Exchange Act in
respect of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations. The CPR
Agreement also provides that Baxter shall transmit by mail to all registered
holders of CPRs summaries of any information documents and reports required to
be filed with the Trustee.
AUDITS. Upon the written request of either the Trustee or holders
representing at least thirty percent of the outstanding CPRs (a "Requesting
Party") and not more than once in each calendar year, and upon reasonable
notice, Baxter shall permit an independent certified public accounting firm of
nationally recognized standing to verify the accuracy of the payment reports. No
such request shall be made more than three years subsequent to the Payment
Measuring Period that is the subject of such audit request. If such accounting
firm concludes and, Baxter agrees with such conclusion, that additional payments
were owed during such period, Baxter shall pay the additional payments within
thirty Business Days of the date the Requesting Party delivers to Baxter such
accounting firm's written report; provided that, if Baxter disagrees with such
conclusion the dispute shall be submitted to arbitration for settlement.
TRANSFER AND EXCHANGE. A holder of CPRs may transfer or exchange CPRs in
accordance with the CPR Agreement. The Trustee may require a holder of CPRs,
among other things, to furnish appropriate endorsements and transfer documents
and Baxter may require a holder of CPRs to pay any taxes and fees required by
law or permitted by the CPR Agreement.
RESALES OF CPR CERTIFICATES. The CPR Certificates will be freely
transferable by the holders of such CPR Certificates under the Securities Act,
except for CPR Certificates issued to any holder of CPR Certificates who may be
deemed to be an "affiliate" of Baxter for purposes of Rule 145 under the
Securities Act, as of the date of the Special Meeting. Such affiliates may not
sell their CPR Certificates, except pursuant to an effective registration
statement under the Securities Act or other applicable exemption from the
registration requirements of the Securities Act. Baxter does not intend to list
the CPRs on any national securities exchange or have them included in any inter
dealer quotation system; accordingly, it is not likely that a secondary market
will develop for the CPRs.
AMENDMENTS. Without the consent of any holders, Baxter and the Trustee, at
any time and from time to time, may enter into one or more amendments hereto or
to the CPRs, for any of the following purposes: (i) to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the CPRs any property or
assets; (ii) to provide for the assumption of Baxter's obligations to holders in
the case of a merger or consolidation; (iii) to make any change that would
provide any additional rights or benefits to the holders or that does not
adversely affect the legal rights under the CPR Agreement of any such holder;
(iv) to cure any ambiguity, defect or inconsistency; or (v) to make any
amendments or changes necessary to comply or maintain compliance with the Trust
Indenture Act.
With the consent of the holders of a majority of the outstanding CPRs,
Baxter and the Trustee may enter into one or more amendments hereto or to the
CPRs for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the CPR Agreement or to the CPRs or of
modifying in any manner the rights of the holders under the CPR Agreement or to
the CPRs; provided, however, that no such amendment shall, without the consent
of the holder of each CPR affected thereby: (i) modify the definition of
Redemption Date, Final Payment Date, Default Payment Date, Default Payment
Amount, Net Sales, Products, Somatogen Recombinant Hemoglobin Technology or
Default Payment Interest Rate, extend the maturity of the CPRs or reduce the
amounts payable in respect of the CPRs or modify any other payment term or
payment date; (ii) reduce the number of CPRs, the consent of whose holders is
required for any such amendment; or (iii) make any change in the provisions of
the CPR Agreement relating to amendments, except to increase any such percentage
or to provide that certain other provisions of the CPR Agreement cannot be
modified or waived without the consent of the holder of each CPR affected
thereby.
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CONCERNING THE TRUSTEE. The CPR Agreement will provide that holders of a
majority of the outstanding CPRs will have the right to direct the time, method,
and place of conducting any proceeding for exercising any remedy available to
the Trustee, subject to certain exceptions. In case an Event of Default shall
occur (which shall not be cured or waived), the Trustee will be required, in the
exercise of its powers, to use the degree of care and skill of a prudent person
in the conduct of his own affairs. The Trustee will be under no obligation to
exercise any of its rights or powers under the CPR Agreement at the request of
any holder of CPRs, unless such holder shall have offered to the Trustee
reasonable security or indemnity to it against any cost, liability or expense.
RISK OF CPRS
The Company has not, to date, accumulated any revenue with respect to any
Products. Because (i) the Somatogen Recombinant Hemoglobin Technology is subject
to many uncertainties, including technological uncertainty, large capital
requirements, dependence on manufacturing capabilities not yet achieved,
government regulation and product approvals, patents and proprietary technology,
competition, dependence on key personnel, product liability and insurance, and
(ii) no revenue has been generated by either Baxter or the Company that
qualifies as Net Sales, there is no assurance that any such Net Sales will be
generated in the future. There is no assurance that Products developed in the
future will receive regulatory approval or be commercially viable. Furthermore,
Baxter has no obligation to initiate or continue research, development or
commercialization activities with respect to any Products or any of the
Somatogen Recombinant Hemoglobin Technology and, in its sole and subjective
discretion, Baxter may abandon efforts to research, develop or commercialize
such technologies or Products. No joint venture, partnership or other fiduciary
relationship is created by the CPR Agreement or by the CPRs. Holders of CPRs may
not receive any payment in respect of their CPRs. Baxter does not intend to
cause the CPRs to be listed on any national securities exchange or quoted in any
inter dealer quotation system; accordingly it is not likely that a secondary
market will develop for the CPRs.
LEGAL MATTERS
The validity of the shares of Baxter Common Stock and the CPRs to be issued
in the Merger will be passed upon by Thomas J. Sabatino, Jr., Corporate Vice
President and General Counsel of Baxter. Mr. Sabatino is a full-time employee of
Baxter and as of March 31, 1998, beneficially owned 8,162 shares of Baxter
Common Stock and had options to acquire an additional 53,940 shares of Baxter
Common Stock, including 10,740 shares which may be acquired within sixty days of
March 31, 1998. Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles,
California, has rendered an opinion regarding the disclosure of certain United
States Federal income tax matters. Price Waterhouse LLP has rendered an opinion
to the Company regarding certain Federal income tax consequences of the Merger.
EXPERTS
The consolidated financial statements of Baxter incorporated in this Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K of Baxter
for the year ended December 31, 1997 have been so incorporated in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting. The consolidated
financial statements of the Company incorporated in this Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K of the
Company for the year ended June 30, 1997 have been so incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
It is expected that representatives of Price Waterhouse LLP will be present
at the Special Meeting, will have an opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
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STOCKHOLDER PROPOSALS
If the Merger is consummated, the Company will not hold an annual meeting
of stockholders in 1998. In the event the Merger is not consummated, any
stockholder of the Company who wishes to present a proposal at the 1998 annual
meeting of stockholders of the Company and who wishes to have such proposal
included in the Company's proxy material for that meeting must deliver a copy of
such proposal to the Company, 2545 Central Avenue, Suite FD1, Boulder, Colorado
80301-2857, Attention: Corporate Secretary, for receipt not later than May 14,
1998. The Company reserves the right to decline to include in proxy material any
stockholder's proposal which does not comply with the rules of the Commission
for inclusion therein.
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APPENDIX A
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BAXTER INTERNATIONAL INC.,
RHB1 ACQUISITION CORP.
AND
SOMATOGEN, INC.
DATED AS OF FEBRUARY 23, 1998
================================================================================
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C> <C>
ARTICLE I THE MERGER.................................................. A-5
Section 1.1 The Merger.................................................. A-5
Section 1.2 Effective Time of the Merger................................ A-5
Section 1.3 Closing..................................................... A-5
Section 1.4 Effects of the Merger....................................... A-6
Section 1.5 Certificate of Incorporation and Bylaws..................... A-6
Section 1.6 Directors................................................... A-6
Section 1.7 Officers.................................................... A-6
ARTICLE II CONVERSION OF SHARES........................................ A-6
Section 2.1 Merger Consideration........................................ A-6
Section 2.2 Exchange Ratio for Company Stock Options.................... A-7
Section 2.3 Dissenter's Rights.......................................... A-8
Section 2.4 Exchange of Certificates Representing Shares................ A-8
Section 2.5 Dividends................................................... A-8
Section 2.6 No Fractional Shares........................................ A-9
Section 2.7 Closing of Company Transfer Books........................... A-9
Section 2.8 Unclaimed Amounts........................................... A-9
Section 2.9 Lost Certificates........................................... A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-9
Section 3.1 Organization and Qualification; Subsidiaries................ A-9
Section 3.2 Capitalization.............................................. A-10
Section 3.3 Authority................................................... A-11
Section 3.4 Consents and Approvals; No Violation........................ A-11
Section 3.5 Company SEC Reports......................................... A-12
Section 3.6 Financial Statements........................................ A-12
Section 3.7 Absence of Undisclosed Liabilities.......................... A-13
Section 3.8 Absence of Certain Changes.................................. A-13
Section 3.9 Taxes....................................................... A-13
Section 3.10 Litigation.................................................. A-14
Section 3.11 Employee Benefit Plans; ERISA............................... A-14
Section 3.12 Environmental Matters....................................... A-16
Section 3.13 Compliance with Applicable Laws............................. A-17
Section 3.14 Material Contracts.......................................... A-17
Section 3.15 Intellectual Property Rights................................ A-17
Section 3.16 Insurance................................................... A-18
Section 3.17 Opinion of Financial Advisor................................ A-19
Section 3.18 Rights Agreement; Takeover Laws............................. A-19
Section 3.19 Company Disclosure.......................................... A-19
Section 3.20 Labor Matters............................................... A-19
Section 3.21 WARN Act.................................................... A-20
Section 3.22 Transactions with Related Parties........................... A-20
Section 3.23 Absence of Certain Payments................................. A-20
Section 3.24 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment.................................... A-20
Section 3.25 FDA Matters................................................. A-20
Section 3.26 Registration Statement and Proxy Statement/Prospectus....... A-21
Section 3.27 Brokers..................................................... A-21
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BAXTER AND MERGER SUB..... A-21
Section 4.1 Organization................................................ A-21
Section 4.2 No Ownership of Company Common Stock........................ A-21
Section 4.3 Capitalization.............................................. A-21
Section 4.4 Authority................................................... A-22
Section 4.5 Baxter Stockholder Approval................................. A-22
Section 4.6 Consent and Approvals; No Violation......................... A-22
Section 4.7 Merger Sub's Operations..................................... A-23
Section 4.8 Baxter SEC Reports.......................................... A-23
Section 4.9 Baxter Disclosure........................................... A-23
Section 4.10 Baxter Financial Statements................................. A-23
Section 4.11 Registration Statement and Proxy Statement/Prospectus....... A-24
Section 4.12 Brokers..................................................... A-24
Section 4.13 Shares...................................................... A-24
ARTICLE V COVENANTS OF THE COMPANY.................................... A-24
Section 5.1 Ordinary Course............................................. A-24
Section 5.2 Rule 145 Affiliates......................................... A-25
Section 5.3 No Solicitation............................................. A-26
Section 5.4 No WARN Act Activities...................................... A-26
Section 5.5 Stockholders' Meeting....................................... A-27
Section 5.6 Rights Plan................................................. A-27
Section 5.7 Company Stock Option Plans.................................. A-27
ARTICLE VI COVENANTS OF BAXTER AND MERGER SUB.......................... A-27
Section 6.1 Directors' and Officers' Indemnification and Insurance...... A-27
Section 6.2 Blue Sky.................................................... A-28
Section 6.3 CPR Agreement............................................... A-28
Section 6.4 NYSE Listing................................................ A-28
Section 6.5 Employment Matters.......................................... A-28
ARTICLE VII MUTUAL COVENANTS............................................ A-29
Section 7.1 Access to Information; Confidentiality...................... A-29
Section 7.2 HSR Act..................................................... A-29
Section 7.3 Consents and Approvals...................................... A-29
Section 7.4 Publicity................................................... A-29
Section 7.5 Filings with the Commission................................. A-30
Section 7.6 Advice of Changes........................................... A-30
Section 7.7 Additional Agreements....................................... A-30
Section 7.8 Tax Matters................................................. A-30
ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE MERGER.................... A-31
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger.................................................... A-31
Section 8.2 Conditions of Obligations of Baxter and Merger Sub.......... A-31
Section 8.3 Conditions of Obligations of the Company.................... A-32
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER........................... A-32
Section 9.1 Termination................................................. A-32
Section 9.2 Effect of Termination and Abandonment....................... A-33
ARTICLE X GENERAL PROVISIONS.......................................... A-34
Section 10.1 Fees and Expenses........................................... A-34
Section 10.2 Amendment and Modification.................................. A-34
Section 10.3 Nonsurvival of Representations and Warranties............... A-34
Section 10.4 Notices..................................................... A-34
Section 10.5 Definitions; Interpretation................................. A-35
Section 10.6 Specific Performance........................................ A-35
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
Section 10.7 Counterparts................................................ A-35
Section 10.8 Entire Agreement; No Third-Party Beneficiaries.............. A-36
Section 10.9 Severability................................................ A-36
Section Governing Law...............................................
10.10 A-36
Section Assignment..................................................
10.11 A-36
</TABLE>
ANNEX A -- Form of CPR Certificate
ANNEX B -- Form of Affiliate Letter (intentionally omitted)
ANNEX C -- Form of Opinion of Cooley Godward LLP (intentionally omitted)
ANNEX D -- Form of Opinion of Thomas J. Sabatino, Jr., General Counsel of
Baxter (intentionally omitted)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 23, 1998 (this
"Agreement"), by and among Baxter International Inc., a Delaware corporation
("Baxter"), RHB1 Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Baxter ("Merger Sub"), and Somatogen, Inc., a Delaware corporation
(the "Company").
WHEREAS, it is the intention of the parties that the Company merge with and
into Merger Sub (the "Merger"), with Merger Sub surviving as a wholly owned
subsidiary of Baxter;
WHEREAS, the Board of Directors of each of Baxter, Merger Sub and the
Company has determined that the transactions contemplated by this Agreement,
including, without limitation, the Merger, are advisable and in the best
interest of their respective corporations and stockholders and have approved
this Agreement;
WHEREAS, as a condition to the willingness of Baxter and Merger Sub to
enter into this Agreement, Eli Lilly and Company, an Indiana corporation and a
stockholder of the Company, and Merger Sub shall have entered into a Voting
Agreement, dated the date hereof, providing, among other things, that such
stockholder will vote all of the shares of capital stock of the Company owned by
it in favor of the Merger; and
WHEREAS, each of Baxter and the Company desires that the merger qualify as
a reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2), in accordance
with the General Corporation Law of the State of Delaware (the "DGCL"), the
Company shall be merged with and into Merger Sub in accordance with this
Agreement and the separate existence of the Company shall cease. Merger Sub
shall be the surviving corporation in the Merger (hereinafter sometimes referred
to as the "Surviving Corporation").
Section 1.2 Effective Time of the Merger. Upon the terms and subject to
the conditions hereof, a certificate of merger (the "Certificate of Merger")
shall be duly prepared, executed and acknowledged by the Surviving Corporation
and thereafter delivered to the Secretary of State of the State of Delaware, for
filing, on the Closing Date (as defined in Section 1.3). The Merger shall become
effective as of the date and at such time as the Certificate of Merger, pursuant
to Section 251 of the DGCL, and any other documents necessary to effect the
Merger in accordance with the DGCL are duly filed with the Secretary of State of
the State of Delaware or at such subsequent date or time as shall be agreed by
the Company and Merger Sub and specified in the Certificate of Merger (the time
the Merger becomes effective pursuant to the DGCL being referred to herein as
the "Effective Time").
Section 1.3 Closing. Subject to the satisfaction or waiver of all of the
conditions to closing contained in Article VIII hereof, the closing of the
Merger (the "Closing") will take place at 8:00 a.m., Chicago time, on a date to
be specified by the parties, which shall be no later than the second Business
Day (as defined below) after the satisfaction or waiver of the conditions to
Closing contained in Article VIII, at the offices of Skadden, Arps, Slate,
Meagher & Flom (Illinois), 333 West Wacker Drive, Chicago, Illinois 60606-1285,
unless another date or place is agreed to in writing by the parties hereto. The
date and time at which the Closing occurs is referred to herein as the "Closing
Date." "Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in New York City, Chicago, Illinois or Denver,
Colorado are not required to be open.
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Section 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.5 Certificate of Incorporation and Bylaws. (a) Subject to
Section 6.1, the certificate of incorporation of Merger Sub as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with the
terms thereof and with applicable law.
(b) Subject to Section 6.1, the bylaws of Merger Sub in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with the terms thereof and with applicable law.
Section 1.6 Directors. The directors of Merger Sub at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
from the Effective Time in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation and until his or her successor is duly
elected and qualified.
Section 1.7 Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
from the Effective Time in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation and until his or her successor is duly
appointed and qualified.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Merger Consideration. As of the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holder thereof:
(a) Each share of Common Stock, par value $.001 per share, of the
Company (the "Company Common Stock"), held by Baxter or any subsidiary of
Baxter shall be cancelled and retired and cease to exist and no
consideration shall be delivered in exchange therefor.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than (x) shares of Company
Common Stock to be cancelled in accordance with Section 2.1(a) and (y)
Dissenting Shares (as defined in Section 2.3), shall be converted into the
right to receive, without withholding or deduction on account of any tax,
levy, impost or other governmental charge:
(i) the fraction of a share (calculated and rounded to the nearest
ten-thousandth of one share) of Common Stock, par value $1 per share, of
Baxter ("Baxter Common Stock"), the numerator of which fraction shall be
(A) $9.00, and the denominator of which shall be (B) the Baxter Stock
Price (as defined in Section 2.1(c) below) (the "Share Consideration").
(ii) a Contingent Payment Right (a "CPR") (as defined in the
certificate representing the CPR substantially in the form of Annex A
attached hereto (the "CPR Certificate")). The CPR Certificates will be
issued by Baxter pursuant to a Contingent Payment Rights Agreement (the
"CPR Agreement") to be entered into between Baxter and First Trust
National Association, a national association (the "Trustee"). The
consideration referred to in (subparagraphs (i) and (ii) of this Section
2.1(b) is hereinafter referred to as the "Merger Consideration").
All such shares of Company Common Stock converted, in accordance with
Section 2.1, into the right to receive Merger Consideration (the "Shares"), when
so converted, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a certificate
formerly
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representing any such Shares (each, a "Certificate") shall cease to have any
rights with respect thereto, except to receive the Merger Consideration, without
interest thereon, upon surrender of such Certificates.
(c) For purposes of calculating the Share Consideration, the "Baxter
Stock Price" shall be an amount equal to the average closing sale price of
a share of a Baxter Common Stock on United States stock exchanges as
reported in The Wall Street Journal under the caption New York Stock
Exchange ("NYSE") Composite Transactions or, if not available, such other
authoritative publication as may be reasonably selected by Baxter, for the
ten consecutive trading days ending on and including the fifth trading day
prior to the Closing Date. In the event Baxter changes (or establishes a
record date for changing) the number or kind of shares of Baxter Common
Stock issued and outstanding prior to the Effective Time as a result of a
stock split, stock dividend, distribution, recapitalization,
reclassification, reorganization or similar transaction with respect to the
outstanding Baxter Common Stock and the record date therefor shall be prior
to the Effective Time, the Share Consideration shall be proportionately
adjusted in such manner as Baxter, Merger Sub and the Company shall agree,
which adjustment may include, as appropriate, the issuance of securities,
property or cash on the same basis as any of the foregoing shall have been
issued, distributed or paid to the holders of shares of Baxter Common Stock
generally.
(d) Each share of Common Stock, par value $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Surviving Corporation.
Section 2.2 Exchange Ratio for Company Stock Options. Each employee,
consultant and director or other option (individually, a "Company Stock Option")
not previously exercised, outstanding immediately prior to the Effective Time
and granted under the Company's (i) Amended and Restated Stock Option Plan, (ii)
Amended and Restated Nonemployee Director Stock Option Plan, (iii) Amended and
Restated Consultants Stock Option Plan and (iv) any other stock option plan or
arrangement of the Company (collectively, (other than the Company's Employee
Stock Purchase Plan (the "ESPP")) the "Company Stock Option Plans"), whether
vested or unvested, will be exchanged or cancelled as provided in this Section
2.2. Each Company Stock Option having an exercise price of $11 or more that is
outstanding immediately prior to the Effective Time shall be cancelled
immediately prior to the Effective Time for no consideration. Each Company Stock
Option (in the case of persons who are employed by or providing services to the
Company as of the Effective Time, whether vested or unvested and in the case of
persons who are no longer employed by or providing services to the Company, as
of the Effective Time, only to the extent such Company Stock Option was vested
on the date such person's employment or service with the Company ceased) having
an exercise price of less than $9 that is outstanding immediately prior to the
Effective Time shall be exchanged immediately prior to the Effective Time for
(x) payment by the Company to the holder of such Company Stock Option, of an
amount in cash equal to (1) the product of $9 and the number of shares of
Company Common Stock subject to such Common Stock Option, less (2) the aggregate
exercise price of such Common Stock Option and (y) the right to receive one CPR
per share of Company Common Stock covered by such Company Stock Option. Each
Company Stock Option (in the case of persons who are employed by or providing
services to the Company as of the Effective Time, whether vested or unvested and
in the case of persons who are no longer employed by or providing services to
the Company, as of the Effective Time, only to the extent such Company Stock
Option was vested on the date such person's employment or service with the
Company ceased) having an exercise price that is greater than or equal to $9 and
less than $11 that is outstanding immediately prior to the Effective Time, shall
be exchanged immediately prior to the Effective Time for the right to receive
one CPR per share of Company Common Stock covered by such Company Stock Option.
The purchase period (as defined in the ESPP) (the "Purchase Period") in effect
under ESPP shall terminate immediately prior to the Effective Time, and the
payroll deductions accumulated during such Purchase Period shall then be applied
to the purchase of shares of Company Common Stock in accordance with the ESPP
(subject to participants' right to withdraw from such plan at any time). Any
shares of Company Common Stock so issued under the ESPP shall be converted into
the right to receive Merger Consideration in accordance with Section 2.1(b). The
Company and Baxter shall take such action as shall be required or necessary
under the terms of the ESPP,
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and the Company Stock Option Plans and any other agreements pursuant to which a
Company Stock Option was subject immediately prior to the Effective Time to
effectuate the provisions of this Section 2.2, including, but not limited to,
the amendment of such plans or agreements.
Section 2.3 Dissenter's Rights. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Merger
or consented thereto in writing and who has delivered a written demand for
appraisal of such shares in accordance with Section 262 of the DGCL, if such
Section 262 provides for appraisal rights for such shares in the Merger
("Dissenting Shares"), shall not be converted into the right to receive the
Merger Consideration, as provided in Section 2.1(b) hereof, unless and until
such holder fails to perfect or effectively withdraws or otherwise loses his
right to appraisal and payment under Section 262 of the DGCL. If, after the
Effective Time, any such holder fails to perfect or effectively withdraws or
loses his right to appraisal, such Dissenting Shares shall thereupon be treated
as if they had been converted as of the Effective Time into the right to receive
the Merger Consolidation to which such holder is entitled, without interest or
dividends thereon. The Company shall give Baxter prompt notice of any demands
received by the Company for appraisal of shares of Company Common Stock, and
Baxter shall have the right to participate in all negotiations and proceedings
with respect to such demands. Prior to the Effective Time, the Company shall
not, except with the prior written consent of Baxter, make any payment with
respect to or offer to settle, any such demands.
Section 2.4 Exchange of Certificates Representing Shares. (a) Baxter shall
deposit, or shall cause to be deposited, with an exchange agent selected by
Baxter and reasonably satisfactory to the Company (the "Exchange Agent"), for
the benefit of the holders of Shares, for exchange in accordance with this
Article II, (i) on the date of the Effective Time, certificates representing the
number of shares of Baxter Common Stock and the CPR Certificates issuable as
part of the Merger Consideration, and (ii) from time to time, cash to be paid in
lieu of the issuance of fractional shares, as provided in Section 2.6 and as
requested by the Exchange Agent, and dividends and other distributions payable
in respect of the shares of Baxter Common Stock as provided in Section 2.5 (such
cash, CPR Certificates and certificates for shares of Baxter Common Stock, if
any, together with dividends or distributions with respect thereto being
hereinafter referred to collectively as the "Exchange Fund").
(b) Promptly after the Effective Time, Baxter shall cause the Exchange
Agent to mail (or deliver at its principal office) to each holder of record of
Shares and to each holder of record of Dissenting Shares (i) a letter of
transmittal which shall (A) specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and (B) be in customary form and (ii)
instructions for use in effecting the surrender of the Certificates. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
a letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder thereof shall be entitled to receive in
exchange therefor that portion of the Exchange Fund which such holder has the
right to receive pursuant to the provisions of this Article II, after giving
effect to any required withholding tax, and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on the cash or other
consideration to be paid as part of the Merger Consideration. In the event of
any transfer of ownership of Shares which has not been registered in the
transfer records of the Company (an "Unregistered Transfer"), a CPR Certificate
and certificates representing the proper number of shares of Baxter Common
Stock, if any, together with a check in an amount equal to the cash component,
if any, of the Exchange Fund, will be issued to the transferee of the
Unregistered Transfer when the Certificate is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect the Unregistered
Transfer and to evidence that any applicable stock transfer taxes associated
with such Unregistered Transfer were paid.
Section 2.5 Dividends. No dividends or other distributions with respect to
shares of Baxter Common Stock constituting part of the Merger Consideration
shall be paid to the holder of any unsurrendered Certificates until such
Certificates are surrendered as provided in Section 2.4. Upon such surrender,
all dividends and other distributions payable in respect of the shares of Baxter
Common Stock to be issued in exchange therefor, on a date subsequent to, and in
respect of a record date after the Effective Time, shall be paid, without
interest, to the person in whose name the certificates representing the shares
of Baxter
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Common Stock into which such Shares were converted are registered or as
otherwise directed by that person. In no event shall the person entitled to
receive such dividends or distributions be entitled to receive interest on any
such dividends or distributions.
Section 2.6 No Fractional Shares. No certificates or scrip representing
fractional shares of Baxter Common Stock shall be issued upon the surrender of
Certificates pursuant to this Article II and no dividend, stock split or other
change in the capital structure of Baxter shall relate to any fractional
interest, and such fractional interests shall not entitle the owner thereof to
vote or to any rights of a security holder. In lieu of any such fractional
interest, each holder of a Certificate who would otherwise have been entitled to
a fraction of a share of Baxter Common Stock upon surrender of Certificates
pursuant to this Article II shall be paid cash upon such surrender in an amount
equal to the product of such fraction multiplied by the Baxter Stock Price.
Section 2.7 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Shares
shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged as
provided in this Article II.
Section 2.8 Unclaimed Amounts. Any portion of the Exchange Fund which
remains unclaimed by the former stockholders of the Company six months after the
Effective Time shall be delivered by the Exchange Agent to Baxter. Any former
stockholders of the Company who have not theretofore complied with this Article
II shall thereafter look only to Baxter for payment of the Merger Consideration,
cash in lieu of fractional shares, and unpaid dividends and distributions in
respect of shares of Baxter Common Stock deliverable as part of the Merger
Consideration, each as determined pursuant to this Agreement, in all cases
without any interest thereon. None of Baxter, the Surviving Corporation, the
Exchange Agent or any other Person will be liable to any former holder of Shares
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
Section 2.9 Lost Certificates. In the event any Certificate shall have
been lost, stolen or destroyed, upon the making and delivery of an affidavit of
that fact by the person claiming such Certificate to have been lost, stolen or
destroyed and, if required by Baxter, the posting by such person of a bond in
such reasonable amount as Baxter may direct as indemnity against any claim that
would be made against the Company, the Surviving Corporation or Baxter with
respect to such Certificate, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificate the portion of the Exchange Fund
deliverable in respect thereof pursuant to this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Baxter and Merger Sub in a letter
delivered to them prior to the execution hereof (which letter shall contain
appropriate references to identify the specific section herein to which the
information in such letter relates) (the "Company Disclosure Letter") or as
disclosed in the Company SEC Reports (as defined herein), the Company represents
and warrants to Baxter and Merger Sub as follows:
Section 3.1 Organization and Qualification; Subsidiaries. (a) The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, is duly qualified to do business as a foreign
corporation and is in good standing in the jurisdictions listed on Section
3.1(a) of the Company Disclosure Letter, which includes each jurisdiction in
which the character of the Company's properties or the nature of its business
makes such qualification necessary, except in jurisdictions, if any, where the
failure to be so qualified would not result in a Material Adverse Effect (as
defined below). The Company has all requisite corporate or other power and
authority to own, use or lease its properties and to carry on its business as it
is now being conducted. The Company has delivered to Baxter a complete and
correct copy of its Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and its Bylaws (the "Bylaws"), each as currently
in effect. The Company is not in default in any material
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respect in the performance, observation or fulfillment of any provision of the
Certificate of Incorporation or the Bylaws.
(b) No Person (as defined below) is a Subsidiary (as defined below).
(c) For purposes of this Agreement, (i) a "Material Adverse Effect" shall
mean any event, circumstance, condition, development or occurrence, individually
or in the aggregate, causing, resulting in or reasonably likely to have a
material adverse effect on the business (as now conducted or as now proposed by
the Company to be conducted), results of operations or financial condition of
the Company other than any event, circumstance, development or occurrence (A)
arising from or relating to general business or economic conditions, (B)
relating to or affecting the biotechnology industry generally, (C) relating to
or affecting the hemoglobin-based oxygen therapeutics industry generally, (D)
arising from or relating to any pre-clinical trials or studies conducted by the
Company, and (E) arising from or relating to the development, discovery or
commercialization of any present or proposed technology, processes or product
that is (or that may reasonably be expected to be) competitive with or superior
to any of the technology, processes or products of the Company, (ii)
"Subsidiary" shall mean, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (x) at least 50
percent or more of the securities or other interests having voting power to
elect 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, or (y) such
party or any other subsidiary of such party is a general partner (excluding such
partnerships where such party or any subsidiary of such party do not have a
majority of the voting interest in such partnership), and (iii) "Person" shall
mean any corporation, individual, limited liability company, joint stock
company, joint venture, partnership, unincorporated association, governmental
regulatory entity, country, state or political subdivision thereof, trust,
municipality or other entity.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 10,000,000 shares of Preferred Stock, par value $.001 per
share ("Company Preferred Stock"), and 35,000,000 shares of Company Common
Stock, of which (i) 4,525,960 shares are reserved for issuance upon exercise of
outstanding Company Stock Options under the Company's Amended and Restated Stock
Option Plan; (ii) 300,000 shares are reserved for issuance under the ESPP; (iii)
180,000 shares are reserved for issuance under the Company's Amended and
Restated Consultants Stock Option Plan; (iv) 470,000 shares are reserved for
issuance under the Company's Amended and Restated Nonemployee Director Stock
Option Plan and (v) 35,000 shares are reserved for issuance under other
non-employee stock option agreements. As of December 31, 1997, (A) 20,921,839
shares of Company Common Stock were issued and outstanding, of which no shares
of Company Common Stock were held in treasury, (B) no shares of Company
Preferred Stock were issued or outstanding, (C) 2,593,433 Company Stock Options
were issued and outstanding under the Company's Amended and Restated Stock
Option Plan; (D) 61,000 Company Stock Options were issued and outstanding under
the Company's Amended and Restated Consultants Stock Option Plan; (E) 201,250
Company Stock Options were issued and outstanding under the Company's Amended
and Restated Nonemployee Director Stock Option Plan and (F) 35,000 Company Stock
Options were issued and outstanding under other non-employee stock option
agreements. Other than rights issued under the Rights Agreement, dated as of
June 5, 1997 (the "Rights Agreement"), by and between the Company and Chase
Mellon Shareholder Services, L.L.C., no agreement or other document grants or
imposes on any shares of the Company Common Stock any right, preference,
privilege or restriction with respect to the transaction contemplated hereby
(including, without limitation, any rights of first refusal) other than the
right to vote on the Merger. All of the issued and outstanding shares of the
Company Common Stock are, and all shares of Company Common Stock that may be
issued pursuant the ESPP or to the exercise of outstanding Company Stock Options
will be, when issued in accordance with the terms thereof, duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. There
are no bonds, debentures, notes or other indebtedness having general voting
rights (or convertible into securities having such rights) ("Voting Debt") of
the Company issued and outstanding. There are no stock appreciation rights with
respect to the Company Common Stock (each, a "SAR") issued and outstanding.
Except as otherwise permitted or contemplated by this Agreement or upon the
exercise or termination of an
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outstanding Company Stock Option in accordance with its terms as set forth
above, (x) there are no shares of the Company authorized, issued or outstanding
and (y) there are no existing options, warrants, calls, preemptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character (including without limitation "earn-out" arrangements) obligating the
Company to issue, transfer or sell or cause to be issued, transferred or sold
any shares of or Voting Debt of, or other equity interests in, or any interest
relating to or whose value is dependent on the value of the equity interests in,
the Company or securities convertible into or exchangeable for such shares or
equity interests or obligations of the Company to grant, extend or enter into
any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment. There are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares of the Company
or affiliate of the Company or to provide funds to make any investment (in the
form of a loan, capital contribution or otherwise) in any other entity.
(b) There are no voting trusts or other agreements or understandings to
which the Company is a party with respect to the voting of the shares of the
Company. Except as expressly contemplated by this Agreement, the Company will
not be required to redeem, repurchase or otherwise acquire shares of capital
stock of the Company, as a result of the transactions contemplated by this
Agreement.
Section 3.3 Authority. The Company has full corporate power and authority
to execute and deliver this Agreement and, subject to approval of this Agreement
by the holders of a majority of the shares of Company Common Stock outstanding
on the record date to be established for the special meeting of the stockholders
of the Company to vote on the Merger as contemplated by Section 5.6 hereof (the
"Special Meeting"). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby on the part of the Company
have been duly and validly authorized by the Company's Board of Directors, and
no other corporate proceedings on the part of the Company are necessary, as a
matter of law or otherwise, for the consummation of the transactions
contemplated hereby, other than the adoption of this Agreement by the Company's
stockholders at the Special Meeting. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement by each of Baxter and Merger Sub, is a
valid and binding agreement of the Company, enforceable against it in accordance
with its terms, except to the extent that the enforcement thereof may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or other similar laws now or hereafter in effect relating to creditor's rights
generally, (ii) general principles of equity (regardless of whether such
enforcement is considered in a proceeding at law or in equity and (iii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to the discretion of the court before which any
enforcement proceeding therefor may be brought.
Section 3.4 Consents and Approvals; No Violation. The execution and
delivery of this Agreement by the Company, the consummation by the Company of
the transactions contemplated hereby and the performance by the Company of its
obligations hereunder will not:
(a) conflict with or result in any breach of any provision of the
Certificate of Incorporation or the Bylaws;
(b) require any consent, approval, order, authorization or permit of,
or registration, filing with or notification to, any court, governmental or
regulatory authority or agency (a "Governmental Entity") or any private
third party, except for (i) the filing of a pre-merger notification and
report form by the Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing with
the Securities and Exchange Commission (the "Commission") of (A) a proxy
statement relating to the Special Meeting to be held in connection with the
transactions contemplated by this Agreement (together with any amendments
thereof or supplements thereto, the "Proxy Statement/Prospectus"), if such
approval is required by law and (B) such reports under Section 13(a) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated hereby and (iii) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, (iv) the delivery of a
prospectus supplement to holders of Company Stock Options pursuant to the
applicable securities
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laws and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings which if not obtained or made would
have a Material Adverse Effect or a material adverse effect on the
Company's ability to consummate the transactions contemplated by this
Agreement;
(c) result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under (or give rise to any
right of termination, cancellation or acceleration or guaranteed payments
under or to, a loss of a material benefit or result in the creation or
imposition of a lien under) any of the terms, conditions or provisions of
any note, lease, mortgage, indenture, license, agreement or other
instrument or obligation to which the Company is a party or by which the
Company or any of its properties or assets may be bound, except for such
violations, breaches, defaults, or rights of termination, cancellation or
acceleration, losses or the imposition of liens as to which requisite
waivers or consents have been obtained or will be obtained prior to the
Effective Time or which, individually or in the aggregate, would not (i)
result in a Material Adverse Effect, (ii) materially impair the ability of
the Company to perform its obligations under this Agreement or (iii)
prevent the consummation of any of the transactions contemplated by this
Agreement;
(d) violate the provisions of any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to the Company, in such a
manner as to (i) result in a Material Adverse Effect, (ii) materially
impair the ability of the Company to perform its obligations under this
Agreement or (iii) prevent the consummation of any of the transactions
contemplated by this Agreement; or
(e) result in the creation of any lien, charge or encumbrance upon any
shares of capital stock, properties or assets of the Company under any
agreement or instrument to which the Company is a party or by which the
Company is bound, in such a manner as to (i) result in a Material Adverse
Effect, (ii) materially impair the ability of the Company to perform its
obligations under this Agreement or (iii) prevent the consummation of any
of the transactions contemplated by this Agreement.
Section 3.5 Company SEC Reports. The Company has filed with the
Commission, and has heretofore made available to Baxter true and complete copies
of, each form, registration statement, report, schedule, proxy or information
statement and other document, as amended (including exhibits thereto),
including, without limitation, its Annual Reports to Stockholders incorporated
by reference in certain of such reports, but excluding any preliminary proxy
materials and pre-effective amendments to registration statements, required to
be filed with the Commission since June 30, 1995 under the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act (collectively, the
"Company SEC Reports"). As of the respective dates such Company SEC Reports were
filed or, if any such Company SEC Reports were amended, as of the date such
amendment was filed, each of the Company SEC Reports, including, without
limitation, any financial statements or schedules included therein, (a)
complied, in all material respects, with all applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and the applicable
rules and regulations promulgated thereunder, and (b) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 3.6 Financial Statements. Each of the audited financial statements
and unaudited consolidated interim financial statements of the Company
(including any related notes and schedules) included (or incorporated by
reference) in its Annual Reports on Form 10-K for each of the three fiscal years
ended June 30, 1995, 1996 and 1997 and its Quarterly Reports on Form 10-Q for
all interim periods during each such annual period and subsequent thereto
(collectively, the "Financial Statements") have been prepared from, and are in
accordance with, the books and records of the Company, complied, as of their
date, in all material respects, with applicable accounting requirements and with
the published rules and regulations of the Commission with respect thereto, have
been prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis (except as may be indicated in
the notes thereto and subject, in the case of quarterly financial statements, to
normal and recurring year-end adjustments) and fairly present, in all material
respects, in conformity with GAAP applied on a consistent basis (except as may
be indicated in the notes thereto), the financial position of the Company as of
the dates thereof and the results of operations and cash flows (and changes in
financial position, if any) of the
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Company for the periods presented therein (subject to normal year-end
adjustments and the absence of financial footnotes in the case of any unaudited
interim financial statements).
Section 3.7 Absence of Undisclosed Liabilities. Except for liabilities and
obligations incurred in the ordinary course of business, since June 30, 1997 the
Company has not incurred any liabilities or obligations of any nature
(contingent or otherwise) which, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect.
Section 3.8 Absence of Certain Changes. Except as expressly contemplated
by this Agreement, since June 30, 1997 the Company has conducted its business in
all material respects only in, and has not engaged in any material transaction
other than according to, the ordinary and usual course, and there has not been,
nor has the Company agreed, whether in writing or otherwise, to take any action
that would result in, (a) any Material Adverse Effect; (b) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the capital stock of the Company or any
redemption, repurchase or other acquisition of any shares of capital stock of
the Company; (c) any change by the Company in tax or financial accounting
principles, practices or methods; (d) any material asset damaged, sold, disposed
of (except inventory sold in the ordinary course of business), mortgaged,
pledged or subjected to any lien, charge or other encumbrance; (e) any increase
in the compensation payable or which could become payable by the Company to its
directors, officers, employees, agents or consultants; (f) any adoption or
amendment of any Plan (as defined herein); (g) any material indebtedness
incurred by the Company, except such as may have been incurred in the ordinary
course of business; (h) any material loan made or agreed to be made by the
Company, nor has the Company become liable or agreed to become liable as a
guarantor with respect to any material indebtedness; (i) any waiver by the
Company of any right or rights of material value or any payment, direct or
indirect, of any material debt, liability or other obligation, except in
accordance with its terms; (j) any change in or amendment to the Certificate of
Incorporation or the Bylaws; (k) any payment, loan or advance of any amount to
or in respect of, or the sale, transfer or lease of any properties or assets
(whether real, personal or mixed, tangible or intangible) to, or entering into
of any agreement arrangement or transaction with, any officer or director of the
Company or any affiliate thereof, or any business or entity in which the Company
or any affiliate thereof, or relative of any such person, has any material
direct or indirect interest (collectively, "Related Parties"), except for (1)
directors' fees, (2) compensation to the officers and employees of the Company
in the ordinary course of business and (3) advancement or reimbursement of
expenses in the ordinary course of business; (l) any material modification or
change that would result in a diminishment of coverage under any insurance
policies; (m) any write-offs as uncollectible of any notes or accounts
receivable of the Company or write-downs of the value of any assets or inventory
by the Company other than in immaterial amounts or in the ordinary course of
business; or (n) any material adverse change to a Material Contract (as defined
herein).
Section 3.9 Taxes. (a) The Company has timely filed (or has had timely
filed on its behalf) or will file or cause to be timely filed, all material Tax
Returns (as defined below) required by applicable law to be filed by it prior
to, or as of, the Closing Date. All such Tax Returns are or will be true,
complete and correct in all material respects.
(b) The Company has paid (or has had paid on its behalf) or has established
(or has had established on its behalf and for its sole benefit and recourse), or
will establish or cause to be established on or before the Closing Date, an
adequate accrual on the books and records of the Company for the payment of all
material Taxes (as defined below) due with respect to any fiscal quarter ending
prior to or as of the Closing Date.
(c) Since January 1, 1995, the Company has not received notification of any
Audit (as defined below) by a Tax Authority with respect to any Tax Returns
filed by, or Taxes due from, the Company. No issue has been raised by any Tax
Authority in any Audit of the Company that if raised with respect to any other
period not so audited could be expected to result in a material proposed
deficiency for any period not so audited. No material deficiency or adjustment
for any Taxes has been threatened, proposed, asserted or assessed against the
Company. There are no liens for Taxes upon the assets of the Company, except
liens for current Taxes not yet due for which adequate reserves have been
established in accordance with GAAP.
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(d) Since January 1, 1995, the Company has not given or been requested to
give any waiver of statutes of limitations relating to the payment of any
material Taxes and has not executed powers of attorney with respect to any
material Tax matters, which will be outstanding as of the Closing Date.
(e) Prior to the date hereof, the Company has disclosed all material Tax
sharing, Tax indemnity, or similar agreements to which the Company is a party
to, is bound by, or has any obligation or liability for Taxes, and any changes
in accounting methods or any rulings from any Tax Authority.
(f) As used in this Agreement, (i) "Audit" shall mean any audit, assessment
of Taxes, other examination by any Tax Authority, proceeding or appeal of such
proceeding relating to Taxes; (ii) "Taxes" shall mean all federal, state, local
and foreign taxes, including, without limitation, sales and use taxes, value
added taxes, property taxes, payroll and employment taxes and other assessments
of a similar nature (whether imposed directly or through withholding), including
any interest, additions to tax, or penalties applicable thereto; (iii) "Tax
Authority" shall mean the Internal Revenue Service (the "Service") and any other
domestic or foreign governmental authority responsible for the administration of
any Taxes; and (iv) "Tax Returns" shall mean all federal, state, local and
foreign tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax Return relating to Taxes.
Section 3.10 Litigation. There is no suit, claim, action, proceeding or,
to the Company's knowledge, investigation pending or, to the Company's
knowledge, threatened in writing against or affecting the Company or any of the
directors or officers of the Company in their capacity as such which would be
reasonably likely to have a Material Adverse Effect. Neither the Company nor any
officer, director or employee of the Company has been permanently or temporarily
enjoined by any order, judgment or decree of any court or any other Governmental
Entity from engaging in or continuing any conduct or practice in connection with
the business, assets or properties of the Company nor, to the Company's
knowledge, is the Company or any officer, director or employee of the Company
under investigation by any Governmental Entity related to the conduct of the
Company's business. There is not in existence any order, judgment or decree of
any court or other tribunal or other agency that is specifically applicable to
the Company enjoining or requiring the Company to take any action of any kind
with respect to its business, assets or properties.
Section 3.11 Employee Benefit Plans; ERISA. (a) Section 3.11(a) of the
Company Disclosure Letter contains a true and complete list of each employment,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, SAR or stock-based incentive, severance or termination pay,
hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan, program,
agreement or arrangement, sponsored, maintained or contributed to or required to
be contributed to by the Company or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with the Company would be
deemed a "single employer" within the meaning of section 4001(b)(1) of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder ("ERISA") within the last six years, for the
benefit of any current or former employee or director of the Company, whether
formal or informal and whether legally binding or not (collectively, the
"Plans"). Section 3.11(a) of the Company Disclosure Letter identifies each of
the Plans that is an "employee welfare benefit plan," or "employee pension
benefit plan" as such terms are defined in sections 3(1) and 3(2) of ERISA (such
plans being hereinafter referred to collectively as the "ERISA Plans"). Neither
the Company nor any ERISA Affiliate has any formal plan or commitment, whether
legally binding or not, to create any additional Plan or modify or change any
existing Plan that would affect any current or former employee or director of
the Company, except as contemplated by this Agreement. Section 3.11(a) of the
Company Disclosure Letter contains a true and complete list of all Company Stock
Options issued and outstanding as of the date hereof.
(b) With respect to each of the Plans, the Company has heretofore delivered
to Baxter true and complete copies of each of the following documents: (i)
copies of the Plans (including all amendments thereto) or a written description
of any Plan that is not otherwise in writing; (ii) a copy of the annual report,
if required under ERISA, with respect to each ERISA Plan for the last three
years; (iii) a copy of the actuarial report, if required under ERISA, with
respect to each ERISA Plan for the last three years; (iv) a copy of the
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most recent Summary Plan Description ("SPD"), together with all Summaries of
Material Modification issued with respect to such SPD, if required under ERISA,
with respect to each ERISA Plan; (v) if the Plan is funded through a trust or
any other funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements thereof;
(vi) all contracts relating to the Plans with respect to which the Company or
any ERISA Affiliate may have any liability, including, without limitation,
insurance contracts, investment management agreements, subscription and
participation agreements and record keeping agreements; and (vii) the most
recent determination letter received from the Service with respect to each Plan
that is intended to be qualified under section 401(a) of the Code.
(c) Neither the Company nor any current or former ERISA Affiliate is
currently or has ever been the sponsor of or required to make contributions to
any "employee benefit plan" (as defined in Section 3(3) of ERISA) subject to
Title IV of ERISA (including without limitation any "multiemployer plan" (as
defined in Section 3(37) of ERISA and a multiple employer plan within the
meaning Section 413(c) of the Code)), and neither the Company nor any ERISA
Affiliate has at any time incurred any liability, directly or indirectly
(including, without limitation, any material contingent liability), with respect
to any such employee benefit plan.
(d) Neither the Company, any ERISA Affiliate, any of the ERISA Plans, any
trust created thereunder nor any trustee or administrator thereof has engaged in
a transaction or has taken or failed to take any action in connection with which
the Company, any ERISA Affiliate, any of the ERISA Plans, any such trust, any
trustee or administrator thereof, or any party dealing with the ERISA Plans or
any such trust could be subject to either a civil penalty assessed pursuant to
section 409 or 502(i) of ERISA or a tax imposed pursuant to section 4975, 4976
or 4980B of the Code.
(e) Full payment has been made, or will be made in accordance with section
404(a)(6) of the Code, of all amounts which the Company or any ERISA Affiliate
is required to pay under the terms of each of the ERISA Plans, and all such
amounts properly accrued through the Closing with respect to the current plan
year thereof will be paid by the Company on or prior to the Closing or will be
properly recorded on the Company's balance sheet.
(f) Each of the Plans has been operated and administered in all material
respects in accordance with its terms and applicable laws, including, but not
limited to, ERISA and the Code.
(g) Each of the ERISA Plans that is intended to be "qualified" within the
meaning of section 401(a) of the Code is so qualified. The Company has timely
applied for and received a currently effective determination letter from the
Service with respect to each such plan.
(h) Each of the ERISA Plans that is intended to satisfy the requirements of
section 501(c)(9) of the Code has so satisfied such requirements.
(i) No amounts payable under any of the Plans or any other agreement or
arrangement with respect to which the Company has or may have any liability
could give rise to the payment of any amount that would fail to be deductible
for federal income tax purposes by virtue of Section 162(m) or Section 280G of
the Code.
(j) No "leased employee" (as defined in section 414(n) of the Code)
performs services for the Company or any ERISA Affiliate.
(k) No Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees after retirement or other termination of service other than (i)
coverage mandated by applicable law, (ii) death benefits or retirement benefits
under any "employee pension plan," as that term is defined in Section 3(2) of
ERISA, (iii) deferred compensation benefits accrued as liabilities on the books
of the Company or the ERISA Affiliates, or (iv) benefits, the full cost of which
is borne by the current or former employee (or his beneficiary).
(l) With respect to each Plan that is funded wholly or partially through an
insurance policy, there will be no liability of the Company or any ERISA
Affiliate, as of the Closing Date, under any such insurance policy or ancillary
agreement with respect to such insurance policy in the nature of a retroactive
rate adjustment, loss
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sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Closing Date.
(m) Except as provided by this Agreement, the consummation of the
transactions contemplated hereunder will not result in the payment, vesting,
acceleration or enhancement of any benefit under any Plan.
(n) Except as set forth in Section 3.11(n) of the Company Disclosure
Letter, the Company has no severance and termination policy and the Company's
employees are not entitled to severance pay under any current Company
arrangement.
(o) There are rights to purchase an aggregate of 8,675 shares of Company
Common Stock, outstanding, on the date hereof, under the ESPP assuming (i) a
purchase price of $4.0375 per share of Company Common Stock and (ii) no changes
in the amount of employees' withholding.
Section 3.12 Environmental Matters. (a) The business of the Company and
its former Subsidiaries has been, and the business of the Company is in,
material compliance with all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment, including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata and natural resources (together,
"Environmental Laws" and including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic or hazardous substances or wastes,
petroleum and petroleum products, polychlorinated biphenyls ("PCBs"), or
asbestos or asbestos-containing materials (collectively, "Materials of
Environmental Concern"), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern); such material compliance includes, but is
not limited to, the possession by the Company of all Governmental Entity permits
and other authorizations required for the operation of its business under all
applicable Environmental Laws, and material compliance with the terms and
conditions thereof. All Governmental Entity permits and other authorizations
held by the Company as of the date hereof pursuant to the Environmental Laws are
identified on Schedule 3.12(a) of the Company Disclosure Letter.
(b) Since July 1, 1995, the Company has not received any communication
(written or oral), whether from a Governmental Entity, citizens group, employee
or otherwise, that alleges that the Company is not in compliance with any
Environmental Laws. The Company has provided to Baxter all information that is
in the possession of the Company regarding environmental matters pertaining to
or the environmental condition of the business or real property of the Company,
or the Company's compliance (or noncompliance) with any Environmental Laws.
(c) There is no claim, action, cause of action, investigation or notice
(written or oral) (together, "Environmental Claim") by any person or entity
alleging potential liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (i) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned or operated by the Company or (ii) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law, that in either
case is pending against the Company or against any person or entity whose
liability for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law.
(d) There are no past or present actions, activities, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that, to the best knowledge
of the Company after due inquiry, is reasonably likely to form the basis of any
Environmental Claim against the Company or against any person or entity whose
liability for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law.
(e) Without in any way limiting the generality of the foregoing, (i) all
on-site and off-site locations where the Company has (previously or currently)
stored, disposed or arranged for the disposal of Materials of Environmental
Concern are identified in Section 3.12(e) of the Company Disclosure Letter, (ii)
all underground storage tanks, and the capacity and contents of such tanks,
located on any property owned,
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leased, operated or controlled by the Company are identified in Section 3.12(e)
of the Company Disclosure Letter, (iii) there is no asbestos contained in or
forming part of any building, building component, structure or office space
owned, leased, operated or controlled by the Company and (iv) no PCBs or
PCB-containing items are used or stored at any property owned, leased, operated
or controlled by the Company.
Section 3.13 Compliance with Applicable Laws. The Company holds all
material licenses, permits and authorizations necessary for the lawful conduct
of its business, as now conducted, and such business is not being, and the
Company has not received any notice since July 1, 1996 from any authority or
person that such business has been or is being, conducted in violation of any
law, ordinance or regulation, including, without limitation, any law, ordinance
or regulation relating to (a) the conduct of medical research or (b)
occupational health and safety, except for possible violations which, either
singly or in the aggregate, have not resulted and are not reasonably expected to
result in a Material Adverse Effect.
Section 3.14 Material Contracts. (a) Section 3.14 of the Company
Disclosure Letter sets forth a true and correct list of any and all executory
agreements, contracts, purchase or installment agreements, indentures, leases,
mortgages, licenses, plans, arrangements, commitments (whether written or oral)
and instruments (collectively, "contracts") in existence as of the date hereof,
that are, as of the date hereof, material to the Company (each a "Material
Contract"), including without limitation, the following types of contracts to
which the Company is a party:
(i) any contract which is not terminable by the Company upon 30 days'
or less notice and which involves annual payments of more than $100,000;
(ii) any oral contract which involves annual payments in excess of
$50,000 or an aggregate payment in excess of $200,000 or any written
contract, in either case for the employment of any director, officer,
consultant or other person or entity who is not an employee on a full-time,
part-time, consulting or other basis, including any severance or other
termination provisions with respect to such employment;
(iii) any noncompetition agreement, other than customary agreements
with employees who are not officers, directors or key employees, or any
other contract that in any way restricts the Company from carrying on its
business any place in the world; and
(iv) any contract between the Company and any of its affiliates or any
of its officers, directors or key employees.
True and complete copies of each written Material Contract, or form thereof, and
true and complete written summaries of each oral Material Contract have been
made available to Baxter by the Company prior to the date hereof.
(b) Each Material Contract is a valid, binding and enforceable agreement of
the Company and, to the Company's knowledge, the other parties thereto and will,
subject to the satisfaction of the conditions in Article VIII, continue to be
valid, binding and enforceable immediately after the Closing, except (i) as such
enforcement may be subject to bankruptcy, insolvency or similar laws now or
hereafter in effect relating to creditors' rights, (ii) general principles of
equity (regardless of whether such enforcement is considered in a proceeding at
law or in equity) and (iii) as the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought;
and
(c) There has not occurred, (i) since June 30, 1997, any material default
(or event which upon provision of notice or lapse of time or both would become
such a default) or, (ii) prior to June 30, 1997, any uncured default (or event
which upon provision of notice or lapse of time or both would become such a
default) under any Material Contract on the part of the Company, except for
violations or defaults that individually or in the aggregate would not be
reasonably expected to have a Material Adverse Effect.
Section 3.15 Intellectual Property Rights. (a) The Company owns or
possesses adequate rights to use all intellectual and similar property of every
kind and nature relating to or used or necessary in the
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operation of the Company's business, including, without limitation, (i) patents
and trademarks associated with the Company's business (including all
Governmental Entity trademarks, service marks, logos and designs, all
registrations and recordings thereof, and all applications in the United States
or with any other Governmental Entity, all goodwill symbolized thereby or
associated therewith and all extensions or renewals thereof) which are set forth
on Schedule 3.15 of the Company Disclosure Letter, (ii) copyrights associated
solely with the Company's business, including all copyrights, United States and
foreign copyright registrations, and applications to register copyrights, which
are set forth on Schedule 3.15 of the Company Disclosure Letter, (iii)
inventions, formulae, processes, designs, know-how, show-how or other data or
information, (iv) confidential or proprietary technical and business
information, processes and trade secrets, (v) computer software, (vi) technical
manuals and documentation made or used in connection with any of the foregoing
and (vii) licenses and rights with respect to the foregoing or property of like
nature (collectively, "Company Intellectual Property").
(b) (i) Schedule 3.15 of the Company Disclosure Letter sets forth a
complete and accurate list of all registered copyrights, patents and trademarks
owned by or under obligation of assignment to the Company, or otherwise licensed
to and currently used in the conduct of the Company's business and related to
the Company's recombinant hemoglobin technology;
(ii) each owner, as of the date hereof, listed on Schedule 3.15 of the
Company Disclosure Letter, is listed in the records of the appropriate
Governmental Entity as the sole owner of record;
(iii) Schedule 3.15 of the Company Disclosure Letter sets forth a complete
and accurate list of all agreements between the Company, on the one hand, and
any person, on the other hand, in existence on the date hereof granting any
right to use or practice any rights under any Company Intellectual Property,
including, without limitation, marketing rights, royalty rights or distribution
rights;
(iv) there is no material encumbrance on the right of the Company to
transfer any of the Company Intellectual Property;
(v) no trade secret, formula, process, invention, design, know-how or any
other confidential information of the Company has been disclosed or authorized
to be disclosed to any Person, except in the ordinary course of business or
pursuant to an obligation of confidentiality binding upon said Person;
(vi) there are no pending proceedings by or before Governmental Entities,
including oppositions, interferences, proceedings or suits involving the
Company, relating to the Company Intellectual Property, and, to the Company's
knowledge, no such proceedings are threatened against the Company;
(vii) to the Company's knowledge, the conduct of the Company's business
does not infringe upon or otherwise violate in a material respect intellectual
property rights of any Person;
(viii) to the Company's knowledge, no Person is infringing upon or
otherwise violating any patents comprising a portion of Company Intellectual
Property;
(ix) since July 1, 1995, the Company has not received written notice of any
claims and there are no pending claims of any Persons involving the Company
relating to the scope, ownership or use of any of the Company Intellectual
Property; and
(x) each copyright registration, patent and registered trademark and
application therefor, is listed on Schedule 3.15 of the Company Disclosure
Letter, and is in proper form, not disclaimed and has been duly maintained,
including the submission of all necessary filings in accordance with the legal
and administrative requirements of the appropriate jurisdictions except with
respect to use requirements as to trademarks.
Notwithstanding the foregoing, no representation is made by the Company
with respect to any intellectual property of Baxter.
Section 3.16 Insurance. Section 3.16 of the Company Disclosure Letter
lists each of the insurance policies relating to the Company which are in effect
as of the date hereof. The Company has provided Baxter with a true, complete and
correct copy of each such policy or the binder therefor. With respect to each
such insurance policy or binder neither the Company nor any other party to the
policy is in breach or
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default thereunder (including, without limitation, with respect to the payment
of premiums or the giving of notices), and the Company does not know of any
occurrence or any event which (with notice or the lapse of time or both) would
constitute such a breach or default or permit termination, modification or
acceleration under the policy, except for such breaches or defaults which,
individually or in the aggregate, would not result in a Material Adverse Effect.
Section 3.16 of the Company Disclosure Letter describes any self-insurance
arrangements affecting the Company. The insurance policies listed on Section
3.16 of the Company Disclosure Letter include all policies which are required in
connection with the operation of the business of the Company, as currently
conducted, by applicable laws and all agreements relating to the Company. All
such policies, in the Company's judgment, provide coverage in reasonably
sufficient amounts to insure against all risks customarily insured against for
the business currently conducted by the Company. All such policies are, as of
the date hereof, in full force and effect, all premiums due with respect thereto
covering all periods up to and including the Closing Date will have been paid as
of such date and no notice of cancellation or termination has been received
prior to the date hereof with respect to any such policy. All policies of
insurance or replacements thereof will remain in full force and effect through
and after the Closing Date.
Section 3.17 Opinion of Financial Advisor. The Company has received the
opinion of Lehman Brothers Inc. ("Lehman Brothers"), the Company's financial
advisor, to the effect that, as of February 23, 1998, the Merger Consideration
to be received by the Company's stockholders in the Merger is fair to the
Company's stockholders from a financial point of view. A draft of the written
confirmation of such opinion has been provided to Baxter for informational
purposes only.
Section 3.18 Rights Agreement; Takeover Laws. The execution and delivery
of this Agreement will not (i) cause any rights issued pursuant to the Rights
Agreement (each, a "Right") to become exercisable or to separate from the stock
certificates to which they are attached, (ii) cause Baxter or any of its
affiliates to be an Acquiring Person (as such term is defined in the Rights
Agreement) or (iii) trigger any other provisions of the Rights Agreement,
including giving rise to a Distribution Date (as such term is defined in the
Rights Agreement). The Company and the Board of Directors of the Company have
each taken all action required to be taken by it in order to exempt this
Agreement, and the transactions contemplated hereby from, and this Agreement and
the transactions contemplated hereby are exempt from, the requirements of any
"moratorium," "control share," "fair price," "affiliate transaction," "business
combination" or other antitakeover laws and regulations of any state, including,
without limitation, the State of Delaware, and including, without limitation,
Section 203 of the DGCL.
Section 3.19 Company Disclosure. No representation or warranty by the
Company in this Agreement (including, without limitation, the representation
concerning Company SEC Reports), the Company Disclosure Letter, any schedule or
certificate furnished or to be furnished by the Company or any of its
representatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains as of the date hereof any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
Section 3.20 Labor Matters. Except as would not be reasonably likely to
have a Material Adverse Effect, (i) there is no labor strike, dispute, slowdown,
work stoppage or lockout actually pending or, to the Company's knowledge,
threatened against or affecting the Company and, during the past five years,
there has not been any such action; (ii) no union or other labor organization
represents or claims to represent the employees of the Company and, to the
Company's knowledge, no union or other labor organizing activity currently is
occurring among and no question of representation exists concerning such
employees; the Company is neither a party to nor bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company; (iii) there are no written personnel
policies, rules or procedures applicable to employees of the Company other than
such policies, rules and procedures, copies of which have been delivered to
Baxter; (iv) the Company is in material compliance with all applicable laws
concerning employment and employment practices, terms and conditions of
employment, immigration, wages, hours of work and occupational safety and
health, and is not engaged in any unfair labor practices
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(as defined in the National Labor Relations Act or other applicable law,
ordinance or regulation); (v) there is no grievance or arbitration proceeding
arising out of any collective bargaining or similar agreement or other grievance
procedure relating to the Company; (vi) to the Company's knowledge, no charges
or complaints relating to the Company are pending before the Equal Employment
Opportunity Commission or any other corresponding state agency; and (vii) to the
Company's knowledge, no federal, state or local agency responsible for the
enforcement of labor or employment laws, immigration laws, occupational health
and safety laws or any other law affecting the employees of the Company intends
to conduct or currently is conducting an investigation with respect to or
relating to the Company, and no such agencies have threatened to or have filed
any claims, charges, complaints or citations against the Company.
Section 3.21 WARN Act. Since the enactment of the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN Act"), the Company has not
effectuated (i) a plant closing as defined in the WARN Act (a "Plant Closing")
affecting any site of employment or one or more operating units within any site
of employment of the Company, or (ii) a mass layoff as defined in the WARN Act
(a "Mass Layoff") affecting the Company; nor has the Company been affected by
any transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local law. None of the
employees of the Company has suffered an employment loss as defined in the WARN
Act (an "Employment Loss") during the ninety-day period prior to the Closing
Date.
Section 3.22 Transactions with Related Parties. No Related Party (i) has
borrowed money or loaned money to the Company; (ii) has made or threatened any
contractual or other claim of any kind whatsoever against the Company; (iii) has
any interest in any property or assets used by the Company in its business; or
(iv) has been engaged in any other transaction with the Company, except for
transactions which are not required to be disclosed in the Company SEC Reports.
Section 3.23 Absence of Certain Payments. None of the Company nor its
officers, directors nor, to the Company's knowledge, any of its other affiliates
nor any of the Company's employees or agents or others acting on behalf of any
of them have (i) engaged in any activity prohibited by the United States Foreign
Corrupt Practices Act of 1977 or any other similar law, regulation, decree,
directive or order of any other country and (ii) without limiting the generality
of the preceding clause (i), used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others.
None of the Company nor its officers, directors nor, to the Company's knowledge,
any of its other affiliates nor any of the Company's employees or agents or
others acting on behalf of any of them, has accepted or received any unlawful
contributions, payments, gifts or expenditures.
Section 3.24 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment. (a) The Company has good and valid title to, or in the
case of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used in its business,
free and clear of any liens, charges, pledges, security interests or other
encumbrances, except as reflected in the Company's audited financial statements
or except for such imperfections of title and encumbrances, if any, which are
not substantial in character, amount or extent, and which do not materially
detract from the value as reflected in the Company's December 31, 1997 balance
sheet, or materially interfere with the present use, of the property subject
thereto or affected thereby.
(b) The equipment owned or leased by the Company is, taken as a whole, (i)
adequate, in all material respects, for the conduct of the Company's business,
(ii) suitable, in all material respects, for the uses to which it is currently
employed, (iii) in good operating condition (ordinary wear and tear excepted),
(iv) regularly and properly maintained, (v) not obsolete, dangerous or in need
of renewal or replacement, except for renewal or replacement in the ordinary
course of business and (vi) free from any defects, except, with respect to
clauses (i) through (vi) above, as would not have a Material Adverse Effect.
Section 3.25 FDA Matters. The Company is in compliance with all statutes,
rules and regulations of the U.S. Food and Drug Administration or similar
domestic state authority ("FDA") with respect to the manufacturing of all of its
products, to the extent that the same are applicable to the Company's business
as it is currently conducted, except for such violations as would not be
reasonably expected to have a Material
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Adverse Effect. The Company adheres to "Good Laboratory Practices" and "Good
Clinical Practices," as required by the FDA, except for such deviations as would
not be reasonably expected to have a Material Adverse Effect. The Company has
all requisite FDA permits, approvals or the like to conduct the Company's
business as it is currently conducted. The Company has previously delivered to
Baxter an index of all information concerning all Investigational New Drug
Applications obtained by the Company from the FDA or required in connection with
the conduct of the Company's business as it is currently conducted and has made
all such information available to Baxter. There are no pending or threatened
actions, proceedings or complaints by the FDA, which would prohibit or impede
the conduct of the Company's business as it is currently conducted. Section 3.25
of the Company Disclosure Letter contains a list of all communication between
the Company and the FDA from January 17, 1990 through the date hereof.
Section 3.26 Registration Statement and Proxy Statement/Prospectus. The
information supplied or to be supplied by the Company, for inclusion in (a) a
registration statement on Form S-4 (together with all amendments thereto, the
"Registration Statement") in which the Proxy Statement/Prospectus shall be
included as a prospectus, in connection with the registration under the
Securities Act of the shares of Baxter Common Stock and the CPRs to be issued
pursuant to the Merger will not, either at the time the Registration Statement
is filed with the Commission, at the time any amendment thereof or supplement
thereto is filed with the Commission, or at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and (b) the Proxy Statement/Prospectus will
not, either at the date mailed to the Company's stockholders or at the time of
the Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Proxy Statement/Prospectus, as to information supplied
by the Company, will comply in all material respects with all applicable
provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder.
Section 3.27 Brokers. Other than Lehman Brothers, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BAXTER AND MERGER SUB
Except as otherwise disclosed to the Company in a letter delivered to it
prior to the execution hereof (which letter shall contain appropriate references
to identify the specific section herein to which the information in such letter
relates) (the "Baxter Disclosure Letter") or as set forth in the Baxter SEC
Reports (as defined herein), Baxter and Merger Sub represent and warrant to the
Company as follows:
Section 4.1 Organization. Each of Baxter and Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
use or lease properties and to carry on its business as it is now being
conducted and as it is now proposed to be conducted. Merger Sub has delivered to
the Company a complete and correct copy of its certificate of incorporation and
bylaws, each as currently in effect. Neither Baxter nor Merger Sub is in default
in any respect in the performance, observation or fulfillment of any provision
of its certificate of incorporation or bylaws.
Section 4.2 No Ownership of Company Common Stock. Neither Baxter nor
Merger Sub owns any shares of Company Common Stock as of the date hereof.
Section 4.3 Capitalization. The authorized capital stock of Baxter
consists of 350,000,000 shares of Baxter Common Stock and 100,000,000 shares of
preferred stock, no par value per share ("Baxter Preferred Stock"), including,
3,500,000 shares of Series A Junior Participating Stock, no par value per share
("Series A Preferred"). As of December 31, 1997, (i) 287,701,247 shares of
Baxter Common Stock were issued and outstanding, of which 7,662,187 shares of
Baxter Common Stock were held in treasury,
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(ii) no shares of Series A Preferred were outstanding, (iii) no shares of Baxter
Preferred Stock were issued and outstanding and (iv) 27,070,672 shares of Baxter
Common Stock were reserved under all employee benefit plans of Baxter. The
authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock,
par value $.01 per share, all of which are validly issued and outstanding, fully
paid and nonassessable and are owned by Baxter.
Section 4.4 Authority. Each of Baxter and Merger Sub has all requisite
corporate power and authority to execute and deliver each of this Agreement, the
CPR Agreement and the CPRs and to consummate the transactions contemplated
hereby or thereby. The execution and delivery of each of this Agreement, the CPR
Agreement and the CPRs and the consummation of the transactions contemplated
hereby or thereby on the part of Baxter and Merger Sub have been duly and
validly authorized by the respective Board of Directors of Baxter and of Merger
Sub and by Baxter as the sole stockholder of Merger Sub and no other corporate
proceedings on the part of Baxter or Merger Sub as a matter of law or otherwise
are necessary to authorize this Agreement, the CPR Agreement and the CPRs or to
consummate the transactions contemplated hereby or thereby. This Agreement has
been duly and validly executed and delivered by Baxter and Merger Sub and,
assuming the due authorization, execution and delivery of this Agreement by the
Company, constitutes a valid and binding agreement of each of Baxter and Merger
Sub, enforceable against each of them in accordance with its terms, except to
the extent that the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally, (ii)
general principles of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity) and (iii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the discretion of the court before which any enforcement proceeding therefor may
be brought.
Section 4.5 Baxter Stockholder Approval. Neither the execution of this
Agreement nor the consummation of the Merger requires approval by the
stockholders of Baxter.
Section 4.6 Consent and Approvals; No Violation. The execution and
delivery of each of this Agreement the CPR Agreement and the CPRs, the
consummation of the transactions contemplated hereby or thereby, and each of the
performance by Baxter and Merger Sub of their obligations hereunder or
thereunder will not:
(a) conflict with or result in a breach of any provision of the
certificate of incorporation or bylaws of Baxter or the certificate of
incorporation or bylaws of Merger Sub;
(b) require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except (i) the
filing of a pre-merger notification and report form by Baxter and Merger
Sub, as applicable, under the HSR Act, (ii) the filing with the Commission
of (x) the Proxy Statement/Prospectus as contemplated by this Agreement, if
such approval is required by law, and (y) the Registration Statement
relating to the offer and sale of the CPRs and shares of Baxter Common
Stock as contemplated by this Agreement, if such filing is required by law,
(iii) the qualification under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act") of the CPR Agreement, if such filing is
required by law, and (iv) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware;
(c) result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under (or give rise to any
right of termination, cancellation or acceleration or guaranteed payments
under or to, a loss of a material benefit or result in the creation or
imposition of a lien under) any of the terms, conditions or provisions of
any note, lease, mortgage, indenture, license, agreement or other
instrument or obligation to which Baxter or Merger Sub is a party or by
which Baxter or Merger Sub or any of their respective properties or assets
may be bound, except for such violations, breaches, defaults, or rights of
termination, cancellation or acceleration, or losses as to which requisite
waivers or consents have been obtained or will be obtained prior to the
Effective Time or which, individually or in the aggregate, would not (i)
have a material adverse effect on the business, results of operations or
financial condition of Baxter and its subsidiaries, taken as a whole, other
than as a result of general economic conditions or conditions affecting the
health care products supply industry generally (a
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"Baxter Material Adverse Effect"), (ii) materially impair the ability of
either Baxter or Merger Sub to perform its obligations under the CPR
Agreement or this Agreement or (iii) prevent the consummation of any of the
transactions contemplated by the CPR Agreement or this Agreement;
(d) violate the provisions of any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to Baxter or Merger Sub, in
such a manner as to (i) have a Baxter Material Adverse Effect, (ii)
materially impair the ability of either Baxter or Merger Sub to perform its
obligations under the CPR Agreement or this Agreement or (iii) prevent the
consummation of any of the transactions contemplated by the CPR Agreement
or this Agreement; or
(e) result in the creation of any lien, charge or encumbrance upon any
shares of capital stock, properties or assets of Baxter or Merger Sub under
any agreement or instrument to which Baxter or Merger Sub is a party or by
which Baxter or Merger Sub is bound.
Section 4.7 Merger Sub's Operations. The Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
Section 4.8 Baxter SEC Reports. Baxter has filed with the Commission, and
has heretofore made available to the Company true and complete copies of, each
form, registration statement, report, schedule, proxy or information statement
and other document (including exhibits and amendments thereto), including
without limitation its Annual Reports to Stockholders incorporated by reference
in certain of such reports, required to be filed with the Commission since
December 31, 1995 under the Securities Act, or the Exchange Act (collectively,
the "Baxter SEC Reports"). As of the respective dates such Baxter SEC Reports
were filed or, if any such Baxter SEC Reports were amended, as of the date such
amendment was filed, each of the Baxter SEC Reports, including without
limitation any financial statements or schedules included therein, (a) complied
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act, as the case may be, and the applicable rules and
regulations promulgated thereunder, and (b) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
Section 4.9 Baxter Disclosure. No representation or warranty by Baxter or
Merger Sub in this Agreement and no statement contained in any document
(including, without limitation, the Baxter SEC Reports), schedule or certificate
furnished or to be furnished by Baxter or Merger Sub to the Company or any of
its representatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains as of the date hereof any untrue
statement of material fact or omits to state any material fact necessary in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
Section 4.10 Baxter Financial Statements. Each of the audited consolidated
financial statements and unaudited consolidated interim financial statements of
Baxter (including any related notes and schedules) included (or incorporated by
reference) in its Annual Reports on Form 10-K for each of the three fiscal years
ended December 31, 1994, 1995 and 1996 and its Quarterly Reports on Form 10-Q
for all interim periods during such period and subsequent thereto (collectively,
the "Financial Statements") have been prepared from, and are in accordance with,
the books and records of Baxter and its consolidated subsidiaries, comply in all
material respects with applicable accounting requirements and with the published
rules and regulations of the Commission with respect thereto, have been prepared
in accordance with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto and subject, in the case of quarterly financial
statements, to normal and recurring year-end adjustments) and fairly present, in
all material respects, in conformity with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of Baxter and its subsidiaries as of the date thereof and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of Baxter and its subsidiaries for the periods presented
therein (subject to normal year-end adjustments and the absence of financial
footnotes in the case of any unaudited interim financial statements).
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Section 4.11 Registration Statement and Proxy Statement/Prospectus. The
information supplied or to be supplied by Baxter or Merger Sub for inclusion in
(a) the Registration Statement will not, either at the time the Registration
Statement is filed with the Commission, at the time any amendment thereof or
supplement thereto is filed with the Commission, at the time the Registration
Statement becomes effective under the Securities Act or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (b) the Proxy Statement/Prospectus will not, either at the
date mailed to the Company's stockholders or at the time of the Company Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The Proxy Statement/Prospectus, as to information supplied by Baxter or Merger
Sub, will comply as to form in all material respects with all applicable
provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, and the Registration Statement, other than
as to information supplied by the Company or its representatives, will comply in
all material respects with the provisions of the Securities Act and the rules
and regulations promulgated thereunder.
Section 4.12 Brokers. Other than Credit Suisse First Boston Corporation,
no broker, finder, investment banker or other person is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement or the CPR Agreement or the issuance
of the CPRs, based upon arrangements made by or on behalf of Baxter or Merger
Sub.
Section 4.13 Shares. The shares of Baxter Common Stock, when issued in
accordance with the terms of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and not issued in violation of any
preemptive rights.
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 Ordinary Course. Except as (i) otherwise specifically provided
in this Agreement, (ii) as set forth in Section 5.1 of the Company Disclosure
Letter or (iii) otherwise consented to in writing by Baxter and Merger Sub, from
the date of this Agreement to the Effective Time, the Company will conduct its
operations only in the ordinary and usual course of business and will preserve
intact its present business organization, take reasonable efforts to keep
available the services of its present officers, employees and consultants and to
preserve its present relationships with licensors, licensees, suppliers, and
others with whom the Company has significant business relationships. Without
limiting the generality of the foregoing, and except (x) as otherwise
specifically provided in this Agreement or (y) as set forth in Section 5.1 of
the Company Disclosure Letter, the Company will not directly or indirectly, from
the date of this Agreement to the Effective Time, without the prior written
consent of Baxter and Merger Sub:
(a) propose or adopt any amendment to or otherwise change the
Certificate of Incorporation or the Bylaws;
(b) authorize for issuance, sale, pledge, disposition or encumbrance,
or issue, sell, pledge, dispose of or encumber (except (x) pursuant to the
exercise of Company Stock Options, outstanding on the date hereof, under
the Company Stock Option Plans and (y) the issuance of shares pursuant to
the ESPP in accordance with past practice or as contemplated by Section
2.2) any of its shares or any of its other securities or any interest
relating to or whose value is dependent on the value of any equity interest
in the Company or issue any securities convertible into or exchangeable
for, options, warrants to purchase, scrip, rights to subscribe for, calls
or commitments of any character whatsoever relating to, or enter into any
contract, understanding or arrangement with respect to the issuance of, any
of its shares or any of its other securities, or enter into any arrangement
or contract with respect to the purchase or voting of shares of its shares,
or adjust, split, reacquire, redeem, combine or reclassify any of its
securities, or make any other changes in its capital structure;
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(c) (i) except in the ordinary course of business, incur (contingently
or otherwise) any material liability or other material obligation
including, without limitation, any indebtedness for borrowed money, enter
into any guarantee of any such obligation of another person or mortgage,
pledge or subject to any lien, charge or other encumbrance of their assets,
properties or business, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person other than advances
to employees, for reasonable expenses, related to Company business, in the
ordinary course of business;
(d) enter into any transaction, commitment, contract, agreement,
license or lease, amend or affirmatively renew any such contracts,
commitments, licenses or leases other than those that are (i) not material
or (ii) in the ordinary course of business and do not involve affiliates of
the Company;
(e) sell or otherwise dispose of or lease any material part of its
properties or assets, including but not limited to the sale or license of
any real estate or Intellectual Property, or purchase or otherwise acquire
or lease material properties or assets (including real estate), except
purchases, sales and other dispositions in the ordinary course of business
(excluding sales or other dispositions of assets held for sale in excess of
$100,000 per item), or acquire or agree to acquire by merging or
consolidating with, or by purchasing all, or substantially all, of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof;
(f) declare, set aside or pay any dividends on, or make any
distributions in respect of, its outstanding shares;
(g) (i) (A) make any change, other than in the ordinary course of
business, in the compensation payable or to become payable to any of its
employees, agents or consultants or (B) make any change in the compensation
payable or to become payable to any of its officers or directors, (ii)
enter into or amend any employment, consulting, severance, termination or
similar agreement; (iii) adopt any new Plan or amend any existing Plan;
(iv) make any loans to any of its officers, directors, employees, agents or
consultants or any changes in its existing borrowing or lending
arrangements for or on behalf of any of such persons, whether contingent on
the Closing or otherwise; or (v) except to the extent permitted by Section
2.2 hereof, take any action to cause to be exercisable any otherwise
unexercisable Company Stock Option under the Company Stock Option Plans;
(h) make any material changes in the type or amount of its insurance
coverages;
(i) make any material tax election (unless required by law) or settle
or compromise any material income tax liability of the Company, except if
such action is taken in the ordinary course of business and Baxter shall
have been provided reasonable prior notice thereof. The Company shall
consult with Baxter before filing or causing to be filed any material Tax
Return of the Company or before executing or causing to be executed any
agreement or waiver extending the period for assessment or collection of
any material Taxes of the Company;
(j) cancel any debts or waive, release or relinquish any material
contract rights or other material rights other than in the ordinary course
of business;
(k) knowingly take or agree or commit to take any action that would
result in any of the Company's representations or warranties hereunder
qualified as to materiality being untrue and any such representations and
warranties that are not so qualified being untrue in any material respect;
or
(l) make, or commit to make, any capital expenditure in excess of
$100,000 including, without limitation, for the purchase of real estate.
Section 5.2 Rule 145 Affiliates. At least 30 days prior to the Effective
Time, the Company shall cause to be delivered to Baxter a letter identifying all
Persons who, at the time of the Special Meeting, may be deemed to be
"affiliates" of the Company for purposes of Rule 145 under the Securities Act
(each such Person, a "Securities Act Affiliate"). The Company shall use its
reasonable efforts to cause each person who is identified as a Securities Act
Affiliate to deliver, to Baxter, at least 15 days prior to the Effective Time,
an agreement substantially in the form of Annex B to this Agreement.
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Section 5.3 No Solicitation. (a) Prior to the Effective Time, the Company
agrees (x) that neither the Company, nor any of its directors, officers, legal
counsel, or financial advisors, will, and that the Company shall make reasonable
efforts to cause its other affiliates, employees and agents not to, directly or
indirectly, (i) solicit or initiate (including by way of furnishing or
disclosing non-public information) any inquiries or the making of any proposal
with respect to any merger, consolidation or other business combination
involving the Company or the acquisition of all or a substantial part of the
assets or capital stock of the Company (an "Acquisition Proposal") or (ii)
negotiate, knowingly encourage or otherwise engage in discussions with any
person (other than Baxter and its representatives) with respect to any
Acquisition Proposal and (y) that the Company will not enter into any agreement,
arrangement or understanding with respect to any such Acquisition Proposal which
would require it to abandon, terminate or fail to consummate the Merger or any
other transaction contemplated by this Agreement; provided, however, that (1)
the Company may, in response to an unsolicited written proposal from a third
party regarding a Superior Proposal (as defined in Section 5.3(b)), furnish
information to (and enter into a confidentiality or similar agreement with) and
negotiate or otherwise engage in discussions with, such third party, if the
Board of Directors of the Company determines in good faith, after consultation
with its outside counsel that such action is required for the Board of Directors
of the Company to comply with its fiduciary duties under applicable law and (2)
concurrently with compliance with Section 9.1(c)(i), the Company, upon three
days prior written notice to Baxter, may accept and may enter into any
definitive agreement relating to such Superior Proposal.
(b) The Company agrees that neither the Company, nor any of its directors,
officers, legal counsel, or financial advisors shall, and the Company shall make
reasonable efforts to cause its other affiliates, employees and agents to,
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person (other than Baxter and its
representatives) conducted heretofore with respect to any Acquisition Proposal.
The Company agrees to promptly advise Baxter of (i) any inquiries or proposals
received by, any non-public information requested from, or any negotiations or
discussions sought to be initiated or continued with, the Company and (ii) any
inquiries or proposals known by the Company to have been received by, any
non-public information known by the Company to have been requested from, or any
negotiation or discussions known by the Company to have been sought to be
initiated or continued with, its affiliates or any of the respective directors,
officers, employees, agents or representatives of the foregoing, in each case
from a person (other than Baxter and its representatives) with respect to an
Acquisition Proposal, and (iii) the terms thereof, including the identity of
such third party and the general terms of any financing arrangement or
commitment in connection with such Acquisition Proposal, and the Company agrees
to promptly update Baxter on an ongoing basis of the status thereof. As used
herein, "Superior Proposal" means a bona fide, written and unsolicited proposal
or offer made by any person (or group) (other than Baxter or any of its
representatives) with respect to an Acquisition Proposal on terms which the
Board of Directors of the Company determines in good faith (based on the written
advice of independent financial advisors), to be more favorable to the Company
and its stockholders than the transactions contemplated hereby; provided,
however, that such a proposal or offer shall not be deemed to be a "Superior
Proposal" unless the Board of Directors of the Company reasonably determines
that any financing required to consummate the transaction contemplated by such
proposal or offer is capable of being obtained.
(c) Nothing contained in this Section 5.3 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by 14d-9 or
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to the Company's stockholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under any applicable law,
rule or regulation or any duty of the Company's Board of Directors.
Section 5.4 No WARN Act Activities. From the date hereof through the
Closing Date, the Company shall not effectuate (i) a Plant Closing affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of the Company's business, or (ii) a Mass Layoff
affecting any site of employment or facility of the Company's business without
giving all notices required by the WARN Act, or any similar state law or
regulation, and the Company shall assume all liability for any alleged failure
to
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give such notice and indemnify and hold harmless Baxter for any and all claims
asserted under the WARN Act or any similar state law or regulation because of a
Plant Closing or a Mass Layoff occurring on or before the Closing Date. For
purposes of this Agreement, the Closing Date is the "effective date" for
purposes of the WARN Act.
Section 5.5 Stockholders' Meeting. The Company shall call the Special
Meeting to be held as promptly as practicable for the purpose of considering and
voting upon this Agreement and the Merger. The Board of Directors of the Company
shall recommend that the stockholders of the Company approve and adopt this
Agreement and the Merger. Notwithstanding anything contrary contained in this
Section 5.5 or elsewhere in this Agreement, at any time prior to the obtaining
such approval of the Company's stockholders, the Board of Directors of the
Company, to the extent that it determines in good faith, after consultation with
outside counsel, that failure to do so would create a risk of liability for
breach its fiduciary duties to the Company's stockholders under applicable law,
may withdraw or modify its approval or recommendation of this Agreement or the
Merger.
Section 5.6 Rights Plan. The Company shall, prior to the Effective Time,
cause the Rights to be redeemed pursuant to the terms of the Rights Agreement,
as in effect on the date hereof.
Section 5.7 Company Stock Option Plans. The Company shall, prior to the
Effective Time, cause the ESPP, and the Company Stock Option Plans and the
agreements governing the Company Stock Options to be amended in order to
effectuate the transactions contemplated by this Agreement. The Company shall
not open a new Purchase Period under the ESPP after June 30, 1998.
ARTICLE VI
COVENANTS OF BAXTER AND MERGER SUB
Section 6.1 Directors' and Officers' Indemnification and Insurance. (a)
Baxter and Merger Sub acknowledge that all rights to indemnification or
exculpation now existing in favor of the directors, officers, employees and
agents of the Company as provided in the Certificate of Incorporation, the
Bylaws or written indemnity agreements or otherwise in effect, as of the date
hereof, with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect. The certificate
of incorporation and bylaws of the Surviving Corporation shall contain
provisions with respect to indemnification and exculpation from liability as set
forth in the Certificate of Incorporation and Bylaws, as of the date of this
Agreement, which provisions will not be amended, repealed or otherwise modified
for a period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of any Indemnified Party (as defined
below). After the Effective Time, Baxter shall indemnify, defend and hold
harmless the present and former officers, directors, employees and agents of the
Company (each an "Indemnified Party") against all losses, claims, damages,
liabilities, fees and expenses (including reasonable fees and disbursements of
counsel and judgments, fines, losses, claims, liabilities and amounts paid in
settlement (provided, that any such settlement is effected with the prior
written consent of Baxter)) arising out of actions or omissions occurring at or
prior to the Effective Time to the full extent permitted under the laws of the
State of Delaware, the Certificate of Incorporation or the Bylaws, in each case,
as in effect at the date of this Agreement, including provisions therein
relating to the advancement of expenses incurred in the defense of any action or
suit.
(b) Baxter shall maintain in effect for not fewer than six years from and
after the Effective Time the policies of directors' and officers' liability
insurance most recently maintained by the Company (provided, that (i) Baxter
may, consistent with Baxter's existing policies, substitute therefor its self
insurance program and/or policies with reputable and financially sound carriers,
in either case providing at least the same coverage and containing terms and
conditions no less advantageous as long as such substitution does not result in
gaps or lapses in coverage with respect to claims arising from or related to
matters occurring prior to the Effective Time) and (ii) with respect to any
insurance (including self insurance) that is substituted for the policies of
directors' and officers' liability insurance most recently maintained by the
Company, Baxter shall ensure that such insurance does not contain limitations of
the type contained in Rule 145(b) of the
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DGCL, public policy limitations or any other limitations in excess of the
limitations contained in such directors' and officers' liability insurance
maintained by the Company); provided, that in no event shall Baxter be required
to expend more than an amount per year (the "Premium Amount") equal to 200% of
the current annual premiums paid by the Company to maintain or procure insurance
coverage pursuant to this Section 6.1(b); provided, further, that if Baxter is
unable to obtain the insurance called for this Section 6.1(b), Baxter shall
obtain as much comparable insurance as is available for the Premium Amount per
year.
(c) Baxter and Merger Sub jointly and severally agree to pay all expenses,
including attorneys' fees, that may be incurred by the Indemnified Parties in
enforcing the indemnity and other obligations provided for in this Section 6.1.
(d) In the event Baxter or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provisions shall be made so that the
successors and assigns of Baxter shall assume Baxter's obligations set forth in
this Section 6.1.
(e) The provisions of this Section 6.1 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her personal representatives.
Section 6.2 Blue Sky. Baxter shall use its commercially reasonably efforts
to obtain prior to the Effective Time all approvals or permits required to carry
out the transactions contemplated hereby under applicable blue sky laws in
connection with the issuance of the CPRs and shares of Baxter Common Stock in
the Merger and as contemplated by this Agreement; provided, however, that with
respect to such qualifications neither Baxter nor the Company shall be required
to register or qualify as a foreign corporation or to take any action which
would subject it to general service of process or taxation in any jurisdiction
where any such entity is not now so subject. The Company shall cooperate with
Baxter in the making of all required filings under applicable blue sky laws in
connection with the issuance of the CPRs and shares of Baxter Common Stock in
the Merger in accordance with this Agreement.
Section 6.3 CPR Agreement. Baxter shall, at or prior to the Effective
Time, cause the CPR Agreement to be duly authorized, executed and delivered by
Baxter and, assuming due authorization and delivery thereof by the Trustee, the
CPR Agreement shall be a valid and binding agreement of Baxter, enforceable in
accordance with its terms except the enforceability thereof may be limited by
(a) applicable bankruptcy, insolvency, moratorium, fraudulent transfer or
similar laws affecting creditors' rights generally, (b) the general principles
of equity (whether enforcement is considered at law or in equity) and (c) the
discretion of a court considering enforcement thereof.
Section 6.4 NYSE Listing. Baxter shall use its reasonable efforts to cause
the shares of Baxter Common Stock to be issued in the Merger in accordance with
this Agreement to be listed on the NYSE and on each national securities exchange
on which shares of Baxter Common Stock may at such time to be admitted for
trading or listed, subject to official notice of issuance, prior to the
Effective Time.
Section 6.5 Employment Matters. (a) Baxter shall cause the Surviving
Corporation to offer employment to persons specified in Schedule 6.5 ("Key
Existing Employees") of the Company Disclosure Letter on terms specified
therein.
(b) Following the Closing, Baxter intends to provide employees of the
Company who become and continue to be employed by Baxter or its subsidiaries
with total compensation benefits comparable to similarly situated Baxter
employees. Each employee of the Company who becomes an employee of Baxter or its
subsidiaries shall receive full credit (A) under the applicable welfare benefit
plans of Baxter in which such employee is eligible to participate for his or her
time of service to the Company, (B) for eligibility and vesting (but not for
benefit accrual) under Baxter's qualified retirement plans for his or her time
of service to the Company and (C) under the vacation, sick leave and paid-time
off policies of Baxter applicable to such employee, for all accrued and unused
vacation, sick leave and paid-time off to which such employee is entitled as of
the Closing Date. Notwithstanding the foregoing, employees will begin to receive
service credit
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for retiree medical benefits as of the Closing Date. Baxter shall waive any
pre-existing condition limitations or waiting periods under such employee
benefit plans.
ARTICLE VII
MUTUAL COVENANTS
Section 7.1 Access to Information; Confidentiality. Subject to the
existing confidentiality agreement, executed as of August 20, 1997, between the
Company and Baxter Healthcare Corporation (the "Confidentiality Agreement"),
between the date of this Agreement and the Effective Time, upon reasonable
notice the Company shall (i) give Baxter, its affiliates and their respective
officers, employees, accountants, counsel, financing sources and other agents
and representatives reasonable access, during normal business hours, to all
plants, offices, warehouses and other facilities and to all contracts, internal
reports, data processing files and records, federal, state, local and foreign
tax returns and records, commitments, books, records and affairs of the Company,
whether located on the premises of the Company or at another location, during
normal business hours; (ii) furnish promptly to Baxter or its affiliates a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws or regulations; (iii) permit Baxter or its affiliates to make,
during normal business hours, such inspections as they may reasonably require;
(iv) cause its officers to furnish Baxter and its affiliates such existing
financial, operating, technical and product data and other information with
respect to the business and properties of the Company as Baxter or its
affiliates from time to time may reasonably request, including without
limitation financial statements and schedules; (v) allow Baxter and its
affiliates the opportunity to interview such employees and other personnel of
the Company with the Company's prior written consent, which consent shall not be
unreasonably withheld; and (vi) assist and cooperate with Baxter and its
affiliates in the development of integration plans for implementation by Baxter
and its affiliates and the Surviving Corporation following the Effective Time;
provided, however, that no investigation pursuant to this Section 7.1 or notice
pursuant to Section 7.6 shall affect or be deemed to modify any representation
or warranty made by the Company herein. Until the Effective Time, materials
furnished to Baxter or its affiliates pursuant to this Section 7.1 may be used
by Baxter or its affiliates solely for continued evaluation of the Company and
integration planning purposes relating to accomplishing the transactions
contemplated hereby and for compliance with the applicable securities laws, and
shall be kept in confidence by Baxter pursuant to the terms of the
Confidentiality Agreement.
Section 7.2 HSR Act. The Company, Baxter and Merger Sub shall take all
reasonable actions necessary to file as soon as practicable notifications under
the HSR Act and to respond as promptly as practicable to any inquiries received
from the Federal Trade Commission and the Antitrust Division of the Department
of Justice for additional information or documentation and to respond as
promptly as practicable to all inquiries and requests received from any state
attorney general or other Governmental Entity in connection with antitrust
matters.
Section 7.3 Consents and Approvals. Each of the Company, Baxter and Merger
Sub will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to this Agreement and the
transactions contemplated hereby (which actions shall include without limitation
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any other Governmental Entity) and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed on it or any of its subsidiaries, if any, in connection
with this Agreement and the transactions contemplated hereby. Each of the
Company, Baxter and Merger Sub will, and will cause its respective subsidiaries,
if any, to, take all reasonable actions necessary to obtain (and will cooperate
with each other in obtaining) any consent, authorization, order or approval of,
or any exemption by, any Governmental Entity or other public or private third
party required to be obtained or made by Baxter, Merger Sub, the Company or any
of their respective subsidiaries, if any, in connection with the Merger or the
taking of any action contemplated thereby or by this Agreement.
Section 7.4 Publicity. So long as this Agreement is in effect, neither the
Company, Baxter nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement
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with respect to the Merger, this Agreement or the other transactions
contemplated hereby without the prior consultation with the other party, except
as may be required by law or by any listing agreement with a national securities
exchange.
Section 7.5 Filings with the Commission. (a) As promptly as practicable
after the execution of this Agreement, the Company shall prepare and file with
the Commission the Proxy Statement/Prospectus, and Baxter shall prepare and file
with the Commission the Registration Statement. Each of Baxter and the Company
(i) shall cause the Proxy Statement/Prospectus and the Registration Statement to
comply as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder, (ii)
shall use commercially reasonable efforts to have or cause the Registration
Statement to become effective and the CPR Agreement to become qualified under
the Trust Indenture Act, as promptly as practicable and (iii) shall take all or
any action required under any applicable federal or state securities laws in
connection with the issuance of shares of Baxter Common Stock and the CPRs
pursuant to the Merger. The Company and Baxter shall furnish to the other all
information concerning the Company and Baxter as the other may reasonably
request in connection with the preparation of the documents referred to herein.
As promptly as practicable after the Registration Statement shall have become
effective and the CPR Agreement has been qualified under the Trust Indenture
Act, the Company shall mail the Proxy Statement/Prospectus to its stockholders.
(b) The information supplied by each of the Company and Baxter for
inclusion in the Registration Statement and the Proxy Statement/Prospectus shall
not, at (i) the time the Registration Statement is declared effective, (ii) the
time the Proxy Statement/Prospectus (or any amendment thereof or supplement
thereto) is first mailed to the stockholders of the Company, (iii) the time of
the Special Meeting, or (iv) the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If, at any
time prior to the Effective Time, any event or circumstance relating to the
Company, Baxter, any subsidiary of Baxter, or their respective officers or
directors, should be discovered by such party which should be set forth in an
amendment or a supplement to the Registration Statement or the Proxy
Statement/Prospectus, such party shall promptly inform the other thereof and
take appropriate action in respect thereof.
Section 7.6 Advice of Changes. The Company and Baxter shall each promptly
give notice to the other party upon becoming aware of any representation or
warranty of the Company or Baxter contained in this Agreement becoming untrue or
inaccurate in any material respect or the failure by the Company or Baxter to
timely comply with or satisfy any material covenant or agreement to be complied
with or satisfied by it under this Agreement and shall use its reasonable best
efforts to prevent or promptly remedy same. No notice given hereunder shall
affect or be deemed to modify any representation or warranty made by the Company
or Baxter herein.
Section 7.7 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers, consents
and approvals in connection with any governmental requirements set forth in
Section 3.4 and 4.6 of the Agreement, to effect all necessary registrations and
filings. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and/or directors of Baxter and the Surviving Corporation and the former
officers and/or directors of the Company shall take all such necessary action.
Section 7.8 Tax Matters. Concurrently with the execution of this
Agreement, and again on the Closing Date, Baxter and Merger Sub shall execute
and deliver to the Company and the Company shall execute and deliver to Baxter
and Merger Sub, a certificate in the form heretofor agreed upon by the parties
(the "Tax Matters Certificate"). Neither Baxter, Merger Sub nor the Company
shall take any action which would cause its respective representations,
warranties and covenants in the Tax Matters Certificate to become untrue or
breached in any material respect.
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or waiver, on or prior to the Closing Date, of the
following conditions:
(a) Governmental Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expiration of waiting
periods imposed by, and federal, state, local or foreign Governmental
Entity necessary for the consummation of the Merger and the transactions
contemplated by this Agreement shall have been filed, occurred or been
obtained and shall be in effect at the Effective Time.
(b) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order precluding, restraining,
enjoining, preventing or prohibiting the consummation of the Merger shall
have been issued by a federal, state or foreign court or other Governmental
Entity and remain in effect.
(c) Statutes. No federal, state, local or foreign statute, rule or
regulation shall have been enacted which prohibits the consummation of the
Merger or would make the consummation of the Merger illegal.
(d) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite
vote of the stockholders of the Company in accordance with and subject to
applicable law.
(e) Registration Statement. The Registration Statement shall have been
declared effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(f) CPR Agreement. The CPR Agreement shall have been duly qualified
under the Trust Indenture Act.
(g) Change in Tax Law. There shall have occurred no amendment to the
Code or promulgation of a Treasury Regulation thereunder or a judicial
interpretation thereof published, after the date of the Agreement, by a
Federal Court (a "Change in Tax Law") that would cause the Merger, if
consummated after the effective date of such Change in Tax Law, to fail to
qualify as a reorganization under Section 368 of the Code.
(h) Listing. The shares of Baxter Common Stock to be issued pursuant
to this Agreement shall have been listed on the NYSE, subject to official
notice of issuance.
Section 8.2 Conditions of Obligations of Baxter and Merger Sub. The
obligation of Baxter and Merger Sub to effect the Merger is further subject to
the satisfaction at or prior to the Closing Date of the following conditions,
unless waived by Baxter and Merger Sub:
(a) The representations and warranties of the Company set forth in
this Agreement (i) shall, when made, be true and correct in all material
respects and (ii) shall be true and correct as if made as of the Closing
Date (unless such representation or warranty is, by its terms, made only as
of a specific other date and time), except, in the case of (ii), for such
inaccuracies as would not be reasonably expected to have a Material Adverse
Effect.
(b) The Company shall have performed, in all material respects, and
complied, in all material respects, with all obligations and covenants
required to be performed or complied with by it under this Agreement at or
prior to the Closing Date.
(c) The Company shall have obtained all consents, approvals,
authorizations and permits referred to in Section 8.2(c) of the Company
Disclosure Letter.
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(d) Baxter and Merger Sub shall have received from the Company an
officer's certificate, executed on behalf of the Company by an authorized
officer confirming, to such officers' knowledge, that the conditions set
forth in Sections 8.2(a) and (b) have been complied with.
(e) From the date of this Agreement through the Effective Time, no
event shall have occurred which shall be reasonably likely to result or
shall have resulted in a Material Adverse Effect.
(f) Baxter and Merger Sub shall have received an opinion from Cooley
Godward LLP, special counsel to the Company, substantially in the form of
Annex C attached hereto, subject to such exceptions and qualifications as
are customary for such counsel and opinions of such type.
(g) Such Key Existing Employees designated in paragraphs (A) and (B)
on Schedule 6.5 of the Company Disclosure Letter shall have entered into
employment or other agreements for the periods and on such other terms
substantially as set forth in the Company Disclosure Letter.
(h) The aggregate number of shares of Company Common Stock
constituting Dissenting Shares shall be less than seven percent of the
outstanding shares of Company Common Stock immediately prior to the
Effective Time.
Section 8.3 Conditions of Obligations of the Company. The obligations of
the Company to effect the Merger are further subject to the satisfaction at or
prior to the Closing Date of the following conditions, unless waived by the
Company:
(a) The representations and warranties of Baxter and Merger Sub set
forth in this Agreement (i) shall, when made, be true and correct in all
material respects and (ii) shall be true and correct as if made as of the
Closing Date (unless such representation or warranty is, by its terms, made
only as of a specific other date and time), except, in the case of (ii),
for such inaccuracies which would not be reasonably expected to have a
Baxter Material Adverse Effect.
(b) Baxter and Merger Sub shall have performed and complied, in all
material respects, with all obligations and covenants required to be
performed or complied with by them under this Agreement at or prior to the
Closing Date.
(c) Baxter and Merger Sub shall have obtained all consents, approvals,
authorizations and permits referred to in Section 4.6.
(d) The Company shall have received from Baxter and Merger Sub an
officer's certificate executed on behalf of each of Baxter and the Merger
Sub by an authorized officer confirming, to such officer's knowledge, that
the conditions set forth in Sections 8.3(a) and 8.3(b) have been complied
with.
(e) The Company shall have received an opinion from Thomas J.
Sabatino, Jr., Corporate Vice President and General Counsel of Baxter,
substantially in the form of Annex D attached hereto, subject to such
exceptions and qualifications as are customary for such counsel and
opinions of such type.
(f) From the date of this Agreement through the Effective Time, no
event shall have occurred which shall be reasonably likely to result or
shall have resulted in a Baxter Material Adverse Effect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
stockholder approval thereof:
(a) By Mutual Consent. By mutual consent of the Board of Directors of
Baxter and the Board of Directors of the Company.
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(b) By Baxter and Merger Sub or the Company. By the Board of Directors
of Merger Sub, Baxter or the Company:
(i) if the Merger shall not have been consummated on or prior to
July 31, 1998; provided, however, that the right to terminate this
Agreement under this Section 9.1(b)(i) shall not be available to any
party whose failure to fulfill any material obligation under this
Agreement has been the cause of or resulted in, the failure of the
Merger to be consummated on or prior to such date; or
(ii) if a court of competent jurisdiction or other Governmental
Entity shall have issued an order, decree or ruling or taken any other
action (which order, decree, ruling or other action the parties hereto
shall use their reasonable efforts to lift), in each case permanently
restraining, enjoining, or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and non-appealable.
(iii) if (a) the Special Meeting (including any adjournments
thereof) shall have been held and completed and the Company's
stockholders shall have taken a final vote on a proposal to approve and
adopt this Agreement and to approve the Merger, and (b) the adoption and
approval of this Agreement and the approval of the Merger by the holders
of a majority of the shares of Company Common Stock outstanding on the
record date for the Special Meeting shall not have been obtained.
(c) By the Company. By the Board of Directors of the Company:
(i) if, prior to the Effective Time, the Company shall have (A)
accepted a Superior Proposal in compliance with the terms of Section 5.3
hereof and (B) paid or caused to be paid the fee provided for in Section
10.1(b) hereof; or
(ii) if, prior to the Effective Time, (A) the Company is not in
material breach of this agreement, (B) Baxter or Merger Sub breaches or
fails in any material respect to perform or comply with any of its
covenants and agreements contained herein or breaches its
representations and warranties in a manner which would cause any of the
conditions contained in Sections 8.3(a) or 8.3(b) not to be satisfied,
and (C) such breach or failure, if curable, shall not have been cured in
all material respects by Baxter or Merger Sub within thirty days
following receipt by Baxter of written notice from the Company
describing such breach or failure.
(d) By Baxter. By the Board of Directors of Baxter:
(i) if (A) neither Baxter nor Merger Sub is in material breach of
this Agreement and (B) prior to the Effective Time, the Board of
Directors of the Company shall have withdrawn, or modified or changed
(including by amendment to the Proxy Statement/Prospectus) in a manner
adverse to Baxter or Merger Sub its approval or recommendation of the
Merger or this Agreement, or shall have recommended a Superior Proposal;
or
(ii) if prior to the Effective Time, (A) neither Baxter nor Merger
Sub is in material breach of this Agreement, (B) the Company breaches or
fails in any material respect to perform or comply with any of its
covenants and agreements contained herein or breaches its
representations and warranties in a manner which would result in any of
the conditions in Section 8.2(a) or 8.2(b) not being satisfied, and (C)
such breach or failure, if curable, shall not have been cured in all
material respects by the Company within thirty days following receipt by
the Company of written notice from the Baxter or Merger Sub describing
such breach or failure.
Section 9.2 Effect of Termination and Abandonment. In the event of
termination of this Agreement as provided in Section 9.1 above, written notice
thereof shall forthwith be given to the other party or parties specifying the
provision hereof pursuant to which such termination is made, and this Agreement
shall forthwith become null and void and there shall be no liability or
obligation on the part of Baxter and Merger Sub, or any of them, or the Company,
or their respective officers, directors or employees, except (a) for
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fraud or for material willful breach of this Agreement and (b) as set forth in
this Section 9.2, in Section 10.1 hereof and in the Confidentiality Agreement.
No termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Fees and Expenses. (a) Except as contemplated by this
Agreement, including Section 10.1(b) hereof, all costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(b) If (A) this Agreement is validly terminated by the Company pursuant to
Section 9.1(c)(i) and (B) at the time of such termination, neither Baxter nor
Merger Sub shall be in breach of this Agreement in any material respect and
there shall not have occurred and continue to exist a Baxter Material Adverse
Effect, then, concurrently with such termination, the Company shall pay or cause
to be paid to Baxter (by wire transfer) an amount equal to $5.0 million.
(c) If (A) this Agreement is validly terminated by Baxter pursuant to
Section 9.1(d)(i), and (B) at the time of such termination, neither Baxter nor
Merger Sub shall be in breach in any material respect of this Agreement and
there shall not have occurred and continue to exist a Baxter Material Adverse
Effect, then, within three business days after such termination, the Company
shall pay or cause to be paid to Baxter (by wire transfer) an amount equal to
$5.0 million.
(d) If (A) this Agreement is validly terminated by the Company or by Baxter
pursuant to Section 9.1(b)(iii), (B) an Acquisition Proposal shall have been
made and publicly announced at or prior to the Special Meeting (or any
adjournment or postponement thereof), (C) an Acquisition Proposal shall have
been consummated within six months of the date of such termination and (D) at
the time of termination of this Agreement pursuant to Section 9.1(b)(iii),
neither Baxter nor Merger Sub shall be in breach in any material respect of this
Agreement and there shall not have occurred and continue to exist a Baxter
Material Adverse Effect, then, upon consummation of such Acquisition Proposal,
the Company shall pay or cause to be paid to Baxter (by wire transfer) an amount
equal to $5.0 million.
Section 10.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company contemplated
hereby, by written agreement of the parties hereto, based upon action taken by
their respective Boards of Directors, at any time prior to the Effective Time
with respect to any of the terms contained herein; provided, however, that after
the approval of this Agreement by the stockholders of the Company, no such
amendment, modification or supplement shall reduce or change the Merger
Consideration.
Section 10.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Time.
Section 10.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon personal delivery, facsimile
transmission (which is confirmed), telex or delivery by an overnight express
courier service (delivery, postage or freight charges prepaid), or on the fourth
day following deposit in the United States mail (if sent by registered or
certified mail, return receipt requested,
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delivery, postage or freight charges prepaid), addressed to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Baxter or Merger Sub, to:
c/o Baxter International Inc.
One Baxter Parkway
Deerfield, Illinois 60015
Telecopy No.: (847) 948-2450
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071-3144
Telecopy No.: (213) 687-5600
Attention: Joseph J. Giunta
(b) if to the Company, to:
Somatogen, Inc.
2545 Central Avenue, Suite FD1
Boulder, CO 80301-2857
Telecopy No.: (303) 440-3013
Attention: President and Chief Executive Officer
with a copy (which shall not constitute notice) to:
Cooley Godward LLP
2595 Canyon Boulevard, Suite 250
Boulder, Colorado 80302-6737
Telecopy No.: (303) 546-4099
Attention: James C.T. Linfield
Section 10.5 Definitions; Interpretation. As used in this Agreement, the
term "affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the
Exchange Act. When a reference is made in this Agreement to an Article, Section
or Schedule, such reference shall be to an Article, Section or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 10.6 Specific Performance. In addition to any other remedies
available at law, or in equity, it is agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court of
the United States located in the State of Delaware or in Delaware state court.
In addition, each of the parties hereto (a) consents to commit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than federal or state court sitting in the
State of Delaware.
Section 10.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
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Section 10.8 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein) and
the Confidentiality Agreement (a) constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, and (b), except as provided
in Section 6.1(d) hereof, are not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
Section 10.9 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or to another
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 10.10 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware (without giving
effect to the conflicts of laws principles thereof).
Section 10.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Merger Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Baxter or to any, direct or indirect, wholly owned subsidiary of Baxter. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
IN WITNESS WHEREOF, each of Baxter, Merger Sub and the Company has caused
this Agreement to be executed on its behalf by its duly authorized officers
hereunder all as of the date first above written.
BAXTER INTERNATIONAL INC.
By:/s/ HARRY M. JANSEN KRAEMER, JR.
----------------------------------
Harry M. Jansen Kraemer, Jr.
President
RHB1 ACQUISITION CORP.
By: /s/ JOHN F. GAITHER, JR.
----------------------------------
John F. Gaither, Jr.
Vice President
SOMATOGEN, INC.
By: /s/ ANDRE DE BRUIN
------------------------------------
Andre de Bruin
Chairman of the Board, President
and Chief Executive Officer
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ANNEX A
BAXTER INTERNATIONAL INC.
No. Certificate for Contingent Payment Rights
This certifies that , or registered assigns (the "Holder"),
is the registered holder of the number of Contingent Payment Rights ("CPRs") set
forth above. Each CPR entitles the Holder, subject to the provisions contained
herein and in the Agreement referred to on the reverse hereof, to payments from
Baxter International Inc., a Delaware corporation (the "Company"), in an amount
and in the form determined pursuant to the provisions set forth on the reverse
hereof and as more fully described in the Agreement referred to on the reverse
hereof. Such payment shall be made on each Payment Date or, if earlier, the
Redemption Date or the Default Payment Date, each as defined in the Agreement
referred to on the reverse hereof.
Payment of any amounts pursuant to this CPR Certificate shall be made only
to the registered Holder (as defined in the Agreement) of this CPR Certificate.
Such payment shall be made in the Borough of Manhattan, The City of New York, or
at any other office or agency maintained by the Company for such purpose, in
such coin or currency of the United States of America as at the time is legal
tender for the payment of public and private debts; provided, however, the
Company may pay such amounts by wire transfer or check payable in such money.
First Trust National Association has been initially appointed as Paying Agent in
the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this CPR Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, this CPR
Certificate shall not be entitled to any benefit under the Agreement, or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated:
Baxter International Inc.
By
-----------------------------------
Attest:
- ------------------------------------------------------
Authorized Signature
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[FORM OF REVERSE OF CPR CERTIFICATE]
This CPR Certificate is issued under and in accordance with the Contingent
Payment Rights Agreement, dated as of [insert date], 1998 (the "Agreement"),
between the Company and First Trust National Association, a national
association, as trustee (the "Trustee," which term includes any successor
Trustee under the Agreement), and is subject to the terms and provisions
contained in the Agreement, to all of which terms and provisions the Holder of
this CPR Certificate consents by acceptance hereof. The Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Agreement for a full statement of the respective rights, limitations
of rights, duties, obligations and immunities thereunder of the Company, the
Trustee and the holders of the CPRs. All capitalized terms used in this CPR
Certificate without definition shall have the respective meanings ascribed to
them in the Agreement. Copies of the Agreement can be obtained by contacting the
Trustee.
Subject to extension or earlier redemption as hereinafter provided, until
March 15, 2008, the Company shall pay to the Holder hereof on March 15 and
September 15 of each year (or if such day is not a Business Day, without
accruing any interest, on the next succeeding Business Day), beginning March 15,
1999, or if such day is not a Business Day, without accruing any interest, on
the next Business Day (as the same may be extended, each a "Payment Date"), for
each CPR represented hereby, a pro rata portion of the Contingent Payment with
respect to the Payment Measuring Period ended immediately prior to such Payment
Date, unless the CPR(s) represented by this CPR Certificate shall have been
redeemed as provided for herein; provided, that in no event shall the aggregate
of all Contingent Payments with respect to each CPR exceed two dollars ($2.00)
and, provided, further, that in no event shall the Company be required to a make
a payment on any Payment Date in an amount less than $0.05 per CPR and such
amounts which would otherwise be payable on such Payment Date shall (x) be
aggregated with the amount payable with respect to the next Payment Measuring
Period and (y) not bear interest except on a Default Payment Date.
The "Contingent Payment," with respect to any Payment Measuring Period,
equals five percent of the Net Sales that are attributable to the commercial
sale of Products.
"Net Sales" means the actual gross amount invoiced by the Company, its
Affiliates, licensees or distributors for the sale of Products to any third
parties during a Payment Measuring Period less: (a) direct transportation
charges, including insurance; (b) trade, quantity and other discounts and
rebates actually allowed and taken to the extent customary in the trade; and (c)
allowances or credits, including but not limited to, allowances or credits to
customers on account of rejection or return of the Products; provided that (i) a
sale or transfer to an Affiliate of the Company for resale by such Affiliate
shall not be considered a sale for the purpose of this provision, but the resale
by such Affiliate shall be a sale for such purposes, and the term "sale" shall
include a transfer or other disposition to a customer; (ii) Net Sales shall not
include reserves for bad debts or allowances, credits or rebates not covered
above; and (iii) a sale of Products shall occur at the earlier of (a) the
transfer of title in such Products to a third party or (b) the shipment of such
Products from the manufacturing or warehouse facilities of the manufacturer of
such Products to a third party.
Net Sales shall not include license fees or other advance payments received
by the Company from a licensee or distributor of the Products which is not
derived from sales of Products, but shall include the Net Sales of such licensee
or distributor.
"Payment Measuring Period" means (i) the period from the Effective Date to
December 31, 1998 and (ii) each six month period ended June 30 and December 31
thereafter, through and including the Final Payment Date.
"Products" shall mean all products in which the primary active ingredient
is human hemoglobin, or derivatives, mutants or modifications thereof, which
have been produced in culture of microbial cells (including yeast cells) which
have been modified using Somatogen Recombinant Hemoglobin Technology (other than
clinical indications of any such Products that are in clinical trials as of the
date of the Merger Agreement).
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"Somatogen Recombinant Hemoglobin Technology" shall mean all technology
owned by or licensed to Somatogen on or prior to the Effective Date, which
involves the use of recombinant DNA techniques.
If for any reason the Contingent Payment has not been finally determined as
of the Payment Date, then the Payment Date will be automatically extended until
the date that is the seventh Business Day after the date of which the Contingent
Payment has been finally determined.
The CPRs will be redeemable, in whole or in part, at any time and from time
to time, at the option of the Company at a redemption price for each CPR
represented hereby equal to $2 less all Contingent Payments made or provided
for, through the Redemption Date. The Agreement does not prohibit the Company
from otherwise acquiring CPRs.
The Contingent Payment, if any, and interest thereon, if any, shall be
payable by the Company in such coin or currency of the United States of America
as at the time is legal tender for the payment of public and private debts;
provided, however, the Company may pay such amounts by its check or wire
transfer payable in such money. First Trust National Association has been
initially appointed as Paying Agent in the Borough of Manhattan, The City of New
York.
If an Event of Default occurs and is continuing, either the Trustee may or
if the Holders holding an aggregate of at least fifty percent of the Outstanding
CPRs, by notice to the Company and to the Trustee shall bring suit to recover
all amounts then due and payable, with interest at the Default Interest Rate
from the Default Payment Date through the date payment is made or duly provided
for.
In the event that, it is finally determined that no amount is payable on
the CPRs to the Holder on any Payment Date, the Company shall give the Trustee
notice of such determination. The failure to give such notice or any defect
therein shall not affect the validity of such determination.
The Agreement permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the holders of CPRs under the Agreement at any time by
the Company and the Trustee with the consent of the holders of a majority of the
CPRs at the time outstanding.
No reference herein to the Agreement and no provision of this CPR
Certificate or of the Agreement shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay any amounts determined
pursuant to the terms hereof and of the Agreement at the times, place and
amount, and in the manner, herein prescribed. The Holder of this CPR
Certificate, by acceptance hereof, agrees that the Company has no obligation to
initiate or continue research, development or commercialization activities with
respect to Products or any of the Somatogen Recombinant Hemoglobin Technology
and, in its sole subjective discretion, the Company may abandon efforts to
research, develop or commercialize such technology or Products.
The Agreement provides that the Trustee shall receive an Officers'
Certificate, on or before each Payment Date, certifying the Net Sales from sales
of Products. The Agreement also provides that the Company shall not transfer
(other than transfers to Subsidiaries and Affiliates) the Somatogen Recombinant
Hemoglobin Technology unless the transferor agrees to be bound by the Agreement
to the same extent as the Company is then bound thereby, whereupon the Company
shall be released from any obligation under the Agreement.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of the CPRs represented by this CPR Certificate is
registrable on the Security Register, upon surrender of this CPR Certificate for
registration of transfer at the office or agency of the Company maintained for
such purpose in the Borough of Manhattan, The City of New York, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
The Company and the Security Registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new CPR
Certificates, for the same amount of CPRs, will be issued to the designated
transferee or transferees. The Company hereby initially designates the office of
First Trust National Association [insert address of trustee] as the office for
registration of transfer of this CPR Certificate.
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As provided in the Agreement and subject to certain limitations therein set
forth, this CPR Certificate is exchangeable for one or more CPR Certificates
representing the same number of CPRs as represented by this CPR Certificate as
requested by the Holder surrendering the same.
No service charge will be made for any registration of transfer or exchange
of CPRs, but the Company may require payment of a sum sufficient to cover all
documentary, stamp or similar issue or transfer taxes or other governmental
charges payable in connection with any registration of transfer or exchange.
Prior to the time of due presentment of this CPR Certificate for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this CPR Certificate is
registered as the owner hereof for all purposes, and neither the Company, the
Trustee nor any agent shall be affected by notice to the contrary.
Neither the Company nor the Trustee has any duty or obligation to the
holder of this CPR Certificate, except as expressly set forth herein or in the
Agreement.
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
this is one of the CPR Certificates referred to in the within-mentioned
Agreement.
FIRST TRUST NATIONAL ASSOCIATION,
Trustee and Transfer
Agent and Registrar
Dated:
By:
----------------------------------
Authorized Signatory
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APPENDIX B
LEHMAN BROTHERS
February 23, 1998
Board of Directors
Somatogen, Inc.
2545 Central Avenue
Boulder, Colorado 80301
Members of the Board:
We understand that Somatogen, Inc. ("Somatogen" or the "Company") is
proposing to enter into an agreement with Baxter International Inc. ("Baxter")
pursuant to which the Company will merge (the "Merger") with a subsidiary of
Baxter, and upon effectiveness of the Merger, each share of the Company's common
stock will be exchanged for the right to receive shares of Baxter's common stock
valued at $9.00 and a contingent payment right ("CPR"), representing the right
to receive payments, not to exceed $2.00 per CPR, based on the sale of future
products derived from the Company's recombinant hemoglobin technology (the
"Proposed Transaction"). The terms and conditions of the Proposed Transaction
are set forth in more detail in the Agreement and Plan of Merger dated February
23, 1998 by and among Baxter, RHB1 Acquisition Corp. and Somatogen and the form
of Contingent Payment Rights Agreement (together the "Agreement").
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be offered to such stockholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) publicly available
information concerning the Company and Baxter that we believe to be relevant to
our analysis, including the Company's Form 10-K for the year ended June 30, 1997
and Form 10-Q for the period ended December 31, 1997, and Baxter's Form 10-K for
the year ended December 31, 1996 and Form 10-Q for the period ended September
30, 1997, (3) financial and operating information with respect to the business,
operations and prospects of the Company furnished to us by the Company, (4) a
trading history of the Company's common stock from February 18, 1996 to February
18, 1998 and a comparison of that trading history with those of other companies
that we deemed relevant, (5) a trading history of Baxter's common stock from
February 18, 1997 to February 18, 1998 and a comparison of that trading history
with those of other companies that we deemed relevant, (6) a comparison of the
historical financial results and present financial condition of the Company with
those of other companies that we deemed relevant, (7) a comparison of the
historical financial results and present financial condition of Baxter with
those of other companies that we deemed relevant, (8) a comparison of the
financial terms of the Proposed Transaction with the financial terms of certain
other transactions that we deemed relevant, and (9) alternatives available to
the Company on a stand-alone basis to fund its future capital and operating
requirements. In addition, we have had discussions with the management of the
Company concerning its business, operations, assets, financial condition and
prospects and have undertaken such other studies, analyses and investigations as
we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts or circumstances that would make such information
materially inaccurate or misleading. With respect to the financial projections
of the Company, upon advice of the Company we have
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Board of Directors
Somatogen, Inc.
February 23, 1998
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
However, for purposes of our analysis, we also have considered certain somewhat
more conservative assumptions and estimates which resulted in certain
adjustments to the projections of the Company. We have discussed these adjusted
projections with the management of the Company and they have agreed with the
appropriateness of the use of such adjusted projections in performing our
analysis. We were not provided with and did not have access to any financial
forecasts or projections of Baxter. In arriving at our opinion, we have not
conducted a physical inspection of the properties and facilities of the Company
or Baxter and have not made or obtained any evaluations or appraisals of the
assets or liabilities of the Company or Baxter. In addition, you have not
authorized us to solicit, and we have not solicited, any indications of interest
from any third party with respect to the purchase of all or a part of the
Company's business. Our opinion necessarily is based upon market, economic and
other conditions as they exist on, and can be evaluated as of, the date of this
letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company and Baxter in the past and have received customary fees
for such services. In the ordinary course of our business, we actively trade in
the securities of the Company and Baxter for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
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APPENDIX C
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
SEC.262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (l) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the
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effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound,
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as the Court may direct. Payment shall be so made to each such stockholder, in
the case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Baxter is empowered by Section 145 of the DGCL, subject to the procedures
and limitations stated therein, to indemnify any person against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in the defense of any
threatened, pending or completed action, suit or proceeding in which such person
is made a party by reason of his or her being or having been a director or
officer of Baxter. The statute provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Baxter Certificate provides that the
Baxter shall indemnify its directors and officers substantially to the fullest
extent permitted by the DGCL.
Baxter is also empowered by Section 102(b) of the DGCL to include a
provision in its certificate of incorporation to limit a director's liability to
Baxter or its stockholders for monetary damages for breaches of fiduciary duty
as a director. Article Eighth of the Baxter Certificate states that directors of
Baxter shall not be liable for monetary damages for breach of fiduciary duty "to
the fullest extent permitted by the DGCL as the same exists or may hereafter be
amended." As Delaware law now exists, directors will remain liable for damages
for (i) a breach of their duty of loyalty to the registrant and its
stockholders; (ii) their failure to act in good faith; (iii) their intentional
misconduct or knowing violation of law; (iv) improper dividend payments, stock
repurchases or redemptions; and (v) any transaction from which the director
derived an improper personal benefit.
Policies of insurance are maintained by Baxter under which the directors
and officers of Baxter are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities which might be
imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such directors or officers.
Baxter has entered into indemnification agreements with its officers and
directors, which its stockholders have approved or ratified. These agreements
provide for full indemnification, including indemnification for judgments or
settlements against an officer or director in favor of Baxter with certain
exceptions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The exhibits to the Registration Statement listed in the
attached exhibit index and are incorporated herein by reference.
(b) Financial Statement Schedules. The information required of Baxter by
Schedule II, Schedule of Valuation and Qualifying Accounts, for the three years
ended December 31, 1997 is incorporated herein by reference to Baxter's Annual
Report on Form 10-K filed with the Commission for the fiscal year ended December
31, 1997 (File No. 1-4448).
(c) Reports, Opinions or Appraisals. The opinion of Lehman Brothers
(included as Appendix B to the Proxy Statement/Prospectus) is incorporated
herein by reference.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement, to include
any prospectus required by Section 10(a)(3) of the Securities Act; to
reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement.
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Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit of proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the registration statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the Township of
West Deerfield, State of Illinois, on the 3rd day of April, 1998.
BAXTER INTERNATIONAL INC.
By: /s/ VERNON R. LOUCKS JR.
----------------------------------
Vernon R. Loucks Jr.
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this amendment to the
registration statement on Form S-4 has been signed by the following persons in
the capacities indicated on the 3rd day of April, 1998.
By: /s/ VERNON R. LOUCKS JR.
----------------------------------
Vernon R. Loucks Jr.
Chairman and Chief Executive
Officer
By:/s/ HARRY M. JANSEN KRAEMER, JR.
----------------------------------
Harry M. Jansen Kraemer, Jr.
President and a Director
By: /s/ BRIAN P. ANDERSON
----------------------------------
Brian P. Anderson
Senior Vice President and Chief
Financial Officer
By: /s/ BRIAN P. ANDERSON
----------------------------------
Brian P. Anderson
Senior Vice President and Chief
Accounting Officer
The Board of Directors of Baxter
Walter E. Boomer
Pei-yuan Chia
John W. Colloton
Susan Crown
Mary Johnston Evans
Frank R. Frame
Martha R. Ingram
Arnold J. Levine, Ph.D.
Georges C. St. Laurent, Jr.
Monroe E. Trout, M.D.
Reed V. Tuckson, M.D.
Fred L. Turner
By: /s/ HARRY M. JANSEN KRAEMER, JR.
--------------------------------
Harry M. Jansen Kraemer, Jr.
Director and Attorney-in-Fact
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENTS
-------------- ------------------------
<S> <C>
2.1 -- Merger Agreement, included as Appendix A to the Proxy
Statement/Prospectus.
3.1 -- The Baxter Certificate, filed as Exhibit 3.1 to the
Baxter's annual report on Form 10-K for the year ended
December 31, 1992 (file No. 1-4448).
3.2 -- Certificate of Designation of Series A Junior
Participating Preferred Stock, filed under the Securities
Act as Exhibit 4.3 to Baxter's registration statement on
Form S-8 (file No. 33-28428).
3.3 -- The Baxter Bylaws, filed as Exhibit 3.3 to Baxter's Form
10-K for the year ended December 31, 1997 (file No.
1-4448).
4.1 -- The Baxter Rights Agreement, filed as Exhibit 1 to
Baxter's registration statement on Form 8-A dated March
21, 1989 (file No. 1-4448).
4.2 -- Form of Contingent Payment Rights Agreement.
5.1* -- Opinion of Thomas J. Sabatino, Jr., Esq.
8.1* -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 -- Voting Agreement, filed as Exhibit A to Lilly's Amendment
No. 4 to its Schedule 13D with respect to the Company
Common Stock.
11.1 -- Statement re: computation of per share earnings, filed as
Exhibit 11.1 to Baxter's Annual Report on Form 10-K for
the year ended December 31, 1997 (file No. 1-4448).
12.1 -- Statements re: computation of ratios, filed as Exhibit 12
to Baxter's Annual Report on Form 10-K for the year ended
December 31, 1997 (file No. 1-4448).
21.1 -- List of subsidiaries of Baxter, filed as Exhibit 21.1 of
Baxter's Annual Report on Form 10-K for the year ended
December 31, 1997 (file No. 1-4448).
23.1 -- Consent of Price Waterhouse LLP., Chicago, Illinois.
23.2 -- Consent of Price Waterhouse LLP., Boulder, Colorado.
23.3 -- Consent of Thomas J. Sabatino, Jr., Esq. (included in
Exhibit 5.1 as previously filed).
23.4 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.1 as previously filed).
23.5* -- Consent of Lehman Brothers Inc.
24.1* -- Power of Attorney of Walter E. Boomer.
24.2* -- Power of Attorney of Pei-yuan Chia.
24.3* -- Power of Attorney of John W. Colloton.
24.4* -- Power of Attorney of Susan Crown.
24.5* -- Power of Attorney of Mary Johnston Evans.
24.6* -- Power of Attorney of Martha R. Ingram.
24.7* -- Power of Attorney of Frank R. Frame.
24.8* -- Power of Attorney of Georges C. St. Laurent, Jr.
24.9* -- Power of Attorney of Monroe E. Trout, M.D.
24.10* -- Power of Attorney of Fred L. Turner.
24.11 -- Power of Attorney of Reed Tuckson, M.D.
24.12 -- Power of Attorney of Arthur J. Levine, Ph.D.
25.1* -- Statement of Eligibility of Trustee.
99.1 -- Form of Proxy.
</TABLE>
- ------------
* Previously filed
<PAGE> 1
EXHIBIT 4.2
================================================================================
CONTINGENT PAYMENT RIGHTS AGREEMENT
by and between
BAXTER INTERNATIONAL INC.
and
FIRST TRUST NATIONAL ASSOCIATION
Dated as of May 4, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Compliance and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.3 Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.4 Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.5 Notices, etc., to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.6 Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.7 Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.8 Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.10 Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.12 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.13 Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.14 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 2
SECURITY FORMS
Section 2.1 Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3
THE SECURITIES
Section 3.1 Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.2 Registrable Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.3 Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4 Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.5 Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.7 Paymentswith respect to CPR Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 3.8 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.9 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4
THE TRUSTEE
Section 4.1 Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.2 Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.3 Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.4 May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.5 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.6 Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.7 Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.8 Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.9 Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.10 Acceptance of Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.11 Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . 22
Section 4.12 Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 5
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 5.1 Company to Furnish Trustee Names and Addresses of Holders . . . . . . . . . . . . . . . . . . . . . 22
Section 5.2 Preservation of Information; Communications to Holders . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.3 Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.4 Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 6
AMENDMENTS
Section 6.1 Amendments Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.2 Amendments with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.3 Execution of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.4 Effect of Amendments; Notice to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.5 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.6 Reference in Securities to Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 7
COVENANTS
Section 7.1 Payment of Amounts, if any, to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 7.3 Money for Security Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.4 Certain Purchases and Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.6 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.7 Non-Monetary Consideration for Licensed Products . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.8 Foreign Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.9 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 8
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
Section 8.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default . . . . . . . . . . . . . . . 30
Section 8.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt . . . . . . . . . . . . . . . . . . . 31
Section 8.3 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.4 Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.5 Restoration of Rights on Abandonment of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.6 Limitations on Suits by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.7 Unconditional Right of Holders to Institute Certain Suits . . . . . . . . . . . . . . . . . . . . . 35
Section 8.8 Powers and Remedies Cumulative; Delay or Omission
Not Waiver of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.9 Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.10 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.11 Trustee to Give Notice of Default, But May Withhold in
Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.12 Right of Court to Require Filing of Undertaking to Pay Costs . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 9.1 Company May Consolidate, etc., on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.2 Successor Person Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.3 Opinion of Counsel to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 10
REDEMPTION
Section 10.1 Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.2 Notices to Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.3 Selection of CPR Certificates to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.4 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.5 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 10.6 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 10.7 CPR Certificates Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
- ----------------
</TABLE>
Annex A - Form of CPR Certificate
* Note: This table of contents shall not, for any purpose, be deemed to
be a part of this Agreement.
iii
<PAGE> 5
Reconciliation and tie between Trust Indenture Act of 1939 and Contingent
Payment Rights Agreement, dated as of May 4, 1998.
<TABLE>
<CAPTION>
Trust Indenture Act Section Agreement Section
- --------------------------- -----------------
<S> <C> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7, 4.9
Section 311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.13(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.13(b)
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(a)(2), 5.3(b)
Section 312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1, 5.2(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(c)
Section 313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(a), 5.3(b)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(c)
Section 314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Section 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.11, 5.3(a)(6)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(b)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)
(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)(1)
(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)(2)
(d)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)(3)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1, 8.12
Section 316 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3
Section 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7
</TABLE>
_______________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Agreement.
iv
<PAGE> 6
CONTINGENT PAYMENT RIGHTS AGREEMENT, dated as of May 4, 1998 (the
"Agreement"), by and between BAXTER INTERNATIONAL INC., a Delaware corporation
(the "Company"), and FIRST TRUST NATIONAL ASSOCIATION, a national banking
association, as trustee (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the creation of an issue of
contingent payment rights (the "Securities" or "CPRs"), of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Agreement;
WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of
February 23, 1998 (the "Merger Agreement"), by and among the Company, RHB1
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the
Company, and Somatogen, Inc., a Delaware corporation ("Somatogen"), the Company
agreed to issue, to the stockholders of Somatogen, the Securities; and
WHEREAS, all things necessary have been done to make the Securities,
when executed by the Company and authenticated and delivered hereunder, the
valid obligations of the Company and to make this Agreement a valid agreement
of the Company, all in accordance with their and its terms.
NOW, THEREFORE, for and in consideration of the premises and the
consummation of the transactions referred to above, it is covenanted and
agreed, for the equal and proportionate benefit of all Holders (as defined
herein) of the Securities, as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1 Definitions. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(b) all accounting terms used herein and not expressly defined
herein shall have the meanings assigned to such terms in accordance with
generally accepted accounting principles in the United States, and the term
"generally accepted accounting principles" or "GAAP" means such accounting
principles as are generally accepted as they may change from time to time;
1
<PAGE> 7
(c) all other terms used herein which are defined in the Trust
Indenture Act (as defined herein), either directly or by reference therein,
have the respective meanings assigned to them therein; and
(d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this instrument as originally executed and as it may
from time to time be supplemented or amended pursuant to the applicable
provisions hereof.
"Authorized Newspaper" means The Wall Street Journal (Eastern
Edition), or if The Wall Street Journal (Eastern Edition) shall cease to be
published, or, if the publication or general circulation of The Wall Street
Journal (Eastern Edition) shall be suspended for whatever reason, such other
English language newspaper of general circulation in The City of New York, New
York, as is selected by the Company.
"Board of Directors" means the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company, to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Business Day" means any day (other than a Saturday or a Sunday) on
which banking institutions in The City of New York, New York or Chicago,
Illinois are not authorized or obligated by law or executive order to close
and, if the CPRs are listed on a national securities exchange, such exchange is
open for trading.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act (as defined herein),
or if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
2
<PAGE> 8
"Company" means the Person (as defined herein) named as the "Company"
in the first paragraph of this Agreement, until a successor Person shall have
become such pursuant to the applicable provisions of this Agreement, and
thereafter "Company" shall mean such successor Person. To the extent necessary
to comply with the requirements of the provisions of Trust Indenture Act
Sections 310 through 317, inclusive, as they are applicable to the Company, the
term "Company" shall include any other obligor with respect to the Securities
for the purposes of complying with such provisions.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by the chairman of the Board of Directors or
the president or any vice president, the controller or assistant controller and
the treasurer or assistant treasurer or the secretary or any assistant
secretary, and delivered to the Trustee.
"Contingent Payment" means, with respect to any Payment Measuring
Period, an amount equal to five percent of the Net Sales that are attributable
to the commercial sale of Products.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Agreement is
located at 111 East Wacker Drive, Suite 3000, Chicago, Illinois 60601.
"CPR Certificate" means a certificate representing any of the CPRs.
"Default Interest Rate" means the 90-day London Interbank Offering
Rate, as published in The Wall Street Journal, as such rate may change from
time to time, plus 200 basis points.
"Default Payment Amount" means, with respect to each CPR, as of a
Default Payment Date (as defined herein), an amount, equal to the difference
between (i) $2.00 and (ii) the aggregate of all Contingent Payments paid or
provided for, in accordance with the terms hereof, from the Effective Date
through and including such Default Payment Date.
"Default Payment Date" means the date upon which the Securities become
due and payable pursuant to Section 8.1.
"Effective Date" means May 4, 1998.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Final Measuring Period" means the six months ending December 31,
2007.
"Final Payment Date" means March 15, 2008.
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"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Net Sales" means the actual gross amount invoiced by the Company, its
Affiliates, licensees or distributors for the sale of Products to any third
parties during a Payment Measuring Period less: (a) direct transportation
charges, including insurance; (b) trade, quantity and other discounts and
rebates actually allowed and taken to the extent customary in the trade; and
(c) allowances or credits, including, but not limited to, allowances or credits
to customers on account of rejection or return of the Products; provided that
(i) a sale or transfer to an Affiliate of the Company for resale by such
Affiliate shall not be considered a sale for the purpose of this provision, but
the resale by such Affiliate shall be a sale for such purposes, and the term
"sale" shall include a transfer or other disposition to a customer; (ii) Net
Sales shall not include reserves for bad debts or allowances, credits or
rebates not covered above; and (iii) a sale of Products shall occur at the
earlier of (a) the transfer of title in such Products to a third party or (b)
the shipment of such Products from the manufacturing or warehouse facilities of
the manufacturer of such Products to a third party.
Net Sales shall not include license fees or other advance
payments received by the Company from a licensee or distributor of the Products
which is not derived from sales of Products, but shall include the Net Sales of
such licensee or distributor.
"Officers' Certificate," when used with respect to the Company means a
certificate signed by the chairman of the Board of Directors or the president
or any vice president, the controller or assistant controller and the treasurer
or assistant treasurer or the secretary or any assistant secretary of the
Company delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company.
"Outstanding" when used with respect to Securities means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Agreement, except: (a) Securities theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation; (b) from and after the
earliest of a Default Payment Date, a Redemption Date or the Final Payment
Date, Securities for the payment of which money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent (other than the
Company) in trust, or set aside and segregated in trust by the Company (if the
Company shall act as its own Paying Agent) for the Holders of such Securities;
and (c) Securities in exchange for or in lieu of which other Securities have
been authenticated and delivered pursuant to this Agreement, other than any
such Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona fide
purchaser in whose hands the Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
Outstanding Securities have given any request, demand, direction, consent or
waiver hereunder, Securities
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owned by the Company or any Affiliate of the Company, whether held as treasury
securities or otherwise, shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, direction, consent or waiver, only Securities
which the Trustee knows to be so owned shall be so disregarded.
"Paying Agent" means any Person authorized by the Company to pay the
amount determined pursuant to Section 3.1, if any, on any Securities on behalf
of the Company.
"Payment Date" means March 15, 1999 and each succeeding March 15 and
September 15, through and including the Final Payment Date.
"Payment Measuring Period" means (i) the period from the Effective
Date to December 31, 1998 and (ii) each six month period ended June 30 and
December 31 thereafter, through and including the Final Measuring Period.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political
subdivision thereof.
"Products" shall mean all products in which the primary active
ingredient is human hemoglobin, or derivatives, mutants or modifications
thereof, which have been produced in culture of microbial cells (including
yeast cells) which have been modified using Somatogen Recombinant Hemoglobin
Technology (other than clinical indications for any such Products that are in
clinical trials as of the date of the Merger Agreement).
"Redemption Date" means the date specified in a notice of redemption
given by the Company pursuant to Section 10.1
"Redemption Price" means, with respect to each CPR, the difference
between (x) $2.00 and (y) the aggregate Contingent Payments made, or provided
for in accordance with the terms hereof, from the Effective Date through and
including the Redemption Date.
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office and also means, with respect to
any particular corporate trust matter, any other officer of the Trustee to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Somatogen Recombinant Hemoglobin Technology" shall mean all
technology owned by or licensed to Somatogen on or prior to the Effective Date,
which involves the use of recombinant DNA techniques.
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"Subsidiary" means each Person more than 50% of the outstanding Voting
Securities of which is owned, directly or indirectly, by the Company and/or one
or more Subsidiaries.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Agreement, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Agreement, and thereafter
"Trustee" shall mean such successor Trustee.
"vice president" when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title of "vice president."
"Voting Securities" means securities having ordinary voting power to
elect a majority of the directors irrespective of whether or not stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency.
Section 1.2 Compliance and Opinions. Upon any application or request
by the Company to the Trustee to take any action under any provision of this
Agreement, the Company shall furnish to the Trustee an Officers' Certificate
stating that, in the opinion of the signor, all conditions precedent, if any,
provided for in this Agreement relating to the proposed action have been
complied with and an Opinion of Counsel stating, subject to customary
exceptions, that in the opinion of such counsel all such conditions precedent,
if any, have been complied with, except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Agreement relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement shall include: (a) a
statement that each individual signing such certificate or opinion has read
such covenant or condition and the definitions herein relating thereto; (b) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (c) a statement that, in the opinion of each such individual, he or
she has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (d) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
Section 1.3 Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person,
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it is not necessary that all such matters be certified by, or covered by the
opinion of, only one such Person, or that they be so certified or covered by
only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel. Any such certificate or Opinion of Counsel may be
based, insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, an officer or officers of the Company stating that
the information with respect to such factual matters is in the possession of
the Company.
Any certificate, statement or opinion of an officer of the Company or
of counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company. Any certificate or opinion of any
independent firm of public accountants filed with the Trustee shall contain a
statement that such firm is independent.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 1.4 Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such
Holders in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and (subject to
Section 4.1) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section. The Company may set a record date for purposes
of determining the identity of Holders entitled to vote or consent to any
action by vote or consent authorized or permitted under this Agreement. If not
set by the Company prior to the first solicitation of a Holder of Securities
made by any Person in respect of any such action, or, in the case of any such
vote, prior to such vote, the record date for such action shall be the later of
ten days prior to the first solicitation of such consent or the date of the
most recent list of Holders furnished to the Trustee pursuant to Section 5.1 of
this Agreement prior to such solicitation. If a record date is fixed, those
Persons who were Holders of Securities at such record date
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(or their duly designated proxies), and only those Persons, shall be entitled
to take such action by vote or consent or, except with respect to clause (d)
below, to revoke any vote or consent previously given, whether or not such
Persons continue to be Holders after such record date. No such vote or consent
shall be valid or effective for more than 120 days after such record date.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register. Neither the Company nor the Trustee nor any Agent of the Company or
the Trustee shall be affected by any notice to the contrary.
(d) At any time prior to (but not after) the evidencing to the
Trustee, as provided in this Section 1.4, of the taking of any action by the
Holders of the Securities specified in this Agreement in connection with such
action, any Holder of a Security the serial number of which is shown by the
evidence to be included among the serial numbers of the Securities the Holders
of which have consented to such action may, by filing written notice at the
Corporate Trust Office and upon proof of holding as provided in this Section
1.4, revoke such action so far as concerns such Security. Any request, demand,
authorization, direction, notice, consent, waiver or other action by the Holder
of any Security shall bind every future Holder of the same Security or the
Holder of every Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, suffered or
omitted to be done by the Trustee, any Paying Agent or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
Section 1.5 Notices, etc., to Trustee and Company. Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Agreement to be made upon, given
or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed, in
writing, to or with the Trustee at its Corporate Trust Office; or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder if in writing and mailed, first-class
postage prepaid, to the Company addressed to it at One Baxter Parkway,
Deerfield, Illinois 60015, Attention: General Counsel, or at any other address
previously furnished in writing to the Trustee by the Company.
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Section 1.6 Notice to Holders; Waiver. Where this Agreement provides
for notice to Holders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Agreement provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any
event as required by any provision of this Agreement, then any method of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 1.7 Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in this Agreement by any of the provisions of the Trust
Indenture Act, such required provision shall control.
Section 1.8 Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 1.9 Successors and Assigns. All covenants and agreements in
this Agreement by the Company shall bind its successors and assigns, whether so
expressed or not.
Section 1.10 Benefits of Agreement. Nothing in this Agreement or in
the Securities, express or implied, shall give to any Person (other than the
parties hereto and their successors hereunder, any Paying Agent and the
Holders) any benefit or any legal or equitable right, remedy or claim under
this Agreement or under any covenant or provision herein contained, all such
covenants and provisions being for sole benefit of the parties hereto and their
successors and of the Holders.
Section 1.11 Governing Law. THIS AGREEMENT AND THE SECURITIES SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
THE COMPANY HEREBY
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IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING
IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 1.12 Legal Holidays. In the event that a Payment Date, a
Redemption Date, the Final Payment Date or a Default Payment Date, as the case
may be, shall not be a Business Day, then (notwithstanding any provision of
this Agreement or the Securities to the contrary) payment on the Securities
need not be made on such date, but may be made, without the accrual of any
interest thereon, on the next succeeding Business Day with the same force and
effect as if made on a Payment Date, a Redemption Date, the Final Payment Date
or a Default Payment Date, as the case may be.
Section 1.13 Separability Clause. In case any provision in this
Agreement or in the CPRs shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 1.14 No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company or the Trustee shall not have
any liability for any obligations of the Company or the Trustee under the
Securities or the Agreement or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security each
Holder waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the Securities.
Section 1.15 Counterparts. This Agreement shall be signed in any
number of counterparts with the same effect as if the signatures to each
counterpart were upon a single instrument, and all such counterparts together
shall be deemed an original of this Agreement.
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ARTICLE 2
SECURITY FORMS
Section 2.1 Forms Generally. The Securities and the Trustee's
certificate of authentication shall be in substantially the forms set forth in
Annex A, attached hereto and incorporated herein by this reference, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Agreement and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may be required by law or any rule or regulation pursuant thereto, all as may
be determined by the officers executing such Securities, as evidenced by their
execution of the Securities. Any portion of the text of any Security may be set
forth on the reverse thereof, with an appropriate reference thereto on the face
of the Security.
The definitive Securities shall be typewritten, printed, lithographed
or engraved on steel engraved borders or produced by any combination of these
methods or may be produced in any other manner permitted by the rules of any
securities exchange on which the Securities may be listed all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
ARTICLE 3
THE SECURITIES
Section 3.1 Title and Terms. (a) The aggregate number of CPR
Certificates which may be authenticated and delivered under this Agreement is
limited to a number equal to [INSERT NUMBER OF SHARES OF COMPANY COMMON STOCK
OUTSTANDING ON A FULLY DILUTED BASIS AT THE EFFECTIVE TIME OF MERGER], except
for Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities pursuant to Section 3.4, 3.5,
3.6 or 6.6.
(b) The Securities shall be known and designated as the
"Contingent Payment Rights" of the Company.
(c) The Company shall, on or prior to any Payment Date, pay, to
each Holder of a CPR on the April 1 or September 1 immediately prior to such
Payment Date, a pro rata portion of the Contingent Payment with respect to the
Payment Measuring Period ended immediately preceding such Payment Date, plus
any amounts deferred pursuant to Section 3.1(d).
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(1) If for any reason the Contingent Payment has not
finally been determined as of any Payment Date, then such Payment Date shall,
upon written notice to that effect from the Company to the Trustee, be
automatically extended until the date that is the seventh Business Day after
the date upon which the Contingent Payment has finally been determined.
(2) The Company shall deliver, on or before each Payment
Date, an Officers' Certificate, to the Trustee, certifying the Net Sales for
the Payment Measuring Period ended immediately prior to such Payment Date and
setting forth the calculation of the Contingent Payment, if any, payable on
such Payment Date. The Trustee shall be protected in relying upon such
Officers' Certificate and shall be under no duty to investigate the facts
underlying such Officers' Certificate.
(d) In the event that the Contingent Payment (plus any amount
deferred pursuant to this Section 3.1(d) otherwise payable on any Payment Date)
is less than $0.05 per CPR, then such amount shall not be payable on such
Payment Date but shall be deferred (without any accrual of interest thereon)
until the next following Payment Date.
(e) In no event shall the aggregate of all Contingent Payments
payable, from the Effective Date to and including the Final Payment Date, with
respect to any CPR, exceed $2.00.
(f) The Holders of the CPR Certificates, by acceptance thereof,
agree that the Company has no obligation to initiate or continue research,
development or commercialization activities with respect to any Products or any
of the Somatogen Recombinant Technologies and, in its sole and subjective
discretion, the Company may abandon efforts to research, develop or
commercialize such technologies or Products. No joint venture, partnership or
other fiduciary relationship is created hereby or by the Securities.
(g) The Company shall not transfer, as an entirety (other than
transfers to Subsidiaries or Affiliates of the Company), ownership of the
Somatogen Recombinant Technology, unless the transferee agrees to be bound by
the Agreement to the same extent as the Company is then bound by this
Agreement, and the Company shall be released from any obligation hereunder to
the extent the transferee assumes the Company's obligations under this
Agreement.
(h) Notwithstanding any provision of this Agreement or the CPR
Certificates to the contrary, other than in the case of interest on the Default
Payment Amount, no interest shall accrue on any amounts payable with respect to
the CPRs.
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(i) In the event that all of the CPR Certificates not previously
cancelled shall have been called for redemption by the Company pursuant to
Article 10 hereof or shall have become due and payable pursuant to the terms
hereof, and the Company has paid or caused to be paid or deposited with the
Trustee all amounts payable to the Holders under this Agreement, then this
Agreement shall cease to be of further effect and shall be deemed satisfied and
discharged. Notwithstanding the satisfaction and discharge of this Agreement,
the obligations of the Company under Section 4.6(c) shall survive.
Section 3.2 Registrable Form. The Securities shall be issuable only
in registered form.
Section 3.3 Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Company by its chairman of the
Board of Directors or its president or any vice president or its treasurer, but
need not be attested. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were, at the time of execution, the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Agreement, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee, in accordance
with such Company Order, shall authenticate and deliver such Securities as
provided in this Agreement and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Agreement or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
duly executed by the Trustee, by manual or facsimile signature of an authorized
officer, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and that the Holder is entitled to the benefits of this
Agreement.
Section 3.4 Temporary Securities. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order, the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, substantially of
the tenor of the definitive Securities in lieu of which
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they are issued and with such appropriate insertions, omissions, substitutions
and other variations as the officers executing such Securities may determine
with the concurrence of the Trustee. Temporary Securities may contain such
reference to any provisions of this Agreement as may be appropriate. Every
temporary Security shall be executed by the Company and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 7.2,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like amount of definitive
Securities. Until so exchanged, the Temporary Securities shall in all respects
be entitled to the same benefits under this Agreement as definitive Securities.
Section 3.5 Registration, Registration of Transfer and Exchange. The
Company shall cause to be kept at the office of the Trustee a register (the
register maintained in such office and in any other office or agency designated
pursuant to Section 7.2 being herein sometimes referred to as the "Security
Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities and of
transfers of Securities. The Trustee is hereby initially appointed "Security
Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 7.2, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new CPR Certificates
representing the same aggregate number of CPRs represented by the CPR
Certificate so surrendered that are to be transferred and the Company shall
execute and the Trustee shall authenticate and deliver, in the name of the
transferor, one or more new CPR Certificates representing the aggregate number
of CPRs represented by such CPR Certificate that are not to be transferred.
At the option of the Holder, CPR Certificates may be exchanged for
other CPR Certificates that represent in the aggregate the same number of CPRs
as the CPR Certificates surrendered at such office or agency. Whenever any CPR
Certificates are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the CPR Certificates which the
Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
rights, and entitled to the same benefits
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under this Agreement, as the Securities surrendered upon such registration of
transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4 or 6.6 not involving any transfer.
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities. If (a)
any mutilated Security is surrendered to the Trustee, or (b) the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Security, and there is delivered to the Company and the Trustee
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Trustee that
such Security has been acquired by a bona fide purchaser, the Company shall
execute and, upon delivery of a Company Order, the Trustee shall authenticate
and deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new CPR Certificate of like tenor and
amount of CPRs, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is to become due and payable within fifteen days, the Company in its
discretion may, instead of issuing a new CPR Certificate, pay to the Holder of
such Security on a Redemption Date, the Final Payment Date or a Default Payment
Date, as the case may be, all amounts due and payable with respect thereto.
Upon the issuance of any new Securities under this Section, the
Company shall pay any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Agreement equally and proportionately with any
and all other Securities duly issued hereunder.
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The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7 Payments with respect to CPR Certificates. Payment of any
amounts pursuant to the CPRs shall be made in such coin or currency of the
United States of America as at the time is legal tender for the payment of
public and private debts or in debt securities of the Company in accordance
with the provisions of Section 3.1(c). However, the Company may, at its option,
pay such amounts by wire transfer or check payable in such money.
Section 3.8 Persons Deemed Owners. Prior to the time of due
presentment for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name any
Security is registered as the owner of such Security for the purpose of
receiving payment on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
Section 3.9 Cancellation. All Securities surrendered for payment,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Agreement. All cancelled
Securities held by the Trustee shall be destroyed and a certificate of
destruction shall be issued by the Trustee to the Company, unless otherwise
directed by a Company Order.
ARTICLE 4
THE TRUSTEE
Section 4.1 Certain Duties and Responsibilities. (a) With respect
to the Holders of Securities issued, the Trustee, prior to the occurrence of an
Event of Default with respect to the Securities and after the curing or waiving
of all Events of Default which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Agreement and
no implied covenants shall be read into this Agreement against the Trustee. In
case an Event of Default with respect to the Securities has occurred (which has
not been cured or waived), the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
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(b) In the absence of bad faith on its part, prior to the
occurrence of an Event of Default and after the curing or waiving of all such
Events of Default which may have occurred, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Agreement; but in the case of any such certificates
or opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that (i) this Subsection
(c) shall not be construed to limit the effect of Subsections (a) and (b) of
this Section; (ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; (iii) no provision
of this Agreement shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it; and
(iv) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders pursuant to Section 8.9 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Agreement.
(d) Whether or not therein expressly so provided, every provision
of this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 4.2 Certain Rights of Trustee. Subject to the provisions of
Section 4.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties and the Trustee need not investigate any fact or matter stated in the
document;
(b) any request or direction or order of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the
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Board of Directors may be sufficiently evidenced by a Board Resolution and the
Trustee shall not be liable for any action it takes or omits to take in good
faith reliance thereon;
(c) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate and the Trustee shall not be liable
for any action it takes or omits to take in good faith reliance thereon or an
Opinion of Counsel;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or Opinion of
Counsel;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement at the request or direction
of any of the Holders pursuant to this Agreement, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
appraisal, bond, debenture, note, coupon, security, or other paper or document,
but the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may see fit, and if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered
or omitted to be taken by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement.
Section 4.3 Not Responsible for Recitals or Issuance of Securities.
The Trustee shall not be accountable for the Company's use of the Securities or
the proceeds from the Securities. The recitals contained herein and in the
Securities, except the Trustee's certificates of authentication, shall be taken
as the statements of the Company, and the
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Trustee assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Securities.
Section 4.4 May Hold Securities. The Trustee, any Paying Agent,
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities, and, subject to
Sections 4.7 and 4.12, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Paying Agent, Security Registrar or such
other agent.
Section 4.5 Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder.
Section 4.6 Compensation and Reimbursement. The Company agrees:
(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to the Trustee's negligence or bad faith; and
(c) to indemnify the Trustee and each of its agents, officers,
directors and employees (each an "indemnitee") for, and to hold it harmless
against, any loss, liability or expense (including attorneys fees and expenses)
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust and the
performance of its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The obligations of the
Company hereunder shall constitute additional indebtedness hereunder. To secure
the Company's payment obligations in this Section, the Trustee shall have a
lien prior to the Securities on all money or property held or collected by the
Trustee other than money or property held in trust to pay particular
Securities. The Company's payment obligations pursuant to this Section shall
survive the termination of this Agreement. When a Trustee incurs expenses after
the occurrence of an Event of Default specified in Section 8.1(c) or 8.1(d)
with respect to the Company, the expenses are intended to constitute expenses
of administration under bankruptcy laws.
Section 4.7 Disqualification; Conflicting Interests. If the Trustee
has or shall acquire
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any conflicting interest within the meaning of the Trust Indenture Act, it
shall, within ninety days after ascertaining that it has such conflicting
interest, either eliminate such conflicting interest or resign to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Agreement. The Company shall take prompt steps to have a
successor appointed in the manner provided in this Agreement.
Section 4.8 Corporate Trustee Required; Eligibility. There shall at
all times be a Trustee hereunder which shall be a corporation that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $15 million. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of a
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
Section 4.9 Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 4.10.
(b) The Trustee, or any trustee or trustees hereafter appointed,
may resign at any time by giving written notice thereof to the Company. If an
instrument of acceptance by a successor Trustee shall not have been delivered
to the Trustee within thirty days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by an act of the
Holders of a majority of the Outstanding Securities, delivered to the Trustee
and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 4.7
after written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section
4.8 and shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any
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public officer shall take charge or control of the Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) the Holder of any Security who has been a bona fide Holder of
a Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after any removal by Holders of a majority of the Outstanding
Securities, a successor Trustee shall be appointed by act of the Holders of a
majority of the Outstanding Securities delivered to the Company and the
retiring Trustee the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with Section 4.10, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders of the Securities and accepted appointment within sixty days after the
retiring Trustee tenders its resignation or is removed, the retiring Trustee
may, or, the Holder of any Security who has been a bona fide Holder for at
least six months may on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities as their names and addresses appear in the Security
Register. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust office. If the Company fails to send such notice
within ten days after acceptance of appointment by a successor Trustee, it
shall not be a default hereunder but the successor Trustee shall cause the
notice to be mailed at the expense of the Company.
Section 4.10 Acceptance of Appointment of Successor. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, upon request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the
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Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 4.11 Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
and such certificate shall have the full force which it is anywhere in the
Securities or in this Agreement provided that the certificate of the Trustee
shall have; provided that the right to adopt the certificate of authentication
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
Section 4.12 Preferential Collection of Claims Against Company. If
and when the Trustee shall be or shall become a creditor of the Company (or any
other obligor upon the Securities) the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE 5
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 5.1 Company to Furnish Trustee Names and Addresses of
Holders. The Company will furnish or cause to be furnished to the Trustee (i)
semiannually a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of a recent date, and (ii) at such times
as the Trustee may request in writing, within thirty days after receipt by the
Company of any such request, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of a date not more than
fifteen days prior to the time such list is furnished; provided, however, that
if and so long as the Trustee shall be the Security Registrar, no such list
need be furnished.
Section 5.2 Preservation of Information; Communications to Holders. (a) The
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Trustee shall preserve, in as current a form as is reasonably practicable, the
names and addresses of Holders contained in the most recent list furnished to
the Trustee as provided in Section 5.1 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar. The Trustee may
destroy any list furnished to it as provided in Section 5.1 upon receipt of a
new list so furnished.
(b) The rights of the Holders to communicate with other Holders
with respect to their rights under this Agreement and the corresponding rights
and privileges of the Trustee shall be as provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee shall be deemed to be in violation of law or held accountable by reason
of the disclosure of any such information as to the names and addresses of the
Holders made pursuant to the Trust Indenture Act.
Section 5.3 Reports by Trustee. (a) Within sixty days after
December 31 of each year commencing with the December 31 following the
Effective Date, the Trustee shall transmit to all Holders such reports
concerning the Trustee and its actions under this Agreement as may be required
pursuant to the Trust Indenture Act at the time and in the manner provided
pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to the Holders, be filed by the Trustee with each stock exchange,
if any, upon which the Securities are listed, with the Commission and also with
the Company. The Company will promptly notify the Trustee when the Securities
are listed on any stock exchange.
Section 5.4 Reports by Company. The Company shall: (a) file with
the Trustee, (i) within fifteen days after the Company is required to file the
same with the Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may from time to time by rules and regulations prescribe)
which the Company may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act (such required information,
documents and other reports, generally, the "Exchange Act Documents"); or, (ii)
if the Company is not required to file its Exchange Act Documents, quarterly
and annual financial information that would be required pursuant to Section 13
of the Exchange Act in respect of a security listed and registered on a
national securities exchange as may be prescribed from time to time in such
rules and regulations; and (b) transmit by mail to all Holders, as their names
and addresses appear in the Security Register, within thirty days after the
filing thereof with the Trustee, such summaries of any information documents
and reports required to be filed by the Company pursuant to subsection (a) of
this Section as may be required by rules and regulations prescribed from time
to time by the Commission.
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ARTICLE 6
AMENDMENTS
Section 6.1 Amendments Without Consent of Holders. Without the
consent of any Holders, the Company and the Trustee, at any time and from time
to time, may enter into one or more amendments hereto or to the Securities, for
any of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee
as security for the Securities any property or assets; or
(b) to evidence the succession of another Person to the Company,
and the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(c) to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions as its Board of Directors and the
Trustee shall consider to be for the protection of the Holders of Securities,
and to make the occurrence, or the occurrence and continuance, of a default in
any such additional covenants, restrictions, conditions or provisions an Event
of Default permitting the enforcement of all or any of the several remedies
provided in this Agreement as herein set forth; provided, that in respect of
any such additional covenant, restriction, condition or provision such
amendment may provide for a particular period of grace after default (which
period may be shorter or longer than that allowed in the case of other
defaults) or may provide for an immediate enforcement upon such an Event of
Default or may limit the remedies available to the Trustee upon such an Event
of Default or may limit the right of the Holders of a majority of the
Securities to waive such an Event of Default; or
(d) to cure any ambiguity, or to correct or supplement any
provision herein or in the Securities which may be defective or inconsistent
with any other provision herein; provided, that such provisions shall not
materially reduce the benefits of this Agreement or the Securities to the
Holders; or
(e) to make any other provisions with respect to matters or
questions arising under this Agreement; provided, that such provisions shall
not adversely affect the interests of the Holders; or
(f) to make any amendments or changes necessary to comply or
maintain compliance with the Trust Indenture Act.
Promptly following any amendment of this Agreement or the Securities in
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accordance with this Section 6.1, the Trustee shall notify the Holders of the
Securities of such amendment; provided, that any failure so to notify the
Holders shall not affect the validity of such amendment.
Section 6.2 Amendments with Consent of Holders. With the consent of
the Holders of a majority of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company (when authorized by a
Board Resolution) and the Trustee may enter into one or more amendments hereto
or to the Securities for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or to the
Securities or of modifying in any manner the rights of the Holders under this
Agreement or to the Securities; provided, however, that no such amendment
shall, without the consent of the Holder of each Outstanding Security affected
thereby:
(a) modify the definition of Redemption Date, Final Payment Date,
Default Payment Date, Default Payment Amount, Net Sales, Products, Somatogen
Recombinant Hemoglobin Technology or Default Payment Interest Rate, modify
Section 3.1(i) or otherwise extend the maturity of the Securities or reduce the
amounts payable in respect of the Securities or modify any other payment term
or payment date.
(b) reduce the number of CPRs, the consent of whose Holders is
required for any such amendment; or
(c) modify any of the provisions of this Section or Section 8.10,
except to increase any such percentage or to provide that certain other
provisions of this Agreement cannot be modified or waived without the consent
of the Holder of each Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed amendment, but it shall he
sufficient if such Act shall approve the substance thereof.
Section 6.3 Execution of Amendments. In executing any amendment
permitted by this Article, the Trustee shall be entitled to receive indemnity
reasonably satisfactory to it, and (subject to Section 4.1) shall be fully
protected in relying upon an Opinion of Counsel stating that the execution of
such amendment is authorized or permitted by this Agreement. The Trustee shall
execute any amendment authorized pursuant to this Article VI if the amendment
does not adversely affect the Trustee's own rights, duties or immunities under
this Agreement or otherwise. Otherwise, the Trustee may, but need not, execute
such amendment.
Section 6.4 Effect of Amendments; Notice to Holders. Upon the
execution of any amendment under this Article, this Agreement and the
Securities shall be modified in
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accordance therewith, and such amendment shall form a part of this Agreement
and the Securities for all purposes; and every Holder of Securities theretofore
or thereafter authenticated and delivered hereunder shall be bound thereby.
Promptly after the execution by the Company and the Trustee of any
amendment pursuant to the provisions of this Article, the Company shall mail a
notice thereof by first class mail to the Holders of Securities at their
addresses as they shall appear on the Security Register, setting forth in
general terms the substance of such amendment. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such amendment.
Section 6.5 Conformity with Trust Indenture Act. Every amendment
executed pursuant to this Article shall conform to the requirements of the
Trust Indenture Act.
Section 6.6 Reference in Securities to Amendments. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. Securities authenticated and delivered
after the execution of any amendment pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such amendment. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any such amendment may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities. Failure to make the appropriate notation or to issue a
new Security shall not affect the validity of such amendment.
ARTICLE 7
COVENANTS
Section 7.1 Payment of Amounts, if any, to Holders. The Company will
duly and punctually pay the amounts, if any, on the Securities in accordance
with the terms of the Securities and this Agreement. Such amounts shall be
considered paid on the date due if on such date the Trustee or the Paying Agent
holds in accordance with this Agreement money sufficient to pay all such
amounts then due. Notwithstanding any other provision of this Agreement, the
Trustee and the Paying Agent shall comply with all U.S. federal withholding
requirements with respect to payments to Holders that the Company, the Trustee
or the Paying Agent reasonably believes are applicable under the Internal
Revenue Code of 1986, as amended, and the Treasury regulations thereunder.
Amounts withheld in compliance with such withholding requirements shall, for
purposes of this Agreement, be treated as paid to the Holder such withholding
was made with respect to. The consent of Holder shall not be required for any
such withholding.
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Section 7.2 Maintenance of Office or Agency. As long as any of the
Securities remain Outstanding, the Company will maintain in the Borough of
Manhattan, The City of New York, an office or agency (i) where Securities may
be presented or surrendered for payment, (ii) where Securities may be
surrendered for registration of transfer or exchange and (iii) where notices
and demands to or upon the Company in respect of the Securities and this
Agreement may be served. The office or agency of the Trustee at 100 Wall
Street, New York 10005 shall be such office or agency of the Company, unless
the Company shall designate and maintain some other office or agency for one or
more of such purposes. The Company or any of its Subsidiaries may act as
Paying Agent, registrar or transfer agent; provided that such Person shall take
appropriate actions to avoid the commingling of funds. The Company will give
prompt written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices
or agencies (in or outside of The City of New York) where the Securities may be
presented or surrendered for any or all such purposes, and may from time to
time rescind such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in the Borough of Manhattan, The City of New York
for such purposes. The Company will give prompt written notice to the Trustee
of any such designation or rescission and any change in the location of any
such office or agency.
Section 7.3 Money for Security Payments to Be Held in Trust. If the
Company or any of its Subsidiaries shall at any time act as the Paying Agent,
it will, on or before a Redemption Date, the Final Payment Date or the Default
Payment Date, as the case may be, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the amounts, if any, so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or before the Final Payment Date, a Redemption Payment
Date or the Default Payment Date, as the case may be, deposit with a Paying
Agent a sum in same day funds sufficient to pay the amount, if any, so becoming
due; such sum to be held in trust for the benefit of the Persons entitled to
such amount, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee,
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subject to the provisions of this Section, that (A) such Paying Agent will hold
all sums held by it for the payment of any amount payable on Securities in
trust for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided and will
notify the Trustee of the sums so held and (B) that it will give the Trustee
notice of any failure by the Company (or by any other obligor on the
Securities) to make any payment on the Securities when the same shall be due
and payable.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment on any Security and remaining
unclaimed for one year after the Final Payment Date, a Redemption Payment Date
or the Default Payment Date, as the case may be, shall be paid to the Company
on Company Request, or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease.
Section 7.4 Certain Purchases and Sales. Nothing contained herein
shall prohibit the Company or any of its Subsidiaries or Affiliates from
acquiring in open market transactions, private transactions or otherwise, the
Securities.
Section 7.5 Reports. Within sixty days after the end of each Payment
Measuring Period, the Company shall furnish to the Trustee and the Holders a
written report showing (i) the gross sales of all Products sold by the Company,
its Affiliates, licensees and distributors during the immediately preceding
Payment Measuring Period; and (ii) the reconciliation of gross sales to Net
Sales. Payments shown to have accrued by each report shall be due and payable,
subject to Section 3.1(d), to the Holders on the next succeeding Payment Date.
If any adjustments or inaccuracies in the amounts paid or payable
under this Section 7.5 are determined by the Holders in their review of the
calculation of the Contingent Payment, which may be performed at the end of any
Payment Measuring Period, and the Company agrees to such adjustment, such
adjustments for the immediately preceding Payment Measuring Period may be
reconciled and described in the next due written report and the payment then
due shall be adjusted to reflect such determination. The Company shall keep
complete and accurate records in sufficient detail to enable the amounts
payable hereunder to be determined by the Holders and their consultants or
professional advisors.
Section 7.6 Audits. (a) Upon the written request of Holders
representing at least thirty percent of the outstanding Securities (the
"Requesting Holders") and not more than once in each calendar year, and upon
reasonable notice, the Company shall permit an independent certified public
accounting firm of nationally recognized standing selected by the Requesting
Holders and reasonably acceptable to the Company, at the Requesting
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Holder's expense, to have access during normal business hours to such of the
records of the Company as may be reasonably necessary to verify the accuracy of
the payment reports. No such request shall be made more than three years
subsequent to the Payment Measuring Period that is the subject of such audit
request. The accounting firm shall disclose to the Requesting Holders any
matters directly related to their findings, to the extent necessary to verify
the accuracy or completeness of the information provided by the Company to the
Requesting Holders. This covenant shall survive the termination of this
Agreement for a period of thirty six months.
(b) If such accounting firm concludes and, the Company agrees with
such conclusion, that additional payments were owed during such period, the
Company shall pay the additional payments within thirty Business Days of the
date the Requesting Holders deliver to the Company such accounting firm's
written report; provided that, if the Company disagrees with such conclusion
the dispute shall be submitted to arbitration for settlement. The fees charged
by such accounting firm shall be paid by the Requesting Holders, unless the
amount of additional payments due exceeds the amount paid for any such period
by ten percent, in which case the Company shall reimburse the Requesting
Holders for the fees charged by such accounting firm.
(c) Upon the expiration of thirty six months following the end of
any Payment Measuring Period, the calculation of payments payable with respect
to such Payment Measuring Period shall be binding and conclusive upon each
party, and the Company shall be released from any liability or accountability
with respect to payments for such Payment Measuring Period.
(d) Each person seeking to receive information from the Company in
connection with an audit shall enter into, and shall cause its accounting firm
to enter into, a reasonable and mutually satisfactory confidentiality agreement
with the Company obligating such party to retain all such financial information
disclosed to such party in confidence pursuant to such confidentiality
agreement.
(e) The Company shall not enter into any license or distribution
arrangement with respect to the Somatogen Recombinant Hemoglobin Technology
unless such agreement contains audit provisions at least as favorable, in the
aggregate, as this Section 7.6.
Section 7.7 Non-Monetary Consideration for Licensed Products. In the
event that the Company shall sell any Product to customers for any
consideration other than cash, such sale shall be deemed to have been made at a
price equal to the average selling price (determined in accordance with
industry practice).
Section 7.8 Foreign Exchange. For the purpose of computing the Net
Sales of Products sold in a currency other than United States Dollars, such
currency shall be
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converted into United States Dollars using the average of the rates of exchange
published in The Wall Street Journal during the five business days preceding
the close of the Payment Measuring Period.
Section 7.9 Notice of Default. The Company shall file with the
Trustee written notice of the occurrence of any Event of Default or other
default under this Agreement within five business days of its becoming aware of
any such Default or Event of Default.
ARTICLE 8
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
Section 8.1 Event of Default Defined; Acceleration of Maturity;
Waiver of Default. "Event of Default" with respect to the Securities, means
each one of the following events which shall have occurred and be continuing
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of all or any part of the amounts
payable in respect of any of the Securities as and when the same shall become
due and payable either at a Payment Date, a Redemption Date, the Final Payment
Date or otherwise; or
(b) default in the performance, or breach, of any covenant or
warranty of the Company in respect of the Securities (other than a covenant or
warranty in respect of the Securities, a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with), and continuance
of such default or breach for a period of ninety days after there has been
given, by registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least fifty percent of the
Outstanding Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(c) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Company or for any
substantial part of its property or ordering the winding up or liquidation of
its affairs, and such decree or order shall remain unstayed and in effect for a
period of sixty consecutive days; or
(d) the Company shall commence a voluntary case under any applicable
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bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment of or taking possession by a receiver,
liquida- tor, assignee, custodian, trustee or sequestrator (or similar
official) of the Company or for any substantial part of its property, or make
any general assignment for the benefit of creditors.
If an Event of Default described above occurs and is continuing, then,
and in each and every such case, unless all of the Securities shall have
already become due and payable, either the Trustee or the Trustee upon the
written request of Holders of not less than fifty percent of the Securities
then Outstanding hereunder by notice in writing to the Company (and to the
Trustee if given by the Holders), shall bring suit for any amounts then due and
payable, which amounts shall bear interest at the Default Interest Rate until
payment is made to the Trustee.
The foregoing provisions, however, are subject to the condition that
if, at any time after the Trustee shall have begun such suit, and before any
judgment or decree for the payment of the moneys due shall have been obtained
or entered as hereinafter provided, the Company shall pay or shall deposit with
the Trustee a sum sufficient to pay all amounts which shall have become due
(with interest upon such overdue amount at the Default Interest Rate to the
date of such payment or deposit) and such amount as shall be sufficient to
cover reasonable compensation to the Trustee, its agents, attorneys and
counsel, and all other expenses and liabilities incurred and all advances made,
by the Trustee, and if any and all Events of Default under this Agreement,
other than the non-payment of the amounts which shall have become due by
acceleration, shall have been cured, waived or otherwise remedied as provided
herein, then and in every such case the Holders of a majority of all the
Securities then Outstanding, by written notice to the Company and to the
Trustee, may waive all defaults with respect to the Securities, but no such
waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereof.
Section 8.2 Collection of Indebtedness by Trustee; Trustee May Prove
Debt. The Company covenants that in case default shall be made in the payment
of all or any part of the Securities when the same shall have become due and
payable, whether at a Redemption Date, the Final Payment Date, a Default
Payment Date or upon acceleration or otherwise, then upon demand of the
Trustee, the Company will pay to the Trustee for the benefit of the Holders of
the Securities the whole amount that then shall have become due and payable on
all Securities (with interest from the date due and payable to the date of such
payment upon the overdue amount at the Default Interest Rate); and in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to the Trustee and
each predecessor Trustee, their respective agents, attorneys and counsel, and
any expenses and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee, except as a result of its negligence or bad
faith.
The Trustee may in its discretion proceed to protect and enforce its
rights and the
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rights of the Holders by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Agreement or in
aid of the exercise of any power granted herein, or to enforce any other
remedy.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any
such judgment or final decree against the Company or other obligor upon such
Securities and collect in the manner provided by law out of the property of the
Company or other obligor upon such Securities, wherever situated, the moneys
adjudged or decreed to be payable.
In case there shall be pending proceedings relative to the Company or
an other obligor upon the Securities under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Company or its property or such other
obligor, or in case of any other comparable judicial proceedings relative to
the Company or other obligor upon the Securities, or to the creditors or
property of the Company or such other obligor the Trustee, irrespective of
whether the principal of any Securities shall then be due and payable as herein
expressed or otherwise and irrespective of whether the Trustee shall have made
any demand pursuant to the provisions of this Section, shall be entitled and
empowered, (but shall have no obligation) by intervention in such proceedings
or otherwise:
(a) to file and prove a claim or claims for the whole amount owing
and unpaid in respect of the Securities, and to file such other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for reasonable compensation to the Trustee and
each predecessor Trustee, and their respective agents, attorneys and counsel,
and for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as a result
of negligence or bad faith) and of the Holders allowed in any judicial
proceedings relative to the Company or other obligor upon the Securities, or to
their respective property;
(b) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders in any election of a trustee or a standby trustee in
arrangement, reorganization, liquidation or other bankruptcy or insolvency
proceedings or person performing similar functions in comparable proceedings;
and
(c) to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute all amounts received with
respect to the claims of the Holders and of the Trustee on their behalf; and
any trustee, receiver, or liquidator, custodian
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or other similar official is hereby authorized by each of the Holders to make
payments to the Trustee, and, in the event that the Trustee shall consent to
the making of payments directly to the Holders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel,
and all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee, except as a result of its negligence or
bad faith, and all other amounts due to the Trustee or any predecessor Trustee
pursuant to Section 4.6. To the extent that such payment of reasonable
compensation, expenses, disbursements, advances and other amounts out of the
estate in any such proceedings shall be denied for any reason, payment of the
same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, moneys, securities and other property which the
Holders may be entitled to receive in such proceedings, whether in liquidation
or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities, or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
All rights of action and of asserting claims under this Agreement, or
under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities or the production thereof and any trial or
other proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Agreement to which the
Trustee shall be a party) the Trustee shall be held to represent all the
Holders, and it shall not be necessary to make any Holders of such Securities
parties to any such proceedings.
Section 8.3 Application of Proceeds. Any monies collected by the
Trustee pursuant to this Article in respect of any Securities shall be applied
in the following order at the date or dates fixed by the Trustee upon
presentation of the several Securities in respect of which monies have been
collected and stamping (or otherwise noting) thereon the payment in exchange
for the presented Securities if only partially paid or upon surrender thereof
if fully paid:
FIRST: To the payment of costs and expenses in respect of which
monies have been collected, including reasonable compensation to the Trustee
and each predecessor Trustee
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and their respective agents and attorneys and of all expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee,
except as a result of its negligence or bad faith, and all other amounts due to
the Trustee or any predecessor Trustee pursuant to Section 4.6;
SECOND: To the payment of the whole amount then owing and unpaid upon
all the Securities, with interest at the Default Interest Rate on all such
amounts, and in case such monies shall be insufficient to pay in full the whole
amount so due and unpaid upon the Securities, then to the payment of such
amounts without preference or priority of any security over any other Security,
ratably to the aggregate of such amounts due and payable and such payments
shall be deemed to be Contingent Payments made for purposes of Section 3.1(e);
and
THIRD: To the payment of the remainder, if any, to the Company or any
other person lawfully entitled thereto.
Section 8.4 Suits for Enforcement. In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Agreement by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Agreement or in aid of the exercise
of any power granted in this Agreement or to enforce any other legal or
equitable right vested in the Trustee by this Agreement or by law.
Section 8.5 Restoration of Rights on Abandonment of Proceedings. In
case the Trustee or any Holder shall have proceeded to enforce any right under
this Agreement and such proceedings shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to the Trustee or to
such Holder, then and in every such case the Company and the Trustee and the
Holders shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company, the Trustee and
the Holders shall continue as though no such proceedings had been taken.
Section 8.6 Limitations on Suits by Holders. No Holder of any
Security shall have any right by virtue or by availing of any provision of this
Agreement to institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to this Agreement, or for
the appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy hereunder, unless such Holder previously shall
have given to the Trustee written notice of default and of the continuance
thereof, as hereinbefore provided, and unless also the Holders of not less than
thirty percent of the Securities then Outstanding shall have made written
request upon the Trustee to institute such action or proceedings in its own
name as trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
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incurred therein or thereby and the Trustee for sixty days after its receipt of
such notice, request and offer of indemnity shall have failed to institute any
such action or proceeding and no direction inconsistent with such written
request shall have been given to the Trustee pursuant to Section 8.9; it being
understood and intended, and being expressly covenanted by the taker and Holder
of every Security with every other taker and Holder and the Trustee, that no
one or more Holders of Securities shall have any right in any manner whatever
by virtue or by availing of any provision of this Agreement to effect, disturb
or prejudice the rights of any other such Holder of Securities, or to obtain or
seek to obtain priority over or preference to any other such Holder or to
enforce any right under this Agreement, except in the manner herein provided
and for the equal, ratable and common benefit of all Holders of Securities. For
the protection and enforcement of the provisions of this Section, each and
every Holder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Section 8.7 Unconditional Right of Holders to Institute Certain
Suits. Notwithstanding any other provision in this Agreement and any provision
of any Security, the right of any Holder of any Security to receive payment of
the amounts payable in respect of such Security on or after the respective due
dates expressed in such Security, or to institute suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
Section 8.8 Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default. Except as provided in Section 8.6, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder to exercise any
right or power accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein; and, subject to
Section 8.6, every power and remedy given by this Agreement or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
shall be deemed expedient, by the Trustee or by the Holders.
Section 8.9 Control by Holders. The Holders of a majority of the
Securities at the time Outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee with respect
to the Securities by this Agreement; provided that such direction shall not be
otherwise than in accordance with law and the provisions of this Agreement; and
provided further that (subject to the provisions of Section 4.1) the Trustee
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shall have the right to decline to follow any such direction if the Trustee,
being advised by counsel, shall determine that the action or proceeding so
directed may not lawfully be taken or if the Trustee in good faith by its board
of directors, the executive committee, or a trust committee of directors or
responsible officers of the Trustee shall determine that the action or
proceedings so directed would involve the Trustee in personal liability or if
the Trustee in good faith shall so determine that the actions or forebearances
specified in or pursuant to such direction would be unduly prejudicial to the
interests of Holders of the Securities not joining in the giving of said
direction, it being understood that (subject to Section 4.1) the Trustee shall
have no duty to ascertain whether or not such actions or forebearances are
unduly prejudicial to such Holders.
Nothing in this Agreement shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and which is not
inconsistent with such direction or directions by Holders.
Section 8.10 Waiver of Past Defaults. In the case of a default or an
Event of Default specified in clause (b), (c) or (d) of Section 8.1, the
Holders of a majority of all the Securities then Outstanding may waive any such
default or Event of Default, and its consequences except a default in respect
of a covenant or provisions hereof which cannot be modified or amended without
the consent of the Holder of each Security affected. In the case of any such
waiver, the Company, the Trustee and the Holders of the Securities shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
Upon any such waiver, such default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for
every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
Section 8.11 Trustee to Give Notice of Default, But May Withhold in
Certain Circumstances. The Trustee shall transmit to the Holders, as the names
and addresses of such Holders appear on the Security Register, notice by mail
of all defaults which have occurred and are known to the Trustee, such notice
to be transmitted within ninety days after the occurrence thereof, unless such
defaults shall have been cured before the giving of such notice (the term
"default" or "Defaults" for the purposes of this Section being hereby defined
to mean any event or condition which is, or with notice or lapse of time or
both would become, an Event of Default); provided that, except in the case of
default in the payment of the amounts payable in respect of any of the
Securities, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee, or a trust committee
of directors or trustees and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interests of the
Holders.
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Section 8.12 Right of Court to Require Filing of Undertaking to Pay
Costs. All parties to this Agreement agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Agreement or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including attorneys' fees, against
any party litigant in such suit, having due regard to the merits and good faith
of the claims or defenses made by such party litigant; but the provisions of
this Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder or group of Holders holding in the aggregate more than
twenty five percent of the Securities Outstanding or to any suit instituted by
any Holder for the enforcement of the payment of any Security on or after the
due date expressed in such Security.
ARTICLE 9
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 9.1 Company May Consolidate, etc., on Certain Terms. The
Company covenants that it will not merge or consolidate with or into any other
Person or sell or convey all or substantially all of its assets to any Person,
unless (i) the Company shall be the continuing corporation, or the successor
Person or the Person which acquires by sale or conveyance substantially all the
assets of the Company shall be a Person organized under the laws of the United
States of America or any State thereof and shall expressly assume by an
instrument supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the Securities,
according to their tenor, and the due and punctual performance and observance
of all of the covenants and conditions of this Agreement to be performed or
observed by the Company and (ii) the Company, or such successor Person, as the
case may be, shall not, immediately after such merger or consolidation, or such
sale or conveyance, be in default in the performance of any such covenant or
condition.
Section 9.2 Successor Person Substituted. In case of any such
consolidation, merger, sale or conveyance, or a transfer to a person other than
a Subsidiary or an Affiliate of the Company of the Somatogen Recombinant
Hemoglobin Technologies as provided in Section 3.1(g) and following such an
assumption by the successor Person, such successor Person shall succeed to and
be substituted for the Company with the same effect as if it had been named
herein. Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Company prior to such succession any or all
of the Securities issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of such
successor corporation instead of the Company and subject to all the terms,
conditions and limitations in this Agreement
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prescribed, the Trustee shall authenticate and shall deliver any Securities
which previously shall have been signed and delivered to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All of
the Securities so issued shall in all respects have the same legal rank and
benefit under this Agreement as the Securities theretofore or thereafter issued
in accordance with the terms of this Agreement as though all of such Securities
had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance, such
changes in phraseology and form (but not in substance) may be made in the
Securities thereafter to be issued as may be appropriate.
In the event of any such sale, transfer or conveyance (other than a
conveyance by way of lease) the Company or any Person which shall theretofore
have become such in the manner described in this Article shall be discharged
from all obligations and covenants under this Agreement and the Securities and
may be liquidated and dissolved.
Section 9.3 Opinion of Counsel to Trustee. The Trustee, subject to
the provisions of Sections 4.1 and 4.2, shall receive an Opinion of Counsel,
prepared in accordance with Sections 1.3 and 1.4, as conclusive evidence that
any such consolidation, merger, sale or conveyance, and any such assumption,
and any such liquidation or dissolution, complies with the applicable
provisions of this Agreement.
ARTICLE 10
REDEMPTION
Section 10.1 Right of Redemption. Redemption of Securities, as
permitted by the provisions of this Agreement, shall be made in accordance with
such provisions and this Article 10. The Company shall have the right to
redeem, in whole or in part, at any time or from time to time, the Securities.
Section 10.2 Notices to Trustees. If the Company elects to redeem
any Securities, it shall notify the Trustee in writing of the Redemption Date
and the aggregate number of CPR Certificates to be redeemed and whether it
wants the Trustee to give notice of redemption to the Holders.
The Company shall give each notice to the Trustee provided for in this
Section 10.2 at least thirty days before the Redemption Date (unless a shorter
notice shall be satisfactory to the Trustee and the Paying Agent). Any such
notice may be conditional and may be cancelled at any time prior to notice of
such redemption being mailed to any Holder and shall thereby be void and of no
effect.
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Section 10.3 Selection of CPR Certificates to Be Redeemed. If less
than all of the CPR Certificates are to be redeemed, the Trustee shall select
the CPR Certificates to be redeemed by lot or by such other method as the
Trustee shall determine to be appropriate and fair.
The Trustee shall make the selection from the CPR Certificates
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the CPR Certificates selected for redemption and, in
the case of any CPR Certificate selected for partial redemption, the number of
CPRs thereof to be redeemed. Provisions of this Agreement that apply to CPR
Certificates called for redemption also apply to portions of CPR Certificates
called for redemption.
Section 10.4 Notice of Redemption. At least twenty days but not more
than sixty days before a Redemption Date, the Trustee shall mail a notice of
redemption by first class mail, postage prepaid, to each Holder whose CPR
Certificates are to be redeemed. Each notice for redemption shall identify the
CPR Certificates to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) the name, address and telephone number of the Trustee and of
the Paying Agent;
(d) that CPR Certificates called for redemption must be
surrendered to the Trustee at the address specified in such notice to collect
the Redemption Price;
(e) that, unless the Company defaults in its obligation to deposit
with the Trustee cash in an amount to fund the Redemption Price, in accordance
with Section 10.6 hereof or such redemption payment is otherwise prohibited,
Contingent Payments on CPR Certificates called for redemption ceases to accrue
on and after the Redemption Date and the only remaining right of the Holders of
such CPR Certificates is to receive payment of the Redemption Price, upon
surrender to the Trustee of the CPR Certificates called for redemption and to
be redeemed;
(f) if any CPR Certificate is being redeemed in part, the portion
of such CPR Certificate to be redeemed and that, after the Redemption Date, and
upon surrender of such CPR Certificate, a new CPR Certificate or CPR
Certificates equal to the CPR Certificates unredeemed portion thereof will be
issued;
(g) if less than all the CPR Certificates are to be redeemed, the
identification of the particular CPR Certificates (or portion thereof) to be
redeemed, as well as the aggregate number of CPR Certificates to be redeemed
and the aggregate number of CPR Certificates to be outstanding after such
partial redemption;
39
<PAGE> 45
(h) the CUSIP number of the CPR Certificates to be redeemed; and
(i) that the notice is being sent pursuant to this Section 10.4
and pursuant to the optional redemption provisions of the CPR Certificates.
Section 10.5 Effect of Notice of Redemption. Once notice of
redemption is mailed in accordance with Section 10.4, CPR Certificates called
for redemption become due and payable on the Redemption Date and at the
Redemption Price. Upon surrender to the Paying Agent, such CPR Certificates
called for redemption shall be paid at the Redemption Price; provided, that if
a Redemption Date is a non-Business Day, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding Business Day.
Section 10.6 Deposit of Redemption Price. On or prior to 10:00
a.m., New York City time, on the Redemption Date, the Company shall deposit
with the Trustee cash sufficient to pay the Redemption Price of all CPR
Certificates to be redeemed on such Redemption Date (other than CPR
Certificates or portions thereof called for redemption on that date that have
been delivered by the Company to the Trustee for cancellation). The Trustee
shall promptly return to the Company any cash so deposited which is not
required for that purpose upon the written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article 10 and payment of the CPR Certificates called for
redemption is not otherwise prohibited, the right to Contingent Payments with
respect to the CPR Certificates to be redeemed will cease to accrue on the
applicable Redemption Date, whether or not such CPR Certificates are presented
for payment. Notwithstanding anything herein to the contrary, if any CPR
Certificate surrendered for redemption in the manner provided in the CPR
Certificates shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, such CPR
Certificates shall remain Outstanding and shall continue to be entitled to
Contingent Payments in the manner provided in Section 4.1 hereof and the CPR
Certificate.
Section 10.7 CPR Certificates Redeemed in Part. Upon surrender of
a CPR Certificate that is to be redeemed in part, the Trustee shall execute and
the Trustee shall authenticate and deliver to the Holder, without service
charge to the Holder, a new CPR Certificate or CPR Certificates equal in
principal amount to the unredeemed portion of the CPR Certificate surrendered.
40
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first above written.
BAXTER INTERNATIONAL INC.
By:
----------------------------
Name:
Title:
FIRST TRUST NATIONAL ASSOCIATION, as
Trustee
By:
----------------------------
Name:
Title:
<PAGE> 47
Baxter International Inc.
No. Certificate for Contingent Payment Rights
This certifies that , or
registered assigns (the "Holder"), is the registered holder of the number of
Contingent Payment Rights ("CPRs") set forth above. Each CPR entitles the
Holder, subject to the provisions contained herein and in the Agreement
referred to on the reverse hereof, to payments from Baxter International Inc.,
a Delaware corporation (the "Company"), in an amount and in the form determined
pursuant to the provisions set forth on the reverse hereof and as more fully
described in the Agreement referred to on the reverse hereof. Such payment
shall be made on each Payment Date or, if earlier, the Redemption Date or the
Default Payment Date, each as defined in the Agreement referred to on the
reverse hereof.
Payment of any amounts pursuant to this CPR Certificate shall
be made only to the registered Holder (as defined in the Agreement) of this CPR
Certificate. Such payment shall be made in the Borough of Manhattan, The City
of New York, or at any other office or agency maintained by the Company for
such purpose, in such coin or currency of the United States of America as at
the time is legal tender for the payment of public and private debts; provided,
however, the Company may pay such amounts by wire transfer or check payable in
such money. First Trust National Association has been initially appointed as
Paying Agent at its office or agency in the Borough of Manhattan, The City of
New York.
Reference is hereby made to the further provisions of this CPR
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this CPR Certificate shall not be entitled to any benefit under the Agreement,
or be valid or obligatory for any purpose.
A-1
<PAGE> 48
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
Dated: Baxter International Inc.
By
--------------------------
Attest:
- ----------------------------
Authorized Signature
A-2
<PAGE> 49
[Form of Reverse of CPR Certificate]
This CPR Certificate is issued under and in accordance with
the Contingent Payment Rights Agreement, dated as of May 4, 1998 (the
"Agreement"), between the Company and First Trust National Association, a
national banking association, as trustee (the "Trustee," which term includes
any successor Trustee under the Agreement), and is subject to the terms and
provisions contained in the Agreement, to all of which terms and provisions the
Holder of this CPR Certificate consents by acceptance hereof. The Agreement is
hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Agreement for a full statement of the respective rights,
limitations of rights, duties, obligations and immunities thereunder of the
Company, the Trustee and the holders of the CPRs. All capitalized terms used
in this CPR Certificate without definition shall have the respective meanings
ascribed to them in the Agreement. Copies of the Agreement can be obtained by
contacting the Trustee.
Subject to extension or earlier redemption as hereinafter
provided, until March 15, 2008, the Company shall pay to the Holder hereof on
March 15 and September 15 of each year (or if such day is not a Business Day,
without accruing any interest, on the next succeeding Business Day), beginning
March 15, 1999, or if such day is not a Business Day, without accruing any
interest, on the next Business Day (as the same may be extended, each a
"Payment Date"), for each CPR represented hereby, a pro rata portion of the
Contingent Payment with respect to the Payment Measuring Period ended
immediately prior to such Payment Date, unless the CPR(s) represented by this
CPR Certificate shall have been redeemed as provided for herein; provided, that
in no event shall the aggregate of all Contingent Payments with respect to each
CPR exceed two dollars ($2.00) and, provided, further, that in no event shall
the Company be required to a make a payment on any Payment Date in an amount
less than $0.05 per CPR and such amounts which would otherwise be payable on
such Payment Date shall (x) be aggregated with the amount payable with respect
to the next Payment Measuring Period and (y) not bear interest except on a
Default Payment Date.
The "Contingent Payment," with respect to any Payment
Measuring Period, equals five percent of the Net Sales that are attributable to
the commercial sale of Products.
"Net Sales" means the actual gross amount invoiced by the
Company, its Affiliates, licensees or distributors for the sale of Products to
any third parties during a Payment Measuring Period less: (a) direct
transportation charges, including insurance; (b) trade, quantity and other
discounts and rebates actually allowed and taken to the extent customary in the
trade; and (c) allowances or credits, including but not limited to, allowances
or credits to customers on account of rejection or return of the Products;
provided that (i) a sale or transfer to an Affiliate of the Company for resale
by such Affiliate shall not be considered a sale for the purpose of this
provision, but the resale by such Affiliate shall be a sale for such purposes,
and the term "sale" shall include a transfer or other disposition to
A-3
<PAGE> 50
a customer; (ii) Net Sales shall not include reserves for bad debts or
allowances, credits or rebates not covered above; and (iii) a sale of Products
shall occur at the earlier of (a) the transfer of title in such Products to a
third party or (b) the shipment of such Products from the manufacturing or
warehouse facilities of the manufacturer of such Products to a third party.
Net Sales shall not include license fees or other advance
payments received by the Company from a licensee or distributor of the Products
which is not derived from sales of Products, but shall include the Net Sales of
such licensee or distributor.
"Payment Measuring Period" means (i) the period from the
Effective Date to December 31, 1998 and (ii) each six month period ended June
30 and December 31 thereafter, through and including the Final Payment Date.
"Products" shall mean all products in which the primary active
ingredient is human hemoglobin, or derivatives, mutants or modifications
thereof, which have been produced in culture of microbial cells (including
yeast cells) which have been modified using Somatogen Recombinant Hemoglobin
Technology (other than clinical indications for any such Products that are in
clinical trials as of the date of the Merger Agreement).
"Somatogen Recombinant Hemoglobin Technology" shall mean all
technology owned by or licensed to Somatogen on or prior to the Effective Date,
which involves the use of recombinant DNA techniques.
If for any reason the Contingent Payment has not been finally
determined as of the Payment Date, then the Payment Date will be automatically
extended until the date that is the seventh Business Day after the date of
which the Contingent Payment has been finally determined.
The CPRs will be redeemable, in whole or in part, at any time
and from time to time, at the option of the Company at a redemption price for
each CPR represented hereby equal to $2.00 less all Contingent Payments made or
provided for, through the Redemption Date. The Agreement does not prohibit the
Company from otherwise acquiring CPRs.
The Contingent Payment, if any, and interest thereon, if any,
shall be payable by the Company in such coin or currency of the United States
of America as at the time is legal tender for the payment of public and private
debts; provided, however, the Company may pay such amounts by its check or wire
transfer payable in such money. First Trust National Association has been
initially appointed as Paying Agent at its office or agency in the Borough of
Manhattan, The City of New York.
If an Event of Default occurs and is continuing, either the
Trustee may or if the Holders holding an aggregate of at least fifty percent of
the Outstanding CPRs, by notice
A-4
<PAGE> 51
to the Company and to the Trustee shall bring suit to recover all amounts then
due and payable, with interest at the Default Interest Rate from the Default
Payment Date through the date payment is made or duly provided for.
The Agreement permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the holders of CPRs under the
Agreement at any time by the Company and the Trustee with the consent of the
holders of a majority of the CPRs at the time outstanding.
No reference herein to the Agreement and no provision of this
CPR Certificate or of the Agreement shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay any amounts determined
pursuant to the terms hereof and of the Agreement at the times, place and
amount, and in the manner, herein prescribed. The Holder of this CPR
Certificate, by acceptance hereof, agrees that the Company has no obligation to
initiate or continue research, development or commercialization activities with
respect to Products or any of the Somatogen Recombinant Hemoglobin Technology
and, in its sole subjective discretion, the Company may abandon efforts to
research, develop or commercialize such technology or Products.
The Agreement provides that the Trustee shall receive an
Officers' Certificate, on or before each Payment Date, certifying the Net Sales
from sales of Products. The Agreement also provides that the Company shall not
transfer (other than transfers to Subsidiaries and Affiliates) the Somatogen
Recombinant Hemoglobin Technology unless the transferor agrees to be bound by
the Agreement to the same extent as the Company is then bound thereby,
whereupon the Company shall be released from any obligation under the
Agreement.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of the CPRs represented by this CPR
Certificate is registrable on the Security Register, upon surrender of this CPR
Certificate for registration of transfer at the office or agency of the Company
maintained for such purpose in the Borough of Manhattan, The City of New York,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to The Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new CPR Certificates, for the same amount of CPRs, will be issued to the
designated transferee or transferees. The Company hereby initially designates
the office of First Trust National Association at 111 East Wacker Drive, Suite
3000, Chicago, Illinois 60601 as the office for registration of transfer of
this CPR Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, this CPR Certificate is exchangeable for one or
more CPR Certificates representing the same number of CPRs as represented by
this CPR Certificate as requested by the Holder surrendering the same.
A-5
<PAGE> 52
No service charge will be made for any registration of
transfer or exchange of CPRs, but the Company may require payment of a sum
sufficient to cover all documentary, stamp or similar issue or transfer taxes
or other governmental charges payable in connection with any registration of
transfer or exchange.
Prior to the time of due presentment of this CPR Certificate
for registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this CPR Certificate
is registered as the owner hereof for all purposes, and neither the Company,
the Trustee nor any agent shall be affected by notice to the contrary.
Neither the Company nor the Trustee has any duty or obligation
to the holder of this CPR Certificate, except as expressly set forth herein or
in the Agreement.
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
this is one of the CPR Certificates referred to in the within-
mentioned Agreement.
FIRST TRUST NATIONAL
ASSOCIATION, as Trustee
Dated:
-------------
By
-------------------------
Authorized Signatory
A-6
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Baxter International Inc. of our report dated February 5, 1998, which
appears on page 26 of the Annual Report to Stockholders, which is incorporated
by reference in its Annual Report on Form 10-K for the year ended December 31,
1997. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page 10 of such Annual Report on
Form 10-K. We also consent to the references to us under the headings "The
Merger: Certain Federal Income Tax Consequences," "Legal Matters" and "Experts"
in such Proxy Statement/Prospectus.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
April 2, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on
Form S-4 of Baxter International Inc. of our report dated July 25, 1997
appearing on page F-1 of Somatogen, Inc.'s Annual Report on Form 10-K for
the year ended June 30, 1997. We also consent to the reference to us under
the heading "Experts" in such Proxy Statement/Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Boulder, Colorado
April 2, 1998
<PAGE> 1
EXHIBIT 24.11
POWER OF ATTORNEY
REGISTRATION STATEMENT ON FORM S-4
The undersigned director of Baxter International, Inc., a Delaware corporation
(the "Company"), which proposes to file with the Securities and Exchange
Commission a registration statement on Form S-4 to register shares of the
Company's Common Stock, $1 par value, under the Securities Act of 1933, as
approved by the Company's board of directors, hereby appoints Vernon R. Loucks
Jr. or Harry M. Jansen Kraemer, Jr. (each acting alone and without the other),
for him and in his name to be his lawful attorney-in-fact, with full power (i)
to sign and file with the Securities and Exchange Commission the proposed
registration statement and any amendments, including post-effective amendments,
which such attorney-in-fact may deem necessary or proper and (ii) to perform
every other act which such attorney-in-fact may deem necessary or proper in
connection with such registration statement or any amendments thereto.
Date: March 12, 1998 /s/ REED V. TUCKSON
--------------------------------
Reed V. Tuckson, M.D.
<PAGE> 1
EXHIBIT 24.12
POWER OF ATTORNEY
REGISTRATION STATEMENT ON FORM S-4
The undersigned director of Baxter International, Inc., a Delaware corporation
(the "Company"), which proposes to file with the Securities and Exchange
Commission a registration statement on Form S-4 to register shares of the
Company's Common Stock, $1 par value, under the Securities Act of 1933, as
approved by the Company's board of directors, hereby appoints Vernon R. Loucks
Jr. or Harry M. Jansen Kraemer, Jr. (each acting alone and without the other),
for him and in his name to be his lawful attorney-in-fact, with full power (i)
to sign and file with the Securities and Exchange Commission the proposed
registration statement and any amendments, including post-effective amendments,
which such attorney-in-fact may deem necessary or proper and (ii) to perform
every other act which such attorney-in-fact may deem necessary or proper in
connection with such registration statement or any amendments thereto.
Date: As of February 17, 1998 /s/ ARNOLD J. LEVINE
--------------------------------
Arnold J. Levine, Ph. D.
<PAGE> 1
SOMATOGEN, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 4, 1998
The undersigned hereby appoints Andre de Bruin, Timothy D. Hoogheem and
James C.T. Linfield and each of them, as attorneys and proxies of the
undersigned, with full power of substitution, to vote all of the shares of
Common Stock, par value $.001, of Somatogen, Inc., which the undersigned may be
entitled to vote at the Special Meeting of Stockholders of Somatogen, Inc. to be
held at the offices of Somatogen, Inc., 2545 Central Avenue, Suite FD1, Boulder,
Colorado on Monday, May 4, 1998 at 9:00 a.m., local time, and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1 AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
THE BOARD OF DIRECTORS OF SOMATOGEN, INC. RECOMMENDS A VOTE FOR THE MERGER
PROPOSAL.
Proposal 1: To adopt the Agreement and Plan of Merger, dated as of February 23,
1998, by and among Baxter International Inc., a Delaware corporation ("Baxter"),
RHB1 Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Baxter, and Somatogen, Inc. and to approve the transactions contemplated
thereby.
/ / FOR / / AGAINST / / ABSTAIN
(To be signed on other side)
(Continued from other side)
DATED , 19
---------------------------------- ---------
----------------------------------------------------
----------------------------------------------------
SIGNATURE(S)
Please sign exactly as your name appears hereon. If
the stock is registered in the names of two or more
persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add
their titles. If signer is a corporation, please give
full corporate name and have a duly authorized
officer sign, stating title. If signer is a
partnership, please sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
