<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1995
REGISTRATION NO. 33-65107
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SCHERING-PLOUGH CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW JERSEY 2834 22-1918501
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
CODE NUMBER)
</TABLE>
ONE GIRALDA FARMS
MADISON, NEW JERSEY 07940-1000
(201) 822-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
KEVIN A. QUINN, ESQ.
STAFF VICE PRESIDENT, SECRETARY AND ASSOCIATE GENERAL COUNSEL
SCHERING-PLOUGH CORPORATION
ONE GIRALDA FARMS
MADISON, NEW JERSEY 07940-1000
(201) 822-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
With copies to:
<TABLE>
<S> <C>
T. KNOX BELL, ESQ.
BARRY A. BRYER, ESQ. MATT KIRMAYER, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ GRAY CARY WARE & FREIDENRICH
51 WEST 52ND STREET 4365 EXECUTIVE DRIVE
NEW YORK, NEW YORK 10019-6150 SUITE 1600
(212) 403-1000 SAN DIEGO, CALIFORNIA 92121-2189
(619) 677-1400
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(2) PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Common Shares, $1.00 par value(1)........... 1,279,136 Shares (3) (3) (3)
- ----------------------------------------------------------------------------------------------------------------
Participation Rights........................ 10,770,000 (3) (3) (3)
Rights
- ----------------------------------------------------------------------------------------------------------------
Total..................................... -- (3) (3) (3)
================================================================================================================
</TABLE>
(1) Includes one attached Preferred Share Purchase Right per share.
(2) The securities offered hereby are offered in connection with the merger (the
"Merger") of Canji Merger Corp., a wholly-owned subsidiary of
Schering-Plough Corporation ("Schering-Plough"), with and into Canji, Inc.
("Canji"), including restricted common shares, $1.00 par value, of
Schering-Plough to be issued to certain holders of unvested options to
purchase common stock, $0.01 par value ("Canji Common Stock"), of Canji
and/or preferred stock, $0.01 par value ("Canji Preferred Stock"), of Canji
to be canceled in the Merger.
(3) Pursuant to Rule 457(f)(2) promulgated under the Securities Act of 1933, as
amended, and estimated solely for purposes of calculating the registration
fee, the proposed maximum aggregate offering price of the securities offered
hereby is $1,817,600, which equals (x) the book value per share of the Canji
Common Stock, on a fully-diluted basis, of $0.16, as computed on September
30, 1995, multiplied by (y) 11,360,000, the total number of shares of Canji
Common Stock and Canji Preferred Stock (including shares issuable pursuant
to the exercise of outstanding options and warrants to purchase Canji Common
Stock and Canji Preferred Stock) to be canceled in the Merger. The proposed
maximum aggregate offering price of $1,817,600 was then multiplied by 1/29
of one percent to arrive at an aggregate registration fee for the securities
offered hereby of $626.76, previously paid on December 18, 1995 upon the
filing of the Registration Statement.
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 THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
SCHERING-PLOUGH CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(b)
<TABLE>
<CAPTION>
FORM S-4 ITEM PROXY STATEMENT/PROSPECTUS HEADING
----------------------------------------------- ----------------------------------------
<S> <C>
INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................. Facing Page; Cross Reference Sheet;
Outside Front Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information................. Summary; Comparative Per Share Data;
Market Price and Dividend Data; Selected
Financial Data of Canji; Unaudited Pro
Forma Combined Financial Information
4. Terms of Transaction........................... Summary; The Merger; The Merger
Agreement; Rights of Dissenting
Stockholders; Certain Federal Income Tax
Consequences; Description of
Schering-Plough Capital Stock;
Description of Participation Rights;
Comparison of Stockholder Rights
5. Pro Forma Financial Information................ Summary; Unaudited Pro Forma Combined
Financial Information
6. Material Contacts With the Company Being
Acquired....................................... Summary; The Merger; The Merger
Agreement; Certain Relationships and
Related Transactions
7. Additional Information Required For Reoffering
by Persons and Parties Deemed to be
Underwriters................................... Not Applicable
8. Interests of Named Experts and Counsel......... Legal Matters
9. Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities.................................... Not Applicable
INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants.... Incorporation of Certain Documents by
Reference; Summary
11. Incorporation of Certain Information by
Reference...................................... Incorporation of Certain Documents by
Reference
12. Information With Respect to S-2 or S-3
Registrants.................................... Not Applicable
13. Incorporation of Certain Information by
Reference...................................... Not Applicable
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants.................... Not Applicable
INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies...... Not Applicable
16. Information With Respect to S-2 or S-3
Companies...................................... Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM S-4 ITEM PROXY STATEMENT/PROSPECTUS HEADING
----------------------------------------------- ----------------------------------------
<S> <C>
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies...................... Summary; Market Price and Dividend Data;
The Canji Special Meeting; The Merger;
The Companies; Selected Financial Data
of Canji; Management's Discussion and
Analysis of Financial Condition and
Results of Operations of Canji; Stock
Ownership of Certain Beneficial Owners
and Management; Index to Financial
Statements of Canji, Inc.
VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents, or
Authorizations Are to be Solicited............. Outside Front Cover Page of Proxy
Statement/Prospectus; Incorporation of
Certain Documents by Reference; Summary;
The Canji Special Meeting; The Merger;
The Merger Agreement; Rights of
Dissenting Stockholders; Stock Ownership
of Certain Beneficial Owners and
Management; Stockholder Proposals
19. Information if Proxies, Consents, or
Authorizations Are Not to be Solicited, or in
an Exchange Offer.............................. Not Applicable
</TABLE>
<PAGE> 4
[SCHERING-PLOUGH [CANJI, INC. LOGO]
CORPORATION LOGO]
CANJI, INC.
PROXY STATEMENT
------------------------
SCHERING-PLOUGH CORPORATION
PROSPECTUS
------------------------
This Proxy Statement/Prospectus is being furnished to stockholders of Canji,
Inc., a Delaware corporation ("Canji"), in connection with the solicitation of
proxies by the Board of Directors of Canji for use at the Special Meeting of
Canji stockholders to be held on Thursday, February 1, 1996, at 3030 Science
Park Road, Suite 302, San Diego, California, commencing at 10:00 a.m., local
time, and at any adjournment or postponement thereof (the "Canji Special
Meeting"). At the Canji Special Meeting, holders ("Canji Stockholders") of
common stock, par value $0.01 per share, of Canji ("Canji Common Stock") and
holders of preferred stock, par value $0.01 per share, of Canji ("Canji
Preferred Stock," and together with Canji Common Stock, "Canji Capital Stock")
as of the close of business on the Record Date (as hereinafter defined) will be
asked to consider and vote on a proposal (the "Canji Merger Proposal") to
approve and adopt the Agreement and Plan of Merger, dated as of December 8, 1995
(the "Merger Agreement"), providing for the merger (the "Merger") of Canji
Merger Corp. ("Subcorp"), a Delaware corporation and a wholly-owned subsidiary
of Schering-Plough Corporation, a New Jersey corporation ("Schering-Plough"),
with and into Canji. The Merger will be consummated on the terms and subject to
the conditions set forth in the Merger Agreement, as a result of which (i) Canji
will become a wholly-owned subsidiary of Schering-Plough and (ii) Canji
Stockholders will be entitled to receive for each share of Canji Capital Stock
held by them, other than shares held, directly or indirectly, by Canji, Subcorp
or any parent of Subcorp, if any, which will be cancelled, and other than shares
as to which dissenters' rights have been perfected, (x) a number of
Schering-Plough common shares, par value $1.00 per share (together with attached
preferred share purchase rights of Schering-Plough, "Schering-Plough Common
Shares"), as determined pursuant to the share exchange formula (the "Exchange
Ratio") set forth in the Merger Agreement, with cash in lieu of fractional
shares, and (y) one Participation Right of Schering-Plough (a "Participation
Right"), representing the right to receive a pro-rata share of a specified
percentage of net sales, if any, subject to certain adjustments, generated from
certain Canji p53 gene technology, as further described under the caption
"Description of the Participation Rights." Holders of outstanding, exercisable
warrants and other rights, if any, to purchase Canji Capital Stock will be
entitled to receive the same merger consideration for such warrants and rights
upon consummation of the Merger, based upon the number of shares of Canji
Capital Stock for which such warrants and rights are exercisable and taking into
account the exercise price with respect thereto. In addition, upon consummation
of the Merger, exercisable options to purchase Canji Capital Stock will be
canceled to the extent not theretofore exercised. See "The Merger
Agreement -- Merger Consideration" and "Rights of Dissenting Stockholders."
As of the Record Date (as hereinafter defined), Schering-Plough beneficially
owned approximately 8.5% of the outstanding Canji Capital Stock, which it
intends to vote in favor of the Canji Merger Proposal.
Approval and adoption of the Canji Merger Proposal by seventy percent (70%)
of the outstanding shares of Canji Preferred Stock entitled to vote at the
meeting, voting together as a single class, will also constitute approval and
adoption of the amendment of Canji's Certificate of Incorporation to eliminate
the liquidation preferences of the Canji Preferred Stock. Such approval by
holders of Canji Preferred Stock is a condition to the consummation of the
Merger and the consummation of the Merger is a condition to the effectiveness of
the amendment.
This Proxy Statement/Prospectus also constitutes the Prospectus of
Schering-Plough with respect to up to 1,279,136 Schering-Plough Common Shares
(including the attached preferred share purchase rights) and up to 10,770,000
Participation Rights to be issued by Schering-Plough in the Merger described
herein in exchange for the outstanding shares of Canji Capital Stock and in
respect of outstanding, exercisable warrants and rights, if any, and certain
unvested options to purchase Canji Capital Stock. Schering-Plough Common Shares
are quoted on the New York Stock Exchange (the "NYSE") under the symbol "SGP."
On December 28, 1995, the closing price of Schering-Plough Common Shares on the
NYSE Composite Tape was $54.13. Stockholders should obtain current quotes for
the Schering-Plough Common Shares. There is currently no public market for the
Participation Rights, and the prices at which the Participation Rights may trade
cannot be predicted.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
All information contained or incorporated by reference in this Proxy
Statement/Prospectus with respect to Schering-Plough has been supplied by
Schering-Plough. All information contained in this Proxy Statement/Prospectus
with respect to Canji has been supplied by Canji.
This Proxy Statement/Prospectus, the Letter to Canji Stockholders, the
Notice of the Canji Special Meeting and the form of proxy for use at the Canji
Special Meeting are first being mailed to stockholders of Canji on or about
December 30, 1995. Any stockholder who has given his proxy may revoke it at any
time prior to its use. See "The Canji Special Meeting -- Voting of Proxies."
------------------------
The date of this Proxy Statement/Prospectus is December 29, 1995.
<PAGE> 5
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SCHERING-PLOUGH COMMON SHARES OR PARTICIPATION RIGHTS MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF SCHERING-PLOUGH OR CANJI SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT
AS OF ANY TIME AFTER THE DATE HEREOF.
AVAILABLE INFORMATION
Schering-Plough is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information filed by Schering-Plough with the Commission
can be inspected and copied at the public reference facilities maintained by the
Commission at its principal office at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York
10048, and Chicago Regional Office, Citicorp Center, 500 West Madison, Suite
1400, Chicago, Illinois 60661. Copies of such material can also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Schering-Plough Common Shares
are listed on the NYSE, and such reports, proxy statements and other information
concerning Schering-Plough are available for inspection and copying at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
Schering-Plough has filed with the Commission a Registration Statement on
Form S-4 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to Schering-Plough Common Shares and Participation Rights to be
issued in the Merger (the "Registration Statement"). This Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is hereby made to the
Registration Statement and related exhibits for further information with respect
to Schering-Plough and the securities offered hereby. Statements contained
herein concerning the provisions of any document are necessarily summaries of
such documents and not complete, and in each instance, reference is made to the
copy of such document attached hereto or filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Schering-Plough with the Commission
pursuant to the Exchange Act (Commission File No. 1-6571) are hereby
incorporated by reference in this Proxy Statement/Prospectus:
1. The description of Schering-Plough Common Shares contained in
Schering-Plough's Registration Statement on Form 8-A dated March 16, 1979, and
any amendment or report filed for the purpose of updating such description;
2. The description of Schering-Plough's Preferred Share Purchase Rights
contained in Schering-Plough's Registration Statement on Form 8-A dated July 31,
1989, and any amendment or report filed for the purpose of updating such
description;
3. Schering-Plough's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, filed with the Commission on March 3, 1995, as amended by the
Form 10-K/A (Amendment No. 1) dated June 26, 1995 (as amended, the "1994
Schering-Plough Form 10-K");
2
<PAGE> 6
4. Schering-Plough's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1995;
5. The information contained in Schering-Plough's Proxy Statement dated
March 24, 1995 for its Annual Meeting of Shareholders held on April 25, 1995
that has been incorporated by reference in the 1994 Schering-Plough Form 10-K;
and
6. Schering-Plough's Current Report on Form 8-K dated June 28, 1995.
All reports and other documents filed with the Commission by
Schering-Plough pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of this Proxy Statement/Prospectus and prior to the Canji
Special Meeting shall be deemed to be incorporated by reference herein and to be
a part hereof from the respective dates of filing of such reports and other
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for all purposes to the extent that a statement contained herein or
in any other subsequently filed document that is also incorporated or deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WITH
RESPECT TO SCHERING-PLOUGH THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
COPIES OF THESE DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS OR HEREIN)
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO
SCHERING-PLOUGH CORPORATION, ONE GIRALDA FARMS, MADISON, NEW JERSEY 07940,
ATTENTION: KEVIN A. QUINN, STAFF VICE PRESIDENT, ASSOCIATE GENERAL COUNSEL AND
CORPORATE SECRETARY; (201) 822-7000. IN ORDER TO ENSURE TIMELY DELIVERY, ANY
REQUEST FOR DOCUMENTS SHOULD BE MADE BY JANUARY 25, 1996.
3
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION................................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................................... 2
SUMMARY................................................................................. 6
The Companies......................................................................... 6
The Canji Special Meeting............................................................. 6
The Merger............................................................................ 7
Availability of Dissenters' Rights.................................................... 10
Certain Federal Income Tax Consequences............................................... 10
Comparison of Stockholder Rights...................................................... 10
Participation Rights.................................................................. 11
Summary Historical and Unaudited Pro Forma Financial Information...................... 12
Computation of Ratio of Earnings to Fixed Charges..................................... 13
COMPARATIVE PER SHARE DATA.............................................................. 14
MARKET PRICE AND DIVIDEND DATA.......................................................... 15
THE CANJI SPECIAL MEETING............................................................... 16
General............................................................................... 16
Matters to Be Considered at the Canji Special Meeting................................. 16
Record Date; Vote Required; Voting at the Meeting..................................... 16
Voting of Proxies..................................................................... 17
Solicitation of Proxies............................................................... 17
THE MERGER.............................................................................. 18
Background of the Merger.............................................................. 18
Reasons for the Merger; Recommendation of the Canji Board of Directors................ 19
Interests of Certain Persons in the Merger............................................ 20
Accounting Treatment.................................................................. 21
Regulatory Approvals.................................................................. 21
Federal Securities Law Consequences................................................... 21
THE MERGER AGREEMENT.................................................................... 23
The Merger............................................................................ 23
Merger Consideration.................................................................. 23
Exchange Procedures................................................................... 24
Representations, Warranties and Covenants............................................. 24
No Negotiations or Solicitations...................................................... 27
Conditions............................................................................ 27
Headquarters.......................................................................... 28
Employee Benefits..................................................................... 28
Termination; Effect of Termination.................................................... 28
Amendment and Waiver.................................................................. 29
Expenses.............................................................................. 29
RIGHTS OF DISSENTING STOCKHOLDERS....................................................... 29
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................................. 32
General Consequences of the Merger.................................................... 32
Installment Sale Treatment............................................................ 33
Backup Withholding.................................................................... 34
THE COMPANIES........................................................................... 35
Business of Canji..................................................................... 35
</TABLE>
4
<PAGE> 8
<TABLE>
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PAGE
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Business of Schering-Plough........................................................... 36
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION...................................... 37
Unaudited Pro Forma Combined Balance Sheet............................................ 38
Unaudited Pro Forma Combined Statements of Earnings................................... 39
SELECTED FINANCIAL DATA OF CANJI........................................................ 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
CANJI................................................................................. 41
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................. 43
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................... 45
DESCRIPTION OF SCHERING-PLOUGH CAPITAL STOCK............................................ 47
DESCRIPTION OF THE PARTICIPATION RIGHTS................................................. 48
COMPARISON OF STOCKHOLDER RIGHTS........................................................ 55
LEGAL MATTERS........................................................................... 62
EXPERTS................................................................................. 62
STOCKHOLDER PROPOSALS................................................................... 62
INDEX TO FINANCIAL STATEMENTS OF CANJI, INC. ........................................... F-1
</TABLE>
ANNEXES:
A -- Agreement and Plan of Merger, dated December 8, 1995, among Schering-Plough
Corporation, Canji Merger Corp. and Canji, Inc.
B -- Section 262 of the Delaware General Corporation Law
5
<PAGE> 9
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus and the Annexes hereto (together, the "Proxy
Statement/Prospectus"). This summary is not intended to be complete and is
qualified in its entirety by the more detailed information and financial
statements appearing elsewhere or incorporated by reference in this Proxy
Statement/Prospectus. Canji Stockholders are urged to read and consider
carefully all of the information contained or incorporated by reference in this
Proxy Statement/Prospectus.
THE COMPANIES
CANJI
Canji was founded in January 1990 and is engaged in the research and
development of tumor suppressor gene technology for malignant cancers and other
diseases. Canji's therapeutic approach is to replace missing or defective tumor
suppressor functions in cancer cells by inserting the normal gene, thereby
blocking tumor growth or causing tumor cell death (apoptosis). Canji has focused
its efforts in tumor suppressor gene technology on the two best characterized
tumor suppressor genes, p53 and RB (retinoblastoma). Canji's initial product
development efforts have been targeted at certain cancers with high morbidity
and mortality and for which current therapy is inadequate. Long-term clinical
targets include non-malignant diseases caused by aberrant cell proliferation,
such as in certain cardiovascular and ophthalmic conditions. Canji has created a
broad enabling platform in tumor suppressor genes, related cell cycle regulators
and associated gene delivery technology. Canji's programs include: p53 gene
therapy in cancer; RB gene therapy in cancer; new tumor suppressor genes in
breast and prostate cancers; dominant cell cycle regulators for proliferative
cardiovascular and ophthalmic diseases; thymidine kinase gene in cancer; and
gene delivery systems (primarily novel adenoviral vectors).
The principal executive offices of Canji are located at 3030 Science Park
Road, Suite 302, San Diego, California 92121, and its telephone number is (619)
597-0177.
SCHERING-PLOUGH
Schering-Plough is a holding company which was incorporated in 1970.
Through its subsidiaries, Schering-Plough is engaged in the discovery,
development, manufacturing and marketing of pharmaceuticals and health care
products worldwide. These products include prescription drugs, animal health,
over-the-counter (OTC), foot care and sun care products.
The principal executive offices of Schering-Plough are located at One
Giralda Farms, Madison, New Jersey 07940, and its telephone number is (201)
822-7000.
THE CANJI SPECIAL MEETING
DATE, TIME AND PLACE OF CANJI SPECIAL MEETING
The Canji Special Meeting will be held at 3030 Science Park Road, Suite
302, San Diego, California, on February 1, 1996, at 10:00 a.m., local time, for
the following purposes:
1. To consider and vote on the Canji Merger Proposal, which is a
proposal to approve and adopt the Merger Agreement pursuant to which, among
other things, (i) Subcorp will be merged with and into Canji with the
result that Canji becomes a wholly-owned subsidiary of Schering-Plough, and
(ii) each issued and outstanding share (other than shares held, directly or
indirectly, by Canji, Subcorp or any parent of Subcorp, if any, which will
be canceled, and other than shares as to which dissenters' rights have been
perfected) of Canji Capital Stock will be converted into (x) a number of
Schering-Plough Common Shares as determined pursuant to the share exchange
formula set forth in the Merger Agreement and (y) one Participation Right.
Approval and adoption of the Canji Merger Proposal by
6
<PAGE> 10
seventy percent (70%) of the outstanding shares of Canji Preferred Stock
entitled to vote at the meeting, voting together as a single class, will
also constitute approval and adoption of the amendment of Canji's
Certificate of Incorporation to eliminate the liquidation preferences of
the Canji Preferred Stock. Such approval by holders of Canji Preferred
Stock is a condition to the consummation of the Merger, and the
consummation of the Merger is a condition to the effectiveness of the
amendment. A copy of the Merger Agreement is attached as Annex A to this
Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the
Canji Special Meeting.
RECORD DATE
Only Canji Stockholders of record at the close of business on December 26,
1995 (the "Record Date"), will be entitled to notice of and to vote at the Canji
Special Meeting. As of the Record Date, there were 2,599,730 shares of Canji
Common Stock outstanding and entitled to vote which were held by approximately
56 holders of record (which number of shares does not include shares of Canji
Common Stock issuable upon the exercise of outstanding options and warrants
prior to the Effective Time (defined below)) and there were 7,664,350 shares of
Canji Preferred Stock outstanding and entitled to vote which were held by
approximately 59 holders of record (which number of shares does not include
shares of Canji Preferred Stock issuable upon the exercise of outstanding
options and warrants prior to the Effective Time). See "The Canji Special
Meeting."
REQUIRED VOTE
The Canji Merger Proposal requires the affirmative vote of the holders of
(i) a majority of the shares of Canji Capital Stock outstanding and entitled to
vote thereon, voting together as a single class, and (ii) seventy percent (70%)
of the shares of Canji Preferred Stock outstanding and entitled to vote thereon,
voting together as a single class. As of the Record Date, the Directors and
executive officers of Canji and certain of their affiliates may be deemed to be
beneficial owners of approximately 45.3% of the outstanding shares of Canji
Capital Stock and each such person has advised Canji that such person intends to
vote in favor of the Canji Merger Proposal. As of the Record Date,
Schering-Plough beneficially owned approximately 8.5% of the outstanding Canji
Capital Stock, which it intends to vote in favor of the Canji Merger Proposal.
See "The Canji Special Meeting -- Record Date; Vote Required; Voting at the
Meeting" and "Comparison of Stockholder Rights -- Liquidation Rights."
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by (i) filing
with the Secretary of Canji, before the taking of the vote at the Canji Special
Meeting, a written notice of revocation bearing a later date than the date of
the proxy or any later-dated proxy relating to the same shares, or (ii)
attending the Canji Special Meeting and voting in person.
THE MERGER
GENERAL; EXCHANGE RATIO
Pursuant to the Merger Agreement, each share of Canji Capital Stock issued
and outstanding immediately prior to the Effective Time (other than shares ("S-P
Canji Shares") held, directly or indirectly, by Canji, Subcorp or any parent of
Subcorp, if any, which will be cancelled, and other than shares as to which
dissenters' rights have been perfected), will be converted into and represent
(x) that number of Schering-Plough Common Shares equal to the Exchange Ratio and
(y) one Participation Right. See "The Merger Agreement -- Merger Consideration"
and "Rights of Dissenting Stockholders."
The Exchange Ratio is equal to the quotient (rounded to the nearest
ten-thousandth of a share) obtained (x) by dividing $54.5 million by the sum of
the total number of shares of Canji Capital Stock issued and outstanding
immediately prior to the Effective Time (defined below) (including dissenting
shares, but excluding the S-P Canji Shares) and the total number of shares of
Canji Capital Stock required to be reserved for issuance upon the exercise of
all outstanding warrants, options (excluding certain unvested options to
purchase up to an aggregate of 600,000 shares of Canji Capital Stock to be
cancelled immediately prior to the
7
<PAGE> 11
Effective Time) and other rights to purchase or otherwise receive such shares
and then dividing that amount by (y) the average of the closing prices of
Schering-Plough Common Shares (the "Average Share Price") as reported on the
NYSE Composite Tape on each of the previous fifteen trading days ending on the
second trading day prior to the Closing Date (defined below), subject to
adjustment in the event that prior to the Effective Time Schering-Plough
declares a stock dividend or other distribution payable in Schering-Plough
Common Shares or securities convertible into Schering-Plough Common Shares, or
effects a stock split, reclassification, combination or other change with
respect to Schering-Plough Common Shares to reflect such stock dividend,
distribution, stock split, reclassification, combination or other change. Based
on the $57.43 average of the closing prices of Schering-Plough Common Shares as
reported on the NYSE Composite Tape on each of the last fifteen trading days
ending on the Record Date, on the Record Date the Exchange Ratio would have been
equal to .0882. However, since the Average Share Price is determined as of two
trading days immediately prior to the Closing Date and the number of issued and
outstanding shares of Canji Capital Stock is determined as of immediately prior
to the Effective Time, there can be no assurance that the same will be true as
of the Effective Time. Consummation of the Merger and the conversion of Canji
Capital Stock into Schering-Plough Common Shares and Participation Rights as
described above are subject to the right of one or more of Canji,
Schering-Plough and Subcorp to terminate the Merger Agreement under certain
circumstances as described under the caption "The Merger
Agreement -- Termination; Effect of Termination."
CANJI OPTIONS AND WARRANTS
At the Effective Time, each exercisable option to purchase Canji Capital
Stock which has not been theretofore exercised will be cancelled. In addition,
at the Effective Time, each outstanding warrant or other right, if any, then
exercisable to purchase or receive Canji Capital Stock which has not been
theretofore exercised will be converted into and represent the right to receive
with respect to each share of Canji Capital Stock for which such warrant or
right was exercisable immediately prior to the Effective Time (x) that number of
Schering-Plough Common Shares equal to the Exchange Ratio, less that number of
Schering-Plough Common Shares (or fraction thereof) with a value that equals the
exercise price under such warrant or right immediately prior to the Effective
Time with respect to one share of Canji Capital Stock and (y) one Participation
Right. See "The Merger -- Interests of Certain Persons in the Merger -- Canji
Options and Warrants" and "The Merger Agreement -- Merger Consideration."
EFFECTIVE TIME OF THE MERGER; CLOSING DATE
The Merger will become effective (the "Effective Time") when a certificate
of merger is filed with the Delaware Secretary of State or at such later time as
is specified in the certificate of merger. Prior to such filing, a closing (the
"Closing") will be held on the date (the "Closing Date") set by Schering-Plough,
which date will be as soon as practicable following the satisfaction or waiver
of all of the conditions set forth in the Merger Agreement. See "The Merger
Agreement -- Conditions."
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to, among other things, (i) the
requisite approval by Canji Stockholders (including the requisite seventy
percent vote of holders of Canji Preferred Stock) of the Merger, the Merger
Agreement and the transactions contemplated thereby, (ii) no temporary
restraining order, preliminary or permanent injunction or other order or decree
being in effect, and no statute, rule or regulation having been enacted by any
governmental authority, in each case which prevents the consummation of the
Merger, and no action instituted by any governmental authority which seeks to
prevent consummation of the Merger being outstanding, and (iii) the Commission
having declared the Registration Statement effective, and on the Closing Date
and at the Effective Time, no stop order or similar restraining order
prohibiting the Merger having been threatened by the Commission or entered by
the Commission or any state securities administrator.
In addition, consummation of the Merger by Canji and Schering-Plough is
conditioned upon each of the other party's representations and warranties being
true and correct on the date of the Merger Agreement and on and as of the
Closing Date (except for those made as of a specified time) and performance in
all material respects of each obligation and agreement and compliance in all
material respects with each covenant to be
8
<PAGE> 12
performed and complied with by the other party at or prior to the Effective
Time. See "The Merger Agreement -- Representations, Warranties and Covenants"
and "The Merger Agreement -- Conditions."
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting
whereby the purchase price for Canji will be allocated to the identifiable
assets and liabilities of Canji based on their respective fair values. Future
payments made under the Participation Rights Agreement, if any, will be expensed
as incurred. See "The Merger -- Accounting Treatment."
REASONS FOR THE MERGER; RECOMMENDATION OF THE CANJI BOARD OF DIRECTORS
Canji. The Canji Board of Directors identified a number of potential
advantages of the Merger to Canji Stockholders. See "The Merger -- Reasons for
the Merger; Recommendation of the Canji Board of Directors." These advantages
include, among others: (i) management's view that Canji would benefit from
Schering-Plough's drug discovery infrastructure because the biotechnology
industry is consolidating and is becoming increasingly competitive by the
combination of development stage companies and major pharmaceutical firms, (ii)
the increased resources which would be available for the development of Canji's
tumor suppressor gene technology utilizing the resources of Schering-Plough,
(iii) the availability of funding for core programs that presently are dependent
upon the timing and inherent risk of a future initial public offering, (iv) the
Canji Board's view that it was unlikely to identify an alternative business
combination or other opportunity that would provide the same likelihood of
return on investment to the Canji Stockholders, and (v) the Canji Board's view
that, given the significant financing and other obstacles facing small
independent biotech companies, including Canji, the merger consideration to be
received in the Merger is a favorable and fair price for the Canji Stockholders.
THE BOARD OF DIRECTORS OF CANJI HAS UNANIMOUSLY DETERMINED THAT THE TERMS
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO,
AND IN THE BEST INTERESTS OF, CANJI AND THE CANJI STOCKHOLDERS. ACCORDINGLY, THE
CANJI BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CANJI STOCKHOLDERS VOTE FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY VOTING FOR THE CANJI MERGER
PROPOSAL.
Schering-Plough. The Schering-Plough Board of Directors, in the course of
reaching its decision to approve the Merger Agreement and the transactions
contemplated thereby, considered a number of factors, including among others:
(i) the opportunity to use Schering-Plough's substantial resources and product
development and production capability to leverage Canji's broad-based scientific
infrastructure, and thereby create a strong gene medicine platform as the
nucleus for gene therapy discovery efforts, with a capability to rapidly
capitalize on promising gene therapy product leads, (ii) the addition of Canji's
innovative and experienced team of scientists and its scientific expertise,
(iii) the opportunity to better realize the benefits of the current
collaborative efforts between Schering-Plough and Canji, and (iv) the
enhancement of Schering-Plough's discovery portfolio and patent estate.
For additional information, see "The Merger -- Reasons for the Merger;
Recommendation of the Canji Board of Directors."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of Canji's Board of Directors with
respect to the Merger Agreement, Canji Stockholders should be aware that certain
officers and Directors of Canji (or their affiliates) have interests in the
Merger that are different from and in addition to the interests of Canji
Stockholders generally. These interests include, but are not limited to, the
fact that (i) certain officers and Directors of Canji currently hold unvested
options to purchase Canji's Capital Stock under Canji's stock option plans that
will be canceled at the Effective Time and will be replaced with restricted
Schering-Plough Common Shares of equivalent value and with the same vesting
schedule immediately following the Effective Time, (ii) certain outstanding
options to purchase Canji Capital Stock held by certain Directors and executive
officers of Canji will accelerate in connection with the Merger, (iii) as a
condition to consummation of the Merger, three scientific employees of Canji
(none of whom are Directors or officers of Canji) are required to enter into
employment
9
<PAGE> 13
agreements with Schering-Plough, (iv) certain Directors and executive officers
are parties to severance agreements with Canji which will be assumed by the
Surviving Corporation in the Merger, and (v) certain officers of Canji will
receive transition bonuses equal to 25% of their base salaries payable on the
first anniversary of the Effective Time or upon termination of employment
without cause by Schering-Plough. The Board of Directors of Canji was aware of
these interests and took these interests into account in approving the Merger
Agreement and the transactions contemplated thereby. See "The
Merger -- Interests of Certain Persons in the Merger" and "The Merger
Agreement -- Employee Benefits."
EXCHANGE PROCEDURES
If the Canji Merger Proposal is approved and the Merger is consummated, as
soon as practicable after the Effective Time, a letter of transmittal will be
mailed or delivered to each Canji Stockholder and holders of Canji warrants and
rights converted in the Merger to be used in forwarding certificates evidencing
such holder's shares of Canji Capital Stock and Canji warrants and other rights
converted in the Merger for surrender and exchange for certificates evidencing
Schering-Plough Common Shares and Participation Rights to which such holder has
become entitled and, if applicable, cash in lieu of fractional Schering-Plough
Common Shares. After receipt of such letter of transmittal, each holder of
certificates formerly representing shares of Canji Capital Stock and Canji
warrants and other rights converted in the Merger should surrender such
certificates to the exchange agent designated in the letter of transmittal
pursuant to and in accordance with the instructions accompanying such letter of
transmittal, and each holder will receive in exchange therefor certificates
evidencing the whole number of Schering-Plough Common Shares and Participation
Rights to which such person is entitled and any cash which may be payable in
lieu of fractional Schering-Plough Common Shares. See "The Merger
Agreement -- Exchange Procedures." Such letter of transmittal will be
accompanied by instructions specifying other details of the exchange. CANJI
STOCKHOLDERS AND HOLDERS OF CANJI WARRANTS AND OTHER RIGHTS TO BE CONVERTED IN
THE MERGER SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER OF
TRANSMITTAL.
AVAILABILITY OF DISSENTERS' RIGHTS
Pursuant to Section 262 of the Delaware General Corporation Law (the
"DGCL"), Canji Stockholders who object to the Merger and do not vote in favor of
the Merger have certain rights to dissent and demand to be paid the "fair value"
of their Canji Capital Stock. See "Rights of Dissenting Stockholders." Section
262 is set forth in Annex B to this Proxy Statement/Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
If the Merger qualifies as a "reorganization" for federal income tax
purposes, as intended by the parties, holders of Canji Capital Stock who
exchange their Canji Capital Stock for Schering-Plough Common Shares and
Participation Rights generally should recognize gain, if any, only to the extent
of the fair market value of the Participation Rights received in the Merger. Any
such gain may be subject to being reported on the installment method. See
"Certain Federal Income Tax Consequences -- Installment Sale Treatment." Whether
the Merger qualifies as a "reorganization" for federal income tax purposes will
depend in part on whether, in the Merger, Schering-Plough acquires at least 80%
of the outstanding Canji Capital Stock in exchange for Schering-Plough Common
Shares, which in turn will depend primarily on the fair market value of the
Participation Rights at the Effective Time. Canji management believes, based on
certain appraisals, that the fair market value of the Participation Rights at
the Effective Time will not be great enough to cause the Merger to fail to
qualify as a reorganization for federal income tax purposes. The issuance of the
Participation Rights may require the receipt of the merger consideration to be
reported on the installment method, unless the recipient elects out of the use
of such method. See "Certain Federal Income Tax Consequences." CANJI
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER.
COMPARISON OF STOCKHOLDER RIGHTS
As a result of the Merger, shares of Canji Capital Stock, which are issued
by a Delaware corporation, will be converted into the right to receive
Schering-Plough Common Shares and Participation Rights, which are
10
<PAGE> 14
issued by a New Jersey corporation. There are differences between the rights of
Canji Stockholders and the rights of holders of Schering-Plough Common Shares
("Schering-Plough Shareholders"). These differences result from (i) differences
between New Jersey and Delaware law, and (ii) differences between the governing
instruments of Canji and Schering-Plough. For a discussion of the various
differences between the rights of Canji Stockholders and Schering-Plough
Shareholders, see "Comparison of Stockholder Rights."
PARTICIPATION RIGHTS
The Participation Rights will be issued under a Participation Rights
Agreement to be entered into between Schering-Plough and The Chase Manhattan
Bank (National Association), as trustee, and will represent the right to receive
a pro-rata share of a specified percentage of net sales, if any, subject to
certain adjustments, generated from certain Canji p53 gene technology as more
fully described under the caption "Description of the Participation Rights."
THERE IS CURRENTLY NO PUBLIC MARKET FOR THE PARTICIPATION RIGHTS, AND THE
PRICES AT WHICH THE PARTICIPATION RIGHTS MAY TRADE CANNOT BE PREDICTED. NO
ASSURANCE CAN BE GIVEN THAT AN ACTIVE PUBLIC MARKET FOR THE PARTICIPATION RIGHTS
WILL DEVELOP OR THAT ANY CONTINGENT PAYMENT THEREUNDER WILL EVER BE PAID TO
HOLDERS THEREOF PURSUANT TO THE PARTICIPATION RIGHTS. Until such securities are
fully distributed and an orderly market develops, the prices at which trading
occurs may fluctuate significantly. Trading prices will be determined by the
marketplace and may be influenced by many factors, including, among others, the
depth and liquidity of the market for such securities, investor perception of
Schering-Plough, the prospects for payment pursuant to the Participation Rights,
and general economic and market conditions.
The Participation Rights are not expected to be listed on a national
securities exchange or quoted for trading on the NASDAQ National Market
following the Merger, and Schering-Plough is not committed and has no present
intent to so list or quote the Participation Rights. Further, immediately
following the Merger, the Participation Rights will not be registered under the
Exchange Act and it is expected that the Participation Rights will only be so
registered to the extent required by the Exchange Act or other applicable law.
See "Description of the Participation Rights."
11
<PAGE> 15
SUMMARY HISTORICAL AND UNAUDITED PRO
FORMA FINANCIAL INFORMATION
CANJI SUMMARY HISTORICAL FINANCIAL INFORMATION
The summary historical financial information of Canji set forth below
should be read in conjunction with, and is qualified in its entirety by, the
audited financial statements of Canji (and the related notes thereto) and other
financial information included elsewhere in this Proxy Statement/Prospectus. See
"Index to Financial Statements of Canji, Inc."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
-------------- INCEPTION TO
SEPT. SEPT. DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
----- ------ ------ ------ ------ ------ -------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................ $ 4.7 $ 2.5 $ 2.9 $ 0.2 -- -- --
Net loss............................ (2.2) (3.8) (5.9) (7.0) $ (3.6) $ (1.7) $ (.8)
Net loss per common share........... (.91) (1.70) (2.61) (3.53) (2.05) (.97) (.46)
Total assets........................ 4.5 8.0 5.9 2.9 2.8 6.1 2.5
Long-term obligations............... .6 2.5 0.4 0.4 -- -- --
Cash dividends per common share..... -- -- -- -- -- -- --
</TABLE>
SCHERING-PLOUGH SUMMARY HISTORICAL FINANCIAL INFORMATION(A)
The summary historical financial information of Schering-Plough set forth
below has been derived from and should be read in conjunction with the audited
financial statements and other financial information incorporated by reference
in this Proxy Statement/Prospectus. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------
SEPT. SEPT.
1995 1994 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales........................ $3,813.5 $3,377.1 $4,536.6 $4,229.1 $3,944.6 $3,475.4 $3,194.9
Income before extraordinary
item, discontinued
operations and cumulative
effect of accounting
changes.................... 813.6 714.7 926.2 815.6 722.1 635.7 560.7
Earnings per common share
before extraordinary item,
discontinued operations and
cumulative effect of
accounting changes......... 2.19 1.86 2.42 2.09 1.80 1.48 1.24
Total assets................. 4,554.2 4,411.0 4,325.7 4,316.9 4,156.6 4,013.2 4,103.1
Long-term debt............... 86.3 186.7 185.8 182.3 184.1 753.6 182.9
Cash dividends per common
share...................... .835 .735 .99 .87 .75 .635 .533
</TABLE>
- ---------------
(a) Amounts for years prior to 1995 have been restated for the effect of
discontinued operations and a 2-for-1 stock split both of which occurred
during the 1995 second quarter.
12
<PAGE> 16
UNAUDITED PRO FORMA COMBINED SUMMARY FINANCIAL INFORMATION(A)
The unaudited pro forma combined summary financial information of
Schering-Plough and Canji set forth below gives effect to the Merger under the
"purchase" method of accounting, and assumes that the Merger had occurred at the
beginning of the earliest period presented. The pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
Merger had been consummated at such time, nor is it necessarily indicative of
future operating results or financial position. The unaudited pro forma combined
summary financial information should be read in conjunction with the "Unaudited
Pro Forma Combined Financial Information" included elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------
SEPT. SEPT.
1995 1994 1994
-------- -------- --------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales and revenue................................................ $3,813.7 $3,378.9 $4,538.3
Income from continuing operations................................ 808.2 710.8 919.9
Earnings per common share from continuing operations............. 2.17 1.84 2.40
Total assets..................................................... 4,611.9 4,470.4 4,385.5
Long-term debt................................................... 86.9 189.2 186.2
Cash dividends per common share.................................. .833 .733 .99
</TABLE>
- ---------------
(a) Schering-Plough historical amounts for periods prior to 1995 have been
restated for the effect of discontinued operations and a 2-for-1 stock split
both of which occurred during the 1995 second quarter.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)
(DOLLARS IN MILLIONS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPT. 30, ------------------------------------------------
1995 1994 1993 1992 1991 1990
--------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes from
continuing operations.................. $1,077.6 $1,226.7 $1,073.1 $ 962.8 $847.6 $768.1
Add: fixed charges
Interest expense....................... 42.3 56.2 48.2 55.4 65.3 82.4
1/3 rentals........................... 7.0 8.7 8.0 7.7 7.0 6.9
Capitalized interest................... 8.0 11.4 12.7 15.8 11.8 6.3
-------- -------- -------- -------- ------ ------
Total fixed charges................. 57.3 76.3 68.9 78.9 84.1 95.6
Less: capitalized interest............... 8.0 11.4 12.7 15.8 11.8 6.3
Add: amortization of capitalized
interest............................... 3.7 4.1 3.5 4.1 4.0 3.8
-------- -------- -------- -------- ------ ------
Earnings before income taxes and fixed
charges (other than capitalized
interest).............................. $1,130.6 $1,295.7 $1,132.8 $1,030.0 $923.9 $861.2
======== ======== ======== ======== ====== ======
Ratio of earnings to fixed charges....... 19.7 17.0 16.4 13.1 11.0 9.0
======== ======== ======== ======== ====== ======
</TABLE>
- ---------------
(1) Restated for the effect of discontinued operations. "Earnings" consist of
income before income taxes and fixed charges (other than capitalized
interest). "Fixed charges" consist of interest expense, capitalized interest
and one-third of rentals which Schering-Plough believes to be a reasonable
estimate of an interest factor on leases.
13
<PAGE> 17
COMPARATIVE PER SHARE DATA
Set forth below are earnings, cash dividends declared and book value per
share data for Schering-Plough and Canji on both historical and pro forma
combined bases and on a per share equivalent pro forma basis for Canji. Pro
forma combined earnings per share are derived from the Unaudited Pro Forma
Combined Financial Information presented elsewhere in this Proxy
Statement/Prospectus, which gives effect to the Merger under the "purchase"
method of accounting. Pro forma combined cash dividends declared per share
reflect Schering-Plough cash dividends per share declared in the periods
indicated. Book value per share for the pro forma combined presentation is based
upon outstanding Schering-Plough Common Shares, adjusted to include
Schering-Plough Common Shares to be issued in the Merger at the Effective Time.
The per share equivalent pro forma data for Canji is based on the assumed
conversion of each share of Canji Capital Stock into Schering-Plough Common
Shares, based upon an assumed Exchange Ratio of .0855. See "The Merger
Agreement -- Merger Consideration." The information set forth below should be
read in conjunction with the respective audited and unaudited financial
statements of Schering-Plough and Canji incorporated by reference or included
elsewhere in this Proxy Statement/Prospectus and the "Unaudited Pro Forma
Combined Financial Information" and the notes thereto presented elsewhere
herein. See "Incorporation of Certain Documents by Reference," "Unaudited Pro
Forma Combined Financial Information" and "Index to Financial Statements of
Canji, Inc."
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994 FOR THE NINE MONTHS ENDED SEPT. 30, 1995
---------------------------------------------- ----------------------------------------------
CANJI CANJI
SCHERING-PLOUGH --------------------- SCHERING-PLOUGH ---------------------
-------------------- EQUIVALENT -------------------- EQUIVALENT
ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA
------ --------- ------ ---------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Book value per common
share..................... $4.23 $4.37 $0.53 $ 0.37 $4.61 $ 4.75 $0.60 $ 0.41
Cash dividends per common
share..................... $0.99 $0.99 -- $ 0.08 $0.835 $ 0.833 -- $ 0.07
Income (loss) per common
share from continuing
operations................ $2.42 $2.40 ($2.61) $ 0.21 $2.19 $ 2.17 ($0.91) $ 0.19
</TABLE>
14
<PAGE> 18
MARKET PRICE AND DIVIDEND DATA
The following table reflects the range of the reported high and low last
sale prices of Schering-Plough Common Shares on the NYSE Composite Tape and the
per share dividends paid thereon for the calendar quarters indicated. Canji
Capital Stock is not publicly traded and no comparative market price data is
available. Canji has not paid any dividends on Canji Capital Stock. The
information in the table has been adjusted to reflect a two-for-one stock split
in 1995.
<TABLE>
<CAPTION>
SCHERING-PLOUGH
COMMON SHARES
-------------------------------
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
1993:
First quarter............................................... $31.94 $25.88 $.195
Second quarter.............................................. 35.44 27.75 .225
Third quarter............................................... 34.63 29.00 .225
Fourth quarter.............................................. 35.50 31.56 .225
1994:
First quarter............................................... $34.56 $27.81 $.225
Second quarter.............................................. 33.31 27.56 .255
Third quarter............................................... 35.69 30.81 .255
Fourth quarter.............................................. 35.81 34.94 .255
1995:
First quarter............................................... $39.44 $35.81 $.255
Second quarter.............................................. 45.38 36.75 .290
Third quarter............................................... 52.50 43.00 .290
Fourth quarter (through December 28, 1995).................. 60.63 51.75 .290
</TABLE>
On December 11, 1995, the last full trading day prior to the public
announcement of the Merger Agreement, the last sale price of the Schering-Plough
Common Shares was $59.25 per share as reported on the NYSE Composite Tape. The
market value of Canji Capital Stock at December 11, 1995, on an equivalent per
share basis, was $5.07 (assuming an Exchange Ratio of .0855). On December 28,
1995, the most recent practicable date prior to the mailing of this Proxy
Statement/Prospectus, the last sale price of the Schering-Plough Common Shares
was $54.13 per share as reported on the NYSE Composite Tape. Canji Stockholders
are encouraged to obtain current market quotations for Schering-Plough Common
Shares.
Schering-Plough intends to apply for the listing of the Schering-Plough
Common Shares to be issued in the Merger on the NYSE. Schering-Plough does not
intend to list the Participation Rights on a national securities exchange or
quote the Participation Rights for trading on the NASDAQ National Market
following the Merger. See "Description of the Participation
Rights -- Considerations Relating to Participation Rights."
Schering-Plough anticipates that it will continue to pay quarterly cash
dividends. However, the timing and amount of any future dividends remain within
the discretion of the Schering-Plough Board of Directors and will depend on
Schering-Plough's future earnings, financial condition, capital requirements and
other factors.
Pursuant to the Merger Agreement, Canji has agreed that, during the period
from the date of the Merger Agreement to the Effective Time, Canji will not
make, declare or pay any dividend or distribution on the Canji Capital Stock.
15
<PAGE> 19
THE CANJI SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to Canji Stockholders in
connection with the solicitation of proxies by the Board of Directors of Canji
for use at the Canji Special Meeting to be held on Thursday, February 1, 1996,
at 3030 Science Park Road, Suite 302, San Diego, California, commencing at 10:00
a.m., local time, and at any adjournment or postponement thereof.
This Proxy Statement/Prospectus, the Letter to Canji Stockholders, the
Notice of the Canji Special Meeting and the form of proxy for use at the Canji
Special Meeting are first being mailed to Canji Stockholders on or about
December 30, 1995.
MATTERS TO BE CONSIDERED AT THE CANJI SPECIAL MEETING
At the Canji Special Meeting, Canji Stockholders will consider and vote on:
1. The Canji Merger Proposal, which is a proposal to approve and adopt
the Merger Agreement pursuant to which, among other things, (i) Subcorp
will be merged with and into Canji with the result that Canji becomes a
wholly-owned subsidiary of Schering-Plough, and (ii) each issued and
outstanding share (other than shares held, directly or indirectly, by
Canji, Subcorp or any parent of Subcorp, if any, which will be cancelled,
and other than shares as to which dissenters' rights have been perfected)
of Canji Capital Stock will be converted into (x) a number of
Schering-Plough Common Shares as determined pursuant to the share exchange
formula set forth in the Merger Agreement and (y) one Participation Right.
Approval and adoption of the Canji Merger Proposal by seventy percent (70%)
of the outstanding shares of Canji Preferred Stock entitled to vote at the
meeting, voting together as a single class, will also constitute approval
and adoption of the amendment of Canji's Certificate of Incorporation to
eliminate the liquidation preferences of the Canji Preferred Stock. Such
approval by holders of Canji Preferred Stock is a condition to the
consummation of the Merger, and the consummation of the Merger is a
condition to the effectiveness of the amendment. A copy of the Merger
Agreement is attached as Annex A to this Proxy Statement/Prospectus.
2. Such other business as may properly come before the Canji Special
Meeting.
RECORD DATE; VOTE REQUIRED; VOTING AT THE MEETING
The Board of Directors of Canji has fixed December 26, 1995, as the Record
Date for the determination of Canji Stockholders entitled to notice of and to
vote at the Canji Special Meeting. Accordingly, only holders of Canji Capital
Stock of record at the close of business on December 26, 1995, will be entitled
to notice of and to vote at the Canji Special Meeting. Each holder of record of
Canji Capital Stock on the Record Date is entitled to cast one vote per share,
exercisable in person or by a properly executed proxy, at the Canji Special
Meeting. As of the Record Date, there were 2,599,730 shares of Canji Common
Stock outstanding and entitled to vote which were held by approximately 56
holders of record (which number of shares does not include shares of Canji
Common Stock issuable upon the exercise of outstanding options and warrants
prior to the Effective Time) and there were 7,664,350 shares of Canji Preferred
Stock outstanding and entitled to vote which were held by approximately 59
holders of record (which number of shares does not include shares of Canji
Preferred Stock issuable upon the exercise of outstanding options and warrants
prior to the Effective Time).
Pursuant to Canji's Certificate of Incorporation (the "Canji Certificate")
and Bylaws (the "Canji Bylaws") and applicable law, approval and adoption of the
Canji Merger Proposal requires the affirmative vote of the holders of (i) a
majority of the shares of Canji Capital Stock outstanding and entitled to vote
thereon, voting together as a single class, and (ii) seventy percent (70%) of
the shares of Canji Preferred Stock outstanding and entitled to vote thereon,
voting together as a single class. As of the Record Date, the Directors and
executive officers of Canji and certain of their affiliates may be deemed to be
beneficial owners of approximately 45.3% of the outstanding shares of Canji
Capital Stock and each such person has advised Canji that such person intends to
vote in favor of the Canji Merger Proposal. As of the Record Date, Schering-
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Plough beneficially owned approximately 8.5% of the outstanding Canji Capital
Stock, which it intends to vote in favor of the Canji Merger Proposal.
VOTING OF PROXIES
All Canji Stockholders who are entitled to vote and are represented at the
Canji Special Meeting by properly executed proxies received prior to or at such
meeting and not revoked will be voted at such meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated, such
proxies will be voted FOR approval and adoption of the Canji Merger Proposal.
If any other matters are properly presented at the Canji Special Meeting
for consideration, including, among other things, consideration of a motion to
adjourn such meeting to another time or place (including, without limitation,
for the purpose of soliciting additional proxies), the persons named in the
enclosed form of proxy, and acting thereunder, will have discretion to vote on
such matters in accordance with their best judgment (unless authorization to use
such discretion is withheld). Canji is not aware of any matters expected to be
presented at the meeting other than as described in its Notice of Special
Meeting.
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 Canji, before the taking of the vote at the Canji Special
Meeting, a written notice of revocation bearing a later date than the date of
the proxy, (ii) duly executing a later-dated proxy relating to the same shares
and delivering it to the Secretary of Canji before the taking of the vote at the
Canji Special Meeting, or (iii) attending the Canji Special Meeting and voting
in person. In order to vote in person at the Canji Special Meeting, Canji
Stockholders must attend the meeting and cast their votes in accordance with the
voting procedures established for the meeting. Attendance at the meeting will
not in and of itself constitute a revocation of a proxy. Any written notice of
revocation or subsequent proxy must be sent so as to be delivered at or before
the taking of the vote at the meeting to Canji, Inc., 3030 Science Park Road,
Suite 302, San Diego, California 92121, Attention: Secretary.
Pursuant to applicable law, abstaining votes and broker non-votes will not
be counted in favor of the Canji Merger Proposal. Since the Canji Merger
Proposal requires the affirmative vote of a majority of the outstanding Canji
Capital Stock, and seventy percent of the outstanding Canji Preferred Stock,
abstentions and broker non-votes will have the same effect as votes against such
proposal.
SOLICITATION OF PROXIES
The expenses of the solicitations for the Canji Special Meeting, including
the cost of printing and distributing this Proxy Statement/Prospectus and the
form of proxy, will be borne by Canji, subject to each party's obligation to
reimburse the other for its expenses under certain circumstances. See "The
Merger Agreement -- Termination; Effect of Termination." In addition to
solicitation by mail, proxies may be solicited by Directors, officers and
employees of Canji in person or by telephone, telegram or other means of
communication. These persons will receive no additional compensation for
solicitation of proxies, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. Arrangements will also be made by
Canji with custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
custodians, nominees and fiduciaries, and Canji will reimburse such custodians,
nominees and fiduciaries for reasonable expenses incurred in connection
therewith.
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THE MERGER
BACKGROUND OF THE MERGER
In 1994, Canji entered into a major strategic alliance with affiliates of
Schering-Plough which included (i) a License Agreement, pursuant to which Canji
granted to Schering-Plough exclusive, worldwide license rights to commercially
develop and market products using Canji's p53 tumor suppressor gene technology
(the "p53 License"), (ii) a Research and Development Collaboration and License
Agreement, pursuant to which Schering-Plough agreed to fund Canji's research and
development work over a number of years, (iii) a First Refusal Agreement,
pursuant to which Schering-Plough acquired an option right or first refusal
right to license additional tumor suppressor gene technology from Canji, and
(iv) a Stock Purchase Agreement, pursuant to which Schering-Plough purchased $6
million of Canji's preferred stock. Canji and Schering-Plough have had numerous
interactions during the course of their strategic alliance, and Schering-Plough
is very familiar with the technology and business of Canji. See "Certain
Realtionships and Related Transactions."
As a small biotechnology research and development company, Canji needs
continually to raise additional cash for conducting Canji's research,
development and business activities. In mid-1995, representatives of Canji
informally discussed with representatives of Schering-Plough Canji's cash needs
and some of the alternatives Canji was considering for raising needed cash,
including (i) an initial public offering, (ii) an additional private placement
of securities, (iii) a merger with an existing company which had cash resources,
(iv) a private debt financing, (v) an additional strategic alliance and funding
with another large pharmaceutical company, or (vi) a merger with another
company, such as Schering-Plough, another large pharmaceutical company, or
another biotechnology company. Canji's representatives sought to determine
Schering-Plough's interest in participating in one or more of the available
financing alternatives then being considered by Canji.
In the fall of 1995, Schering-Plough informed Canji that it might be
interested in making a proposal for acquiring all of Canji. Informal discussions
between Dr. M. Blake Ingle, President of Canji, and representatives of
Schering-Plough proceeded via telephone in September and October of 1995.
By letter dated October 27, 1995, Schering-Plough expressed interest in
negotiating a purchase of Canji's assets, although no specific purchase price
was indicated.
On October 31, 1995, representatives of Canji and Canji's legal counsel met
with representatives of Schering-Plough to discuss the possible acquisition of
Canji by Schering-Plough. Representatives from both companies were in agreement
that Schering-Plough's acquisition of Canji would further the development and
commercialization of Canji's tumor suppressor gene technology and benefit the
business and scientific focus of Schering-Plough. The parties terminated the
negotiating meeting on October 31, 1995 without being able to reach a consensus
on valuation.
Representatives of the companies continued to discuss valuation during
telephone conversations throughout early November 1995, with both parties making
compromises and ultimately arriving at a valuation of approximately $5.00 per
share of Canji Capital Stock, and a total valuation in the range of $53-$55
million of Schering-Plough stock to be exchanged for Canji stock (excluding
shares owned by Schering-Plough), plus Canji Stockholders receiving a future
royalty income stream from the p53 License. During this period, Dr. Ingle and
Mr. Kenneth Cohen, the Chief Operating Officer of Canji, continued to pursue
other financing alternatives, and representatives of Canji held meetings with
various investment banks to consider the feasibility of such alternatives.
At a meeting held on November 9, 1995, Canji's Board of Directors discussed
the terms of the proposed merger transaction with Schering-Plough as well as
various other alternatives, including proceeding further with a private
placement of preferred stock, and possible merger transactions with other
companies. Dr. Ingle and Mr. Cohen reported to the Board concerning their recent
discussions with several investment banks concerning various financing
alternatives. The Board unanimously approved in principle the proposed merger
with Schering-Plough and authorized Dr. Ingle and Mr. Cohen to proceed with
negotiations for the Merger.
At a meeting held in San Diego on November 13, 1995, representatives of
Canji and Schering-Plough negotiated and executed a letter of intent and a Loan
Agreement. The proposed purchase price of $54.5
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million plus the future royalty income stream from a p53 containing gene product
under the p53 License was the result of negotiations between the parties.
Discussions between the parties and their respective legal advisors continued
during the next several weeks.
At a meeting of the Board of Directors of Canji held in San Diego on
November 15, 1995, the terms of the November 13, 1995 letter of intent were
discussed in detail. The Board again considered the various other alternatives
available to Canji. The Board unanimously approved the proposed merger
transaction with Schering-Plough as outlined in the letter of intent. The Board
appointed a three-person Special Committee consisting of Dr. Ingle, Mr. Theodore
Heinrichs and Dr. Gregory Johnson, to oversee the negotiation of a definitive
Merger Agreement.
Representatives of Schering-Plough and Canji conducted further negotiations
toward the preparation of the definitive Merger Agreement from November 15
through December 8, 1995. A copy of the draft definitive Merger Agreement was
circulated to all Canji Board members on December 6, 1995, and Canji's
management had individual telephone discussions with each Board member
concerning the Merger Agreement. The Merger Agreement was approved by Canji's
Board of Directors and Special Committee of the Board of Directors on December
8, 1995, by unanimous vote.
The Board of Directors of Canji concluded that the valuation of Canji at
$54.5 million plus the future royalty income stream from the p53 License, is a
favorable and fair price for the Canji Stockholders, given the financing and
other obstacles facing small biotech companies at this time. While the value of
the future royalty income stream from the p53 License is indeterminate at this
time, this right affords Canji stockholders the potential for additional value
if the p53 technology becomes successful in the market over the next
approximately 18 years. THE PRESENT VALUE OF THIS ROYALTY INCOME STREAM IS
HIGHLY SPECULATIVE AND UNCERTAIN.
On December 8, 1995, Schering-Plough and Canji executed the Merger
Agreement. On December 11, 1995, the Board of Directors of Schering-Plough
approved the Merger Agreement and the transaction contemplated thereby, and on
December 12, 1995, the parties issued a press release announcing the Merger.
REASONS FOR THE MERGER; RECOMMENDATION OF THE CANJI BOARD OF DIRECTORS
Canji. In approving the Merger, the Board of Directors of Canji and the
Special Committee thereof consulted with Canji's legal advisors as well as with
Canji's management, and considered a number of factors, including (i)
management's view that Canji would benefit from Schering-Plough's drug discovery
infrastructure because the biotechnology industry is consolidating and is
becoming increasingly competitive by the combination of development stage
companies and major pharmaceutical firms, (ii) the increased resources which
would be available for the development of Canji's tumor suppressor gene
technology utilizing the resources of Schering-Plough, (iii) the availability of
funding for core programs that presently are dependent upon the timing and
inherent risk of a future initial public offering, (iv) the Canji Board's view
that it was unlikely to identify an alternative business combination or other
opportunity that would provide the same likelihood of return on investment to
the Canji Stockholders, and (v) the Canji Board's view that, given the financing
and other obstacles facing small independent biotech companies, including Canji,
the merger consideration to be received in the Merger is a favorable and fair
price for the Canji Stockholders.
The foregoing discussion of the factors considered by the Canji Board is
not intended to be exhaustive. In view of the wide variety of factors considered
in connection with its evaluation of the Merger, the Canji Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determinations.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF DIRECTORS OF CANJI HAS
UNANIMOUSLY DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS
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OF, CANJI AND THE CANJI STOCKHOLDERS. ACCORDINGLY, THE CANJI BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT CANJI STOCKHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT BY VOTING FOR THE CANJI MERGER PROPOSAL.
Schering-Plough. In the course of reaching its decision to approve the
Merger Agreement and each of the transactions contemplated thereby, the Board of
Directors of Schering-Plough consulted with Schering-Plough's legal advisors as
well as with Schering-Plough's management, and considered a number of factors,
including: (i) the opportunity to use Schering-Plough's substantial resources
and product development and production capability to leverage Canji's
broad-based scientific infrastructure, and thereby create a strong gene medicine
platform as the nucleus for gene therapy discovery efforts, with a capability to
rapidly capitalize on promising gene therapy product leads, (ii) the addition of
Canji's innovative and experienced team of scientists and its scientific
expertise, (iii) the opportunity to better realize the benefits of the current
collaborative efforts between Schering-Plough and Canji, and (iv) the
enhancement of Schering-Plough's discovery portfolio and patent estate.
The foregoing discussion of the factors considered by the Schering-Plough
Board is not intended to be exhaustive. In view of the wide variety of factors
considered in connection with its evaluation of the Merger, the Schering-Plough
Board did not find it practicable to, and did not, quantify or otherwise attempt
to assign relative weights to the specific factors considered in reaching its
determinations.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Canji Board with respect to the
Merger Agreement, Canji Stockholders should be aware that certain officers and
Directors of Canji (or their affiliates) have interests in the Merger that are
different from and in addition to the interests of Canji Stockholders generally.
The Board of Directors of Canji was aware of these interests and took these
interests into account in approving the Merger Agreement and the transactions
contemplated thereby.
Canji Options. Prior to the Effective Time, Canji will take such action as
is necessary to cause each of the Canji stock option plans and each unvested
option to purchase Canji Capital Stock issued thereunder to be canceled
immediately prior to the Effective Time (an "Unvested Canji Option").
Schering-Plough will offer to each person identified in the Merger Agreement
(including certain Directors and officers of Canji) to enter into a restricted
stock agreement with such person to provide such person with restricted
Schering-Plough Common Shares of equivalent value to (and upon the same vesting
schedule as) the Unvested Canji Options that such person held immediately prior
to the Effective Time. The restricted Schering-Plough Common Shares will be
valued at the Average Share Price and will be expensed over the vesting period.
Holders of such Unvested Canji Options will not be entitled to receive
Participation Rights in respect of such Unvested Canji Options. In no event will
Schering-Plough be obligated to offer to enter into restricted stock agreements
with such persons for more than Unvested Canji Options to purchase an aggregate
of 600,000 shares of Canji Capital Stock. Certain of the officers and Directors
of Canji hold options to purchase Canji Capital Stock which will qualify as
Unvested Canji Options and be replaced with restricted Schering-Plough Common
Shares following consummation of the Merger as described above.
In addition, in connection with the Merger, at the Effective Time certain
outstanding options to purchase Canji Capital Stock held by certain Directors
and executive officers of Canji will accelerate pursuant to their terms and are
expected to be exercised simultaneously therewith, and will be canceled to the
extent not so exercised. Such options are held by (and the number of shares of
Canji Capital Stock for which such options will be exercisable for are): M.
Blake Ingle, Ph.D. (260,000 shares), Kenneth M. Cohen (150,000 shares), Bryan
Finkle, Ph.D. (42,000 shares), Roger Headrick (10,000 shares), Gregory Johnson,
Ph.D. (10,000 shares), Wen-Hwa Lee, Ph.D. (10,000 shares), Erkki I. Ruoslahti,
M.D. (10,000 shares), Theodor H. Heinrichs (10,000 shares) and Jui Lien Li,
Ph.D. (5,000 shares).
Employment Agreements. In connection with and as a condition to
consummation of the Merger, three scientific employees of Canji (none of whom
are Directors or officers of Canji) will be required to enter into employment
agreements with Schering-Plough, and Schering-Plough intends to offer to enter
into employment agreements with certain other employees of Canji (none of whom
are Directors or officers of Canji).
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Severance Arrangements. Dr. Ingle, Mr. Cohen and Michael Shepard, Ph.D.
are parties to severance agreements with Canji which will be assumed by the
Surviving Corporation in the Merger. Pursuant thereto, when terminated, Dr.
Ingle will be entitled to a severance payment of one month base salary per year
of employment (which commenced March 1, 1993); Mr. Cohen will be entitled to a
severance payment of 6 months base salary if terminated prior to March 15, 1996,
and 12 months base salary if terminated thereafter; and Dr. Shepard will be
entitled to a severance payment of 3 months base salary.
Transition Bonuses. Pursuant to the Merger Agreement, each current
employee of Canji, other than Dr. Ingle, Mr. Cohen, Dr. Shepard and one
non-officer employee, will be entitled to a transition bonus of 25% of such
employee's base salary payable on the first anniversary of the Effective Time or
upon such employee's termination of employment by Schering-Plough without cause.
Other Interests. Dr. Shepard currently owes Canji $60,000 pursuant to a
loan from Canji, which loan will be fully forgiven pursuant to its terms upon
consummation of the Merger.
See "The Merger Agreement -- Employee Benefits."
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting
whereby the purchase price for Canji will be allocated to the identifiable
assets and liabilities of Canji based on their respective fair values. Future
payments made under the Participation Rights Agreement, if any, will be expensed
as incurred. See "Unaudited Pro Forma Combined Financial Information."
REGULATORY APPROVALS
The Merger does not require the approval of any Federal or state agency.
FEDERAL SECURITIES LAW CONSEQUENCES
All Schering-Plough Common Shares and Participation Rights issued in
connection with the Merger will be freely transferable, except that any
Schering-Plough Common Shares and Participation Rights received by persons who
are deemed to be "affiliates" (as such term is defined under the Securities Act)
of Schering-Plough or Canji prior to the Merger may be sold by them only in
transactions permitted by the resale provisions of Rule 145 under the Securities
Act with respect to affiliates of Schering-Plough or Canji, or Rule 144 under
the Securities Act with respect to persons who are or become affiliates of
Schering-Plough, or as otherwise permitted under the Securities Act. Persons who
may be deemed to be affiliates of Schering-Plough or Canji generally include
individuals or entities that control, are controlled by or are under common
control with, such person and generally include the executive officers and
directors of such person as well as principal stockholders of such person.
Affiliates may not sell their Schering-Plough Common Shares or
Participation Rights acquired in connection with the Merger, except pursuant to
an effective registration under the Securities Act covering such shares or
rights, as the case may be, or in compliance with Rule 145 under the Securities
Act (or Rule 144 under the Securities Act in the case of persons who become
affiliates of Schering-Plough) or another applicable exemption from the
registration requirements of the Securities Act. In general, Rule 145 under the
Securities Act provides that for two years following the Effective Time an
affiliate (together with certain related persons) would be entitled to sell
Schering-Plough Common Shares and Participation Rights acquired in connection
with the Merger only through unsolicited "broker transactions" or in
transactions directly with a "market maker," as such terms are defined in Rule
144. Additionally, the number of shares or rights, as the case may be, to be
sold by an affiliate (together with certain related persons and certain persons
acting in concert) within any three-month period for purposes of Rule 145 under
the Securities Act may not exceed the greater of 1% of the outstanding
Schering-Plough Common Shares or Participation Rights, as the case may be, or
the average weekly trading volume of such shares or rights, as the case may be,
during the four calendar weeks preceding such sale. Rule 145 under the
Securities Act will remain available to affiliates if Schering-Plough remains
current with its informational filings with the Commission under the Exchange
Act. Two
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years after the Effective Time, an affiliate will be able to sell such
Schering-Plough Common Shares and Participation Rights without being subject to
such manner of sale or volume limitations provided that Schering-Plough is
current with its Exchange Act informational filings and such affiliate is not
then an affiliate of Schering-Plough. Three years after the Effective Time, an
affiliate will be able to sell such Schering-Plough Common Shares and
Participation Rights without any restrictions so long as such affiliate had not
been an affiliate of Schering-Plough for at least three months prior to the
date.
It is a condition to the Merger that no later than the Closing, each person
who may be at the Effective Time an "affiliate" of Canji for purposes of Rule
145 under the Securities Act shall have executed and delivered to
Schering-Plough written undertakings to the effect that, among other things, (i)
from the date thereof and until the Effective Time, such person will not sell,
transfer or otherwise dispose of, or direct or cause the sale, transfer or other
disposition of, any shares of Canji Capital Stock held by such person or on such
person's behalf, whether then owned or thereafter acquired, and (ii) such person
agrees not to offer to sell, sell, transfer or otherwise dispose of any of the
Schering-Plough Common Shares and/or Participation Rights issued thereto upon
consummation of the Merger except (a) in compliance with the applicable
provisions of Rule 145 under the Securities Act or (b) pursuant to a
registration statement under the Securities Act or (c) in a transaction which,
in the opinion of independent counsel reasonably satisfactory to Schering-Plough
or as described in a "no-action" or interpretive letter from the Staff of the
Commission, is not required to be registered under the Securities Act, provided,
however, that, for so long as such person holds any Schering-Plough Common
Shares and/or Participation Rights as to which such person is subject to the
limitations of Rule 145, Schering-Plough will use its reasonable efforts to file
all reports required to be filed by it pursuant to the Exchange Act, so as to
satisfy the requirements of paragraph (c) of Rule 144 under the Securities Act
that there be available current public information with respect to
Schering-Plough and to that extent to make available to the undersigned the
exemption afforded by Rule 145 with respect to the sale, transfer or other
disposition of the Schering-Plough Common Shares and/or Participation Rights.
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THE MERGER AGREEMENT
The following is a summary of material provisions of the Merger Agreement,
a copy of which is attached as Annex A to this Proxy Statement/Prospectus. This
summary is qualified in its entirety by reference to the Merger Agreement which
is incorporated herein by this reference.
THE MERGER
The Merger Agreement provides that Subcorp will be merged with and into
Canji with the result that Canji as the Surviving Corporation becomes a
wholly-owned subsidiary of Schering-Plough, subject to the requisite approvals
of Canji Stockholders and the satisfaction or waiver of the other conditions to
the Merger. The Merger will become effective upon the filing of a duly executed
certificate of merger with the Delaware Secretary of State or at such later time
as shall be specified in the certificate of merger. This filing is to be made
after the Closing which will be held on the Closing Date set by Schering-Plough,
which date will be as soon as practicable following the satisfaction or waiver
of all of the conditions set forth in the Merger Agreement. It is currently
anticipated that the Effective Time will occur shortly after the date of the
Canji Special Meeting assuming the Merger Agreement and the Merger are approved
by the requisite vote of Canji Stockholders at such meeting.
From and after the Effective Time, the officers and directors of Subcorp
will be the officers and directors of the Surviving Corporation in the Merger,
and the Certificate of Incorporation and Bylaws of the Surviving Corporation
will be those of Subcorp as in effect immediately prior to the Effective Time.
MERGER CONSIDERATION
Conversion of Shares. Upon consummation of the Merger pursuant to the
Merger Agreement, each share of Canji Capital Stock issued and outstanding
immediately prior to the Effective Time (other than shares held, directly or
indirectly, by Canji, Subcorp or any parent of Subcorp, if any, which will be
canceled, and other than shares as to which dissenters' rights have been
perfected) will be converted into and represent (i) that number of
Schering-Plough Common Shares equal to the Exchange Ratio and (ii) one
Participation Right. The Exchange Ratio is equal to the quotient (rounded to the
nearest ten-thousandth of a share) obtained (x) by dividing $54.5 million by the
sum of the total number of shares of Canji Capital Stock issued and outstanding
immediately prior to the Effective Time (including dissenting shares, but
excluding the S-P Canji Shares) and the total number of shares of Canji Capital
Stock required to be reserved for issuance upon the exercise of all outstanding
warrants, options (excluding the Unvested Canji Options to purchase up to an
aggregate of 600,000 shares of Canji Capital Stock to be cancelled immediately
prior to the Effective Time) and other rights to purchase or otherwise receive
such shares and then dividing that amount by (y) the Average Share Price. In the
event that prior to the Effective Time Schering-Plough declares a stock dividend
or other distribution payable in Schering-Plough Common Shares or securities
convertible into Schering-Plough Common Shares, or effects a stock split,
reclassification, combination or other change with respect to Schering-Plough
Common Shares, the Average Share Price and Exchange Ratio will be adjusted to
reflect such stock dividend, distribution, stock split, reclassification,
combination or other change. Based on the $57.43 average of the closing prices
of Schering-Plough Common Shares as reported on the NYSE Composite Tape on each
of the last fifteen trading days ending on the Record Date, on the Record Date
the Exchange Ratio would have been equal to .0882. However, since the Average
Share Price is determined as of two trading days immediately prior to the
Closing Date and the number of issued and outstanding shares of Canji Capital
Stock is determined as of immediately prior to the Effective Time, there can be
no assurance that the same will be true as of the Effective Time.
Cancellation of Exercisable Options to Purchase Canji Capital Stock. At
the Effective Time, each exercisable option to purchase Canji Capital Stock
which has not been theretofore exercised will be cancelled.
Conversion of Warrants and Other Rights to Purchase Canji Capital
Stock. At the Effective Time, each outstanding warrant or other right, if any,
then exercisable to purchase or receive Canji Capital Stock which has not been
theretofore exercised will be converted into and represent the right to receive
with respect to each share of Canji Capital Stock for which such warrant or
right was exercisable immediately prior to the Effective Time (x) that number of
Schering-Plough Common Shares equal to the Exchange Ratio, less that number of
Schering-Plough Common Shares (or fraction thereof) with a value that equals the
exercise price under such
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warrant or right immediately prior to the Effective Time with respect to one
share of Canji Capital Stock and (y) one Participation Right.
Fractional Shares. No certificates for fractional Schering-Plough Common
Shares will be issued in the Merger, and to the extent that an outstanding share
of Canji Capital Stock or Canji warrant or other right converted in the Merger
would otherwise have become a fractional Schering-Plough Common Share, the
holder thereof, upon presentation of such fractional interest represented by an
appropriate certificate for Canji Capital Stock or such warrant or right to the
exchange agent designated by Schering-Plough as described under "-- Exchange
Procedures" below, will be entitled to receive a cash payment therefor in an
amount equal to the value (determined with reference to the Average Share Price)
of such fractional interest.
Conversion of Subcorp Common Stock. At the Effective time, each share of
common stock, $10.00 par value, of Subcorp issued and outstanding immediately
prior to the Effective Time will be converted into one share of common stock, no
par value, of Canji as the Surviving Corporation. Such newly issued shares will
thereupon constitute all of the issued and outstanding common stock of the
Surviving Corporation.
EXCHANGE PROCEDURES
HOLDERS OF SHARES OF CANJI CAPITAL STOCK AND CANJI WARRANTS AND OTHER
RIGHTS TO BE CONVERTED IN THE MERGER SHOULD NOT SEND IN THEIR CANJI STOCK
CERTIFICATES OR CERTIFICATES REPRESENTING SUCH WARRANTS OR RIGHTS UNTIL THEY
RECEIVE A LETTER OF TRANSMITTAL.
As soon as practicable after the Effective Time, a letter of transmittal
will be mailed to each holder of record of a certificate or certificates (the
"Certificates"), which immediately prior to the Effective Time represented
outstanding shares of Canji Capital Stock or Canji warrants or other rights
whose shares, warrants or rights were converted into the right to receive
Schering-Plough Common Shares and Participation Rights. Such letter of
transmittal will be used in forwarding Certificates for surrender in exchange
for certificates evidencing Schering-Plough Common Shares and Participation
Rights to which such holder has become entitled and, if applicable, cash in lieu
of any fractional Schering-Plough Common Share. After receipt of such letter of
transmittal, each holder of Certificates should surrender such Certificates to
the Schering-Plough exchange agent designated therein pursuant to and in
accordance with the instructions accompanying such letter of transmittal, and
each such holder will receive in exchange therefor (i) a certificate evidencing
the whole number of Schering-Plough Common Shares to which such holder is
entitled, (ii) that number of Participation Rights to which such holder is
entitled, and (iii) a check representing the amount of cash payable in lieu of
any fractional Schering-Plough Common Share, and unpaid dividends and
distributions, if any, which such holder has the right to receive pursuant to
the Merger Agreement, after giving effect to any required withholding tax. No
interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of Certificates.
Such letters of transmittal will be accompanied by instructions specifying other
details of the exchange. Certificates surrendered for exchange by any person
constituting an "affiliate" of Canji for purposes of Rule 145(c) under the
Securities Act shall not be exchanged until Schering-Plough has received written
undertakings from such person as prescribed under the Merger Agreement.
After the Effective Time, each Certificate, until so surrendered, will be
deemed, for all purposes, to represent only the right to receive upon surrender
a certificate representing Schering-Plough Common Shares, Participation Rights
and cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, as provided above. The holder of such unexchanged
Certificates will not be entitled to receive any dividends or other
distributions declared or made by Schering-Plough having a record date after the
Effective Time until the Certificate is surrendered. Subject to applicable laws,
upon surrender of such unexchanged Certificates, such dividends and
distributions, if any, will be paid without interest and less the amount of any
withholding taxes which may be required thereon.
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Merger Agreement contains various representations, warranties and
covenants of Schering-Plough, Subcorp and Canji. The representations and
warranties made by the parties in the Merger Agreement will not survive the
Effective Time, although it is a condition of each of Schering-Plough's and
Canji's obligations
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under the Merger Agreement that the other party's representations and warranties
each be true and correct on the date of the Merger Agreement and on and as of
the Closing Date (except for those made as of a specified time).
Pursuant to the Merger Agreement, each of Schering-Plough and/or Subcorp
and Canji has agreed that it will (i) use its reasonable efforts to take all
action and to do all things necessary, proper or advisable to consummate the
Merger and the other transactions contemplated by the Merger Agreement
(including satisfying the conditions precedent to the Merger), (ii) use its
reasonable efforts to take any additional action that may be necessary, proper
or advisable in connection with any notices to, filings with, and
authorizations, consents and approvals of any governmental authority or other
third party that it may be required to give, make or obtain, (iii) unless
otherwise required by applicable laws or requirements of the NYSE (and in that
event only if time does not permit), at all times prior to the earlier of the
Effective Time or termination of the Merger Agreement pursuant to its terms,
consult with the other before issuing any press release with respect to the
Merger and not to issue any such press release prior to such consultation, (iv)
subject to the terms and conditions of the Merger Agreement, cause the
certificate of merger to be prepared and properly executed and filed with the
Secretary of State of the State of Delaware in accordance with the DGCL at the
Effective Time, (v) cooperate in the preparation, execution and filing of all
returns, questionnaires, applications, or other documents regarding (A) any real
property transfer gains, sales, use, transfer, value-added, stock transfer, and
stamp taxes, (B) any recording, registration and other fees, and (C) any similar
taxes or fees that become payable in connection with the transactions
contemplated by the Merger Agreement that are required or permitted to be filed
on or before the Effective Time, and (vi) use its reasonable best efforts, to
the extent permitted by the terms and conditions of the Merger Agreement, to
consummate the Merger in a manner which will cause it to qualify as a
"reorganization" within the meaning of Section 368(a)(1)(A) of the Code, by
reason of Section 368(a)(2)(E) of the Code.
Schering-Plough covenants in the Merger Agreement (i) (A) to use all
reasonable efforts to prepare and file the Registration Statement with the
Commission as promptly as practicable following the Board of Directors'
approvals of Schering-Plough, Subcorp and Canji, as contemplated by the Merger
Agreement, (B) to use all reasonable efforts to have the Registration Statement
declared effective by the Commission as promptly as practicable and to maintain
the effectiveness of the Registration Statement through the Effective Time, (C)
as promptly as practicable following the Board of Directors' approvals of
Schering-Plough, Subcorp and Canji, to prepare and file any other filings
required under the Exchange Act, the Securities Act or any other Federal or
state securities or "blue sky" laws relating to the Merger and any applicable
state laws of similar effect (collectively, "Other Filings"), (D) to promptly
notify Canji of the receipt of any comments from the Commission or its staff and
of any request of the Commission or its staff or any other government officials
for amendments or supplements to the Registration Statement, this Proxy
Statement/Prospectus or any Other Filings or for additional information, and to
supply Canji with copies of all correspondence between Schering-Plough or any of
its representatives, on the one hand, and the Commission, or its staff or any
other government officials, on the other hand, with respect to the Registration
Statement, this Proxy Statement/Prospectus, the Merger or any of the Other
Filings, (E) if at any time prior to the Effective Time, to the best knowledge
of Schering-Plough, any event shall occur which would be required to be set
forth in an amendment or supplement to the Registration Statement, this Proxy
Statement/Prospectus or any of the Other Filings, to promptly inform Canji of
such occurrence, and (F) the Registration Statement and the Other Filings shall
comply in all material respects with all applicable requirements of law, (ii) to
give prompt notice to Canji of (A) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would cause any representation or
warranty contained in the Merger Agreement to be untrue or inaccurate at or
prior to the Effective Time and (B) any material failure of Schering-Plough to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under the Merger Agreement; provided, however, that the
delivery of any such notice will not limit or otherwise affect the remedies
available under the Merger Agreement to Canji, (iii) the Schering-Plough Common
Shares to be issued in the Merger shall have been authorized for inclusion on
the NYSE, subject to official notice of issuance, (iv) to offer to employees of
Canji the benefits package described in the Merger Agreement, which includes
certain "pay-to-stay" benefits and certain "severance" benefits, (v) to offer to
each person identified in the Merger Agreement to enter into a restricted stock
agreement with such person to provide such person
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with restricted Schering-Plough Common Shares of equivalent value to (and upon
the same vesting schedule as) the Unvested Canji Options that such person held
immediately prior to the Effective Time, provided that, in no event shall
Schering-Plough be obligated to offer to enter into restricted stock agreements
with such persons for more than Unvested Canji Options to purchase an aggregate
of 600,000 shares of Canji Capital Stock, and (vi) that on or prior to the first
anniversary of the Closing Date, Schering-Plough and the Surviving Corporation
will not (A) cease to conduct the business of the Surviving Corporation, (B)
dispose, transfer or distribute a significant portion of the assets of the
Surviving Corporation, other than sales in the ordinary course of business, (C)
dispose of the stock of the Surviving Corporation, or (D) repurchase the
Schering-Plough Common Shares issued to Canji Stockholders in the Merger, unless
prior to taking such action, Schering-Plough and the Surviving Corporation shall
have received an opinion of Skadden, Arps, Slate, Meagher & Flom to the effect
that such action should not cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code.
Canji covenants in the Merger Agreement (i) at the earliest practicable
date, to take all requisite action in accordance with the federal securities
laws, the DGCL and the Canji Certificate and Canji Bylaws necessary to obtain
the requisite consent and approval of Canji Stockholders with respect to the
Merger, the Merger Agreement and the other transactions contemplated thereby and
to obtain the requisite consent and approval of holders of Canji Preferred Stock
to the amendment to the Canji Certificate to provide for the distribution of the
merger consideration in the Merger among the holders of Canji Common Stock and
Canji Preferred Stock on an equal pro rata basis in accordance with the Merger
Agreement, without any preference to any share of Canji Preferred Stock (the
"Canji Preferred Stockholders Vote"), (ii) at the earliest practicable date, to
take all requisite action in accordance with the federal securities laws, the
DGCL and the operative certificates, documents and agreements governing the
rights of all holders of all warrants, options and other rights to purchase or
otherwise receive shares of Canji Capital Stock to inform such holders of the
Merger, the Canji Preferred Stockholders Vote and the other transactions
contemplated by the Merger Agreement in order to permit them to exercise their
rights thereunder, (iii) (A) to furnish Schering-Plough with all information
concerning Canji as may be required for inclusion in the Registration Statement,
(B) to cooperate with Schering-Plough in the preparation of the Registration
Statement in a timely fashion and use all reasonable efforts to have the
Registration Statement declared effective by the Commission as promptly as
practicable, (C) if at any time prior to the Effective Time, any information
pertaining to Canji contained in or omitted from the Registration Statement
makes such statements contained in the Registration Statement false or
misleading, to promptly so inform Schering-Plough and provide Schering-Plough
with the information necessary to make statements contained therein not false
and misleading, (D) as soon as is reasonably practicable, to prepare and deliver
to Schering-Plough this Proxy Statement/Prospectus for inclusion in the
Registration Statement of which it is a part, and (E) to use all reasonable
efforts to mail at the earliest practicable date to Canji Stockholders this
Proxy Statement/Prospectus, which shall include all information required under
applicable law to be furnished to Canji Stockholders in connection with the
Merger and the transactions contemplated thereby and shall include the
recommendation of Canji's Board of Directors in favor of the Merger, (iv) during
the period from the date of the Merger Agreement to the Effective Time, to
conduct its normal operations and use its reasonable efforts in order to
maintain and preserve its business organization and its material rights and to
retain the services of its officers and key employees and maintain relationships
with research collaborators, suppliers, licensees, licensors and other third
parties to the end that their goodwill and ongoing business shall not be
impaired in any material respect, (v) during the period from the date of the
Merger Agreement to the Effective Time, to permit a scientific advisor,
designated by Schering-Plough, who is reasonably satisfactory to Canji, to be
present at Canji's premises, to be consulted on all research and development
activities, to monitor the day-to-day operations of Canji and to oversee
transitional matters prior to the Effective Time, (vi) from and after the date
of the Merger Agreement until the Effective Time (or the termination of the
Merger Agreement), to permit representatives of Schering-Plough, in conjunction
with the Merger Agreement, to have appropriate access at all reasonable times to
Canji's premises, properties, books, records, contracts, tax records, documents,
and suppliers, (vii) to use all reasonable and good faith efforts to cause each
such person who may be at the Effective Time an "affiliate" of Canji for
purposes of Rule 145 under the Securities Act, to execute and deliver to
Schering-Plough the written undertakings set forth in the Merger Agreement as
soon as practicable, but in no event later than the Closing
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Date, (viii) to give prompt notice to Schering-Plough of (A) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would cause
any representation or warranty contained in the Merger Agreement to be untrue or
inaccurate at or prior to the Effective Time and (B) any material failure of
Canji to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it thereunder; provided, however, that the
delivery of any such notice will not limit or otherwise affect the remedies
available thereunder to Schering-Plough, (ix) not to settle or compromise any
claim for appraisal rights prior to the Effective Time without the prior written
consent of Schering-Plough, (x) prior to the Effective Time, (A) to take such
action as is necessary to cause each of the Canji stock option plans and each
Unvested Canji Option issued thereunder to be canceled immediately prior to the
Effective Time and (B) to take such action as is necessary to cause each such
Unvested Canji Option held by consultants or other non-employees of Canji to be
accelerated and exercised or otherwise canceled at the Effective Time of the
Merger, (xi) to deliver to each Canji Stockholder a copy of this Proxy
Statement/Prospectus in accordance with all applicable provisions of the
Securities Act, and (xii) to in good faith utilize all reasonable efforts to
commence performing certain tasks regarding environmental matters set forth in
the Merger Agreement within ten days of the date of the Merger Agreement, except
where a different time period is specified therein, and to in good faith utilize
all reasonable efforts to complete such tasks prior to the Effective Time.
NO NEGOTIATIONS OR SOLICITATIONS
Pursuant to the Merger Agreement, Canji agreed that, prior to the Effective
Time, it will not, and will not authorize or permit any directors, officers,
Canji Stockholders, warrant holders, employees, agents or representatives,
directly or indirectly, to solicit, initiate, encourage or facilitate, or
furnish or disclose non-public information in furtherance of, any inquiries or
the making of any proposal with respect to any recapitalization, merger,
consolidation or other business combination involving Canji, or acquisition of
any capital stock or any material portion of the assets of Canji, or any
combination of the foregoing (a "Competing Transaction"), or negotiate, explore
or otherwise engage in discussions with any person (other than Schering-Plough,
Subcorp or their respective directors, officers, employees, agents and
representatives) with respect to any Competing Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by the
Merger Agreement; provided that Canji may furnish information to, and negotiate
or otherwise engage in discussions with, any party who delivers a written
proposal for a Competing Transaction if the Board of Directors of Canji
determines in good faith by a majority vote, based upon a written opinion from
its outside legal counsel (a copy of which is provided to Schering-Plough), that
failing to take such action would constitute a breach of the fiduciary duties of
the Board and such a proposal is, in the written opinion of its independent
financial advisor more favorable to Canji Stockholders from a financial point of
view than the transactions contemplated by the Merger Agreement. From and after
the execution of the Merger Agreement, Canji shall immediately advise
Schering-Plough in writing of the receipt, directly or indirectly, of any
inquiries or proposals relating to a Competing Transaction and promptly furnish
to Schering-Plough a copy of any such proposal in addition to any information
provided to or by any third party relating thereto.
CONDITIONS
The obligations of Schering-Plough, Subcorp and Canji to consummate the
Merger are subject to fulfillment of the following conditions, among others, (i)
the Merger, the Merger Agreement and the other transactions contemplated thereby
shall have been duly approved by the Canji Stockholders and the requisite Canji
Preferred Stockholders Vote shall have been duly received; (ii) no temporary
restraining order, preliminary or permanent injunction or other order or decree
which prevents the consummation of the Merger shall have been issued and remain
in effect, no action instituted by any governmental authority which seeks to
prevent consummation of the Merger shall be outstanding and no statute, rule or
regulation shall have been enacted by any governmental authority which prevents
the consummation of the Merger, and (iii) the Commission shall have declared the
Registration Statement effective, and on the Closing Date and at the Effective
Time, no stop order or similar restraining order prohibiting the Merger shall
have been threatened by the Commission or entered by the Commission or any state
securities administrator.
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The obligations of Canji to consummate the Merger and the transactions
contemplated by the Merger Agreement are further subject to the receipt of
certain closing certificates and a legal opinion and fulfillment of the
following conditions unless waived by Canji (i) each of the representations and
warranties of each of Schering-Plough and Subcorp shall be true and correct on
the date of the Merger Agreement and on and as of the Closing Date (except for
those made as of a specified time), (ii) each of Schering-Plough and Subcorp
shall have performed in all material respects each of its obligations and
agreements and shall have complied in all material respects with each covenant
to be performed and complied with by it under the Merger Agreement at or prior
to the Effective Time, (iii) the Merger and the transactions contemplated by the
Merger Agreement shall have been duly approved by the Boards of Directors of
Schering-Plough and Subcorp, and (iv) the Schering-Plough Common Shares to be
issued in the Merger shall have been authorized for inclusion on the NYSE,
subject to official notice of issuance.
The obligations of Schering-Plough to consummate the Merger and the other
transactions contemplated by the Merger Agreement are further subject to the
receipt of certain closing certificates and a legal opinion and fulfillment of
the following conditions unless waived by each of Schering-Plough and Subcorp
(i) each of the representations and warranties of Canji shall be true and
correct on the date of the Merger Agreement and on and as of the Closing Date
(except for those made as of a specified time), (ii) Canji shall have performed
in all material respects each of its obligations and agreements and shall have
complied in all material respects with each covenant to be performed and
complied with by it under the Merger Agreement at or prior to the Effective
Time, (iii) each person who may be at the Effective Time an "affiliate" of Canji
for purpose of Rule 145 under the Securities Act, shall have executed and
delivered to Schering-Plough the written undertakings as provided in the Merger
Agreement no later than the Closing, (iv) the Board of Directors of Canji, at a
meeting duly called and held (A) determined that the Merger Agreement and the
transactions contemplated thereby, including the Merger and the transactions
contemplated thereby, taken together, are fair to and in the best interests of
the Canji Stockholders, and (B) resolved to recommend that Canji Stockholders
approve the Merger Agreement and the other transactions contemplated therein,
including the Merger, and the holders of Canji Preferred Stock consent to and
approve the requisite Canji Preferred Stockholder Vote, (v) each of the
employees of Canji set forth in the Merger Agreement shall have executed and
delivered to Schering-Plough an employment agreement as provided in the Merger
Agreement, and (vi) Canji shall have delivered to Schering-Plough an affidavit,
dated as of the Closing Date, that is satisfactory to Schering-Plough and which
satisfies the requirements of Section 1445(b)(3) of the Code and U.S. Treasury
Regulation sec.1.1445-2(c)(3)(i).
HEADQUARTERS
Schering-Plough intends to retain most of the research activities currently
conducted by Canji in the San Diego area following the Closing Date, and for an
indefinite period thereafter. While Schering-Plough retains the sole
discretionary authority to relocate some or all of Canji's research operation in
the future, Schering-Plough has no present intention to do so.
EMPLOYEE BENEFITS
Pursuant to the Merger Agreement, Schering-Plough will offer to Canji
employees, with certain limited exceptions, the benefits package as described
therein, including the transition bonuses described under "The
Merger -- Interests of Certain Persons in the Merger" and benefits provided
generally to Schering-Plough employees.
TERMINATION; EFFECT OF TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval and adoption of the Merger and the Merger
Agreement by Canji Stockholders (i) by mutual consent of Schering-Plough and
Canji, (ii) by either Schering-Plough and Subcorp or Canji if any permanent
injunction or other order of a court or other competent governmental authority
preventing the consummation of the Merger becomes final and non-appealable,
(iii) by either Schering-Plough and Subcorp or Canji if the Merger is not
consummated before March 31, 1996, unless that deadline is extended by the
Boards of
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Directors of Schering-Plough, Subcorp and Canji, provided that a party shall not
have a right to so terminate the Merger Agreement if such party's failure or
such party's affiliate's failure to perform any material covenant or obligation
under the Merger Agreement has been the cause of or resulted in the failure of
the Merger to occur on or before such date, (iv) by Schering-Plough and Subcorp
if the Canji Board shall not have, by December 15, 1995, adopted resolutions to
recommend the Merger Agreement, the Merger and the Canji Preferred Stockholder
Vote in the manner set forth in the Merger Agreement or, following such date
having so recommended, shall thereafter withdraw, modify or change its
recommendations in a manner adverse to Schering-Plough, at any time prior to the
Canji Stockholders meeting to vote on the Merger, and (v) by Schering-Plough and
Subcorp if at the meeting of Canji Stockholders (including any adjournment or
postponement thereof) the requisite vote of the Canji Stockholders to approve
the Merger, the Merger Agreement and the other transactions contemplated by the
Merger Agreement and the requisite Canji Preferred Stockholder Vote shall not
have been obtained.
The Merger Agreement provides that if the Merger Agreement is terminated
and it is judicially determined that termination was caused by an intentional
breach of the Merger Agreement, the breaching party shall indemnify and hold
harmless the other parties thereto for their respective costs, fees and expenses
of their counsel, accountants, financial advisors and other experts and advisors
as well as fees and expenses incident to negotiation, preparation and execution
of the Merger Agreement and related documentation and stockholders' meetings and
consents.
AMENDMENT AND WAIVER
The Merger Agreement may be amended in writing by Schering-Plough, Subcorp
and Canji by action taken or authorized by their respective Boards of Directors,
at any time before or after approval and adoption of the Merger Agreement and
the Merger by Canji Stockholders and the requisite Canji Preferred Stockholder
Vote, but after any such approval, no amendment shall be made which by law
requires further approval by Canji Stockholders without such further approval.
At any time prior to the Effective Time, Schering-Plough (with respect to
Canji) and Canji (with respect to Schering-Plough and Subcorp) by action taken
or authorized by their respective Boards of Directors may, to the extent legally
allowed, (i) extend the time for performance of any of the obligations or other
acts of such party, (ii) waive any inaccuracies in the representations and
warranties contained in the Merger Agreement or any document delivered pursuant
thereto, and (iii) waive compliance with any of the agreements or conditions
contained therein, provided such waiver or extension is set forth in a written
document signed on behalf of such party.
EXPENSES
Except as otherwise provided in the Merger Agreement Schering-Plough,
Subcorp and Canji will pay their own costs and expenses associated with the
transactions contemplated by the Merger Agreement.
RIGHTS OF DISSENTING STOCKHOLDERS
Holders of shares of Canji Capital Stock are entitled to appraisal rights
under Section 262 ("Section 262") of the DGCL, provided that they comply with
the conditions established by Section 262. Section 262 is reprinted in its
entirety as Annex B to this Proxy Statement/Prospectus. The following discussion
is not a complete statement of the law relating to appraisal rights and is
qualified in its entirety by reference to Annex B. This discussion and Annex B
should be reviewed carefully by any Canji Stockholder who wishes to exercise
statutory appraisal rights or who wishes to preserve the right to do so, since
failure to comply with the procedures set forth herein or therein will result in
the loss of appraisal rights.
Canji Stockholders of record who desire to exercise their appraisal rights
must:
- hold shares of Canji Capital Stock on the date of making a demand for
appraisal;
- make a written demand for appraisal prior to the vote on the Merger by
Canji Stockholders;
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- continuously hold such shares through the Effective Time;
- not vote in favor of the Merger nor consent thereto in writing;
- file any necessary petition in the Delaware Court of Chancery (the
"Delaware Court"), as more fully described below, within 120 days after
the Effective Time; and
- otherwise satisfy all of the conditions described more fully below.
A record holder of shares of Canji Capital Stock who makes the demand
described below with respect to such shares, who continuously is the record
holder of such shares through the Effective Time, who otherwise complies with
the statutory requirements of Section 262 and who neither votes in favor of the
Merger nor consents thereto in writing will be entitled to an appraisal by the
Delaware Court of the fair value of his shares of Canji Capital Stock. All
references in Section 262 and in this summary of appraisal rights to a "Canji
Stockholder" or "holders" of shares are to the record holder or holders of
shares of Canji Capital Stock.
Holders of shares of Canji Capital Stock who desire to exercise their
appraisal rights must not vote in favor of the Merger and must deliver a
separate written demand for appraisal to Canji prior to the vote by the Canji
Stockholders on the Merger. A demand for appraisal must be executed by or on
behalf of the holder of record, fully and correctly, as such holder's name
appears on the certificate or certificates representing shares of Canji Capital
Stock. A person having a beneficial interest in shares of Canji Capital Stock
that are held of record in the name of another person, such as a broker,
fiduciary or other nominee, must act promptly, to cause the record holder to
follow the steps summarized herein properly and in a timely manner to perfect
whatever appraisal rights are available. If shares of Canji Capital Stock are
owned of record by a person other than the beneficial owner, including a broker,
fiduciary (such as a trustee, guardian or custodian) or other nominee, such
demand must be executed by or for the record owner. If shares of Canji Capital
Stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by or for all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for appraisal for a stockholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in exercising
the demand, such person is acting as agent for the record owner.
A record owner, such as a broker, fiduciary or other nominee, who holds
shares of Canji Capital Stock as a nominee for others, may exercise appraisal
rights with respect to the shares held for all or less than all beneficial
owners of shares as to which such person is the record owner. In such case, the
written demand must set forth the number of shares covered by such demand. Where
the number of shares is not expressly stated, the demand will be presumed to
cover all shares of Canji Capital Stock outstanding in the name of such record
owner.
A Canji Stockholder who elects to exercise appraisal rights should mail or
deliver his or her written demand to: Canji, Inc., 3030 Science Park Road, Suite
302, San Diego, California 92121, Attention: Secretary. The written demand for
appraisal should specify the Canji Stockholder's name and mailing address, the
number of shares of Canji Capital Stock owned, and that the holder is thereby
demanding appraisal of his or her shares. A proxy or vote against the Merger
will not constitute such a demand. Within ten days after the Effective Time, the
Surviving Corporation must provide notice of the Effective Time to all holders
who have complied with Section 262.
Within 120 days after the Effective Time, either Canji, as the Surviving
Corporation, or any holder who has complied with the required conditions of
Section 262, may file a petition in the Delaware Court, with a copy served on
the Surviving Corporation in the case of a petition filed by a holder, demanding
a determination of the fair value of the shares of all dissenting holders. The
Surviving Corporation does not presently intend to file an appraisal petition
and holders seeking to exercise appraisal rights should not assume that the
Surviving Corporation will file such a petition or that the Surviving
Corporation will initiate any negotiations with respect to the fair value of
such shares. Accordingly, Canji Stockholders who desire to have their shares
appraised should initiate any petitions necessary for the perfection of their
appraisal rights within the time periods and in the manner prescribed in Section
262. Within 120 days after the Effective Time, any Canji Stockholder who has
theretofore complied with the applicable provisions of Section 262 will be
entitled,
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upon written request, to receive from the Surviving Corporation, a statement
setting forth the aggregate number of shares of Canji Capital Stock with respect
to which demands for appraisal were received by Canji and the number of holders
of such shares. Such statement must be mailed within 10 days after the written
request therefor has been received by the Surviving Corporation or within 10
days after expiration of the time for delivery of demands for appraisal under
Section 262, whichever is later.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which holders are entitled to
appraisal rights and will appraise shares of Canji Capital Stock owned by such
holders, determining the fair value of such 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. In determining fair value, the Delaware Court is to take into
account all relevant factors. In Weinberger v. UOP Inc., the Delaware Supreme
Court discussed the factors that could be considered in determining fair value
in an appraisal proceeding, stating 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, and that "fair price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that in making this determination
of fair value the court must consider market value, asset value, dividends,
earnings, prospects, the nature of the enterprise and any other facts which
could be ascertained as of the date of the merger which throw light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
stated that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." Section 262, however, provides that
fair value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger."
Canji Stockholders considering seeking appraisal should recognize that the
fair value of their shares determined under Section 262 could be more than, the
same as or less than the consideration they are to receive pursuant to the
Merger Agreement if they do not seek appraisal of their shares. The cost of the
appraisal proceeding may be determined by the Delaware Court and taxed against
the parties as the Delaware Court deems equitable in the circumstances. Upon
application of a dissenting Canji Stockholder, the Delaware Court may order that
all or a portion of the expenses incurred by any dissenting holder in connection
with the appraisal proceeding, including without limitation, reasonable
attorney's fees and the fees and expenses of experts, be charged pro rata
against the value of all shares entitled to appraisal.
Any holder of shares of Canji Capital Stock who has duly demanded appraisal
in compliance with Section 262 will not, after the Effective Time, be entitled
to vote for any purpose any shares subject to such demand or to receive payment
of dividends or other distributions on such shares, except for dividends or
distributions payable to stockholders of record at a date prior to the Effective
Time.
At any time within 60 days after the Effective Time, any Canji Stockholder
will have the right to withdraw such demand for appraisal and to accept the
terms offered in the Merger. After this period, such stockholder may withdraw
such demand for appraisal only with the consent of the Surviving Corporation. If
no petition for appraisal is filed with the Delaware Court within 120 days after
the Effective Time, holders' rights to appraisal shall cease, and all holders of
shares of Canji Capital Stock will be entitled to receive the consideration
offered pursuant to the Merger Agreement. Inasmuch as the Surviving Corporation
has no obligation to file such a petition, and has no present intention to do
so, any holder of shares of Canji Capital Stock who desires such a petition to
be filed is advised to file it on a timely basis.
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<PAGE> 35
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of certain federal income tax
consequences of the Merger to Schering-Plough, Subcorp, Canji and Canji
Stockholders, and is based on the assumption that the Merger is consummated as
contemplated herein. This summary is based upon the Internal Revenue Code of
1986, as amended (the "Code"), applicable Treasury regulations thereunder and
administrative rulings and judicial authority as of the date hereof, all of
which are subject to change, possibly with retroactive effect. Any such change
could affect the continuing validity of this summary. This summary applies to
Canji Stockholders who hold their shares of Canji Capital Stock as capital
assets at the Effective Time. This summary does not discuss all aspects of
income taxation that may be relevant to a particular Canji Stockholder in light
of such holder's specific circumstances or to certain types of Canji
Stockholders subject to special treatment under the federal income tax laws (for
example, foreign persons, dealers in securities, banks and other financial
institutions, insurance companies, tax-exempt organizations, and holders who
acquired Canji Capital Stock pursuant to the exercise of options or otherwise as
compensation or through a tax-qualified retirement plan), and it does not
discuss any aspect of state, local, foreign or other tax laws.
Gray Cary Ware & Freidenrich, counsel to Canji, has advised Canji that, in
its opinion, the following discussion, insofar as it relates to matters of
federal income tax law, is a fair and accurate summary of such matters. In
rendering such opinion, counsel has expressly relied on the accuracy of certain
assumptions and the representations made to such counsel by Schering-Plough,
Subcorp, Canji, and certain Canji Stockholders. No ruling has been (or will be)
sought from the Internal Revenue Service as to the anticipated tax consequences
of the Merger. CANJI STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE
TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT
OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS, AND ANY CHANGES
IN SUCH LAWS (POSSIBLY INCLUDING CHANGES WITH RETROACTIVE EFFECT).
GENERAL CONSEQUENCES OF THE MERGER
The federal income tax consequences to Canji Stockholders will depend in
part on whether, in the Merger, Schering-Plough acquires at least 80% of the
outstanding Canji Capital Stock in exchange for Schering-Plough Common Shares.
For purposes of the preceding sentence, (1) the Canji Capital Stock owned by
Schering-Plough prior to the Merger should not be counted as being acquired in
the Merger, but should be counted as outstanding and (2) any Canji Capital Stock
held by Canji Stockholders who have perfected appraisal rights with respect to
such stock should not be counted as outstanding. Because some amount of
outstanding Canji Capital Stock will be viewed as being exchanged for the
Participation Rights, whether Schering-Plough acquires the requisite percentage
of Canji Capital Stock will depend primarily upon the fair market value of the
Participation Rights at the Effective Time.
Canji management believes, based on certain appraisals, that the fair
market value of the Participation Rights at the Effective Time will not be great
enough to cause the Merger to fail to qualify as a reorganization within the
meaning of Section 368(a) of the Code. However, there can be no assurance that
the Participation Rights will not ultimately be determined to have a greater
value. The assumptions and representations made in connection with the issuance
of the opinion described above include, among other things, that the Canji
Stockholders (other than Schering-Plough) have no plan or intention to sell,
exchange or otherwise dispose of a number the Schering-Plough Common Shares that
they will receive pursuant to the Merger that would reduce the Canji
Stockholders' ownership of the Schering-Plough Common Shares received in the
Merger to a number of shares having an aggregate fair market value, as of the
Effective Date of the Merger, of less than 50% of the value of all of the Canji
Capital Stock outstanding immediately prior to the Merger, including the Series
I Preferred Shares owned by Schering-Plough. In addition, qualification as a
reorganization will depend upon the satisfaction of certain other conditions.
Based on the assumptions and representations referred to above, these conditions
are expected to be satisfied. However, there can be no assurance that the Merger
will qualify as a reorganization.
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<PAGE> 36
If the Merger does qualify as a "reorganization" for federal income tax
purposes within the meaning of Section 368(a) of the Code, the following federal
income tax consequences should generally result (subject to the discussion below
under "Installment Sale Treatment"):
1. Schering-Plough, Canji and Subcorp should not recognize any gain or
loss as a result of the Merger.
2. Holders of Canji Capital Stock who exchange their Canji Capital
Stock for Schering-Plough Common Shares and Participation Rights will
realize gain measured by the difference, if any, between (i) the fair
market value of the Schering-Plough Common Shares and the Participation
Rights received by such Canji Stockholder in the Merger and (ii) such Canji
Stockholder's tax basis in the Canji Capital Stock exchanged therefor.
However, the gain realized will be recognized only to the extent of the
fair market value of the Participation Rights received in the Merger. In
general, any such gain should be recognized as capital gain. Any loss
realized by an exchanging Canji Stockholder will not be recognized. For a
discussion of the possible application of the installment method to the
recognition of gain or loss, please see the discussion below under the
heading "Installment Sale Treatment."
3. Each Canji Stockholder's aggregate tax basis in the Schering-Plough
Common Shares received in the Merger should equal his aggregate tax basis
in the Canji Capital Stock exchanged therefor, increased by the amount of
any gain recognized by such Canji Stockholder and decreased by the amount
of any tax basis allocable to any fractional share interest for which cash
is received.
4. The holding period of the Schering-Plough Common Shares received in
the Merger in exchange for Canji Capital Stock will include the holding
period of such Canji Capital Stock.
5. A Canji Stockholder who receives cash in lieu of a fractional
Schering-Plough Common Share in the Merger generally should be treated as
if the fractional share had been distributed to such holder as part of the
Merger and then redeemed by Schering-Plough in exchange for the cash
distributed in lieu of the fractional share in a transaction qualifying as
an exchange under Section 302 of the Code. As a result, a holder of Canji
Capital Stock generally should recognize capital gain or loss with respect
to the cash payment received in lieu of a fractional share.
If the Merger does not qualify as a "reorganization," the federal income
tax consequences generally should be as follows (subject to the discussion below
under "Installment Sale Treatment"):
1. A Canji Stockholder who, pursuant to the Merger, exchanges Canji
Capital Stock for Schering-Plough Common Shares, Participation Rights, and
cash, if any, in lieu of fractional shares should recognize capital gain or
loss in an amount equal to the difference, if any, between (i) the amount
of cash and the fair market value of the Schering-Plough Common Shares and
Participation Rights received and (ii) the Canji Stockholder's adjusted tax
basis in the Canji Capital Stock surrendered in exchange therefor. The gain
or loss should be long-term capital gain or loss if the Canji Stockholder's
holding period for such Canji Capital Stock is more than one year at the
Effective Time.
2. If a Canji Stockholder owns more than one "block" of such stock
(each block consisting of shares of stock acquired at the same time in a
single transaction), gain or loss should be determined separately for each
block held. In general, the amount of cash, if any, and the fair market
value of the Schering-Plough Common Shares and Participation Rights
received should be allocated ratably among the blocks in the proportion
that the number of shares in a particular block bears to the total number
of shares held by such Canji Stockholder.
INSTALLMENT SALE TREATMENT
As a result of the issuance of the Participation Certificates, the receipt
of the Merger Consideration may be an installment sale under the Code, in which
case any gain realized from such sale would be required to be reported on the
installment method, unless the taxpayer elects out of the installment method. If
the installment method were applicable, no gain or loss would be recognized at
the Effective Time in connection with the receipt by a Canji Stockholder of a
Participation Certificate. Instead, when and if payments under such
Participation Certificate were made, a portion of each such payment would be
treated as interest, and the remainder of each such payment would be treated as
principal, which may result in a capital gain or loss. For purposes of
determining the amount of any such gain or loss under the installment method, a
Canji
33
<PAGE> 37
Stockholder's basis in his or her Canji Capital Stock (or, if the Merger
qualifies as a reorganization, the portion of such basis, if any, that is
allocable to the Participation Certificates) may be allocated in equal annual
increments to each of the taxable years in which payment may be received
pursuant to the Merger, unless the taxpayer is able to demonstrate to the
Internal Revenue Service that the application of this rule will substantially
and inappropriately defer recovery of basis. In addition, in certain
circumstances, an interest charge may be imposed on any deferral of tax
liability resulting from the application of the installment method. There can be
no assurance that the installment method will apply to the receipt of the Merger
Consideration.
Canji Stockholders are urged to consult their tax advisors regarding the
federal income tax consequences of the receipt and holding of the Participation
Rights, especially the availability and application of the installment sale
method.
BACKUP WITHHOLDING
To prevent "backup withholding" of federal income tax on any payments of
cash to a Canji Stockholder in the Merger, each Canji Stockholder must, unless
an exception applies under the applicable law and regulations, provide the payor
of such cash with such Canji Stockholder's correct taxpayer identification
number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury
that such number is correct and that such Canji Stockholder is not subject to
backup withholding. A Substitute Form W-9 will be provided to each Canji
Stockholder in the letter of transmittal to be mailed to each such Stockholder
after the Effective Time. If the correct TIN and certifications are not
provided, a $50 penalty may be imposed on a Canji Stockholder by the Internal
Revenue Service, and any cash received by such Canji Stockholder may be subject
to backup withholding at a rate of 31%.
THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY AND IS BASED ON EXISTING LAW AS OF THE DATE OF THIS
PROXY STATEMENT/PROSPECTUS. THIS DISCUSSION DOES NOT ADDRESS ALL FEDERAL INCOME
TAX CONSIDERATIONS THAT MAY BE RELEVANT TO PARTICULAR CANJI STOCKHOLDERS IN
LIGHT OF THEIR SPECIFIC CIRCUMSTANCES, SUCH AS CANJI STOCKHOLDERS WHO ARE
DEALERS IN SECURITIES, FOREIGN PERSONS, OR CANJI STOCKHOLDERS WHO ACQUIRED THEIR
SHARES PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS
COMPENSATION. CANJI STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER (INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS,
WHICH MAY HAVE RETROACTIVE EFFECT).
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<PAGE> 38
THE COMPANIES
BUSINESS OF CANJI
Canji was founded in January 1990 and is engaged in the research and
development of tumor suppressor gene technology for malignant cancers and other
diseases. Canji's therapeutic approach is to replace missing or defective tumor
suppressor functions in cancer cells by inserting the normal gene, thereby
blocking tumor growth or causing tumor cell death (apoptosis). Canji has focused
its efforts in tumor suppressor gene technology on the two best characterized
tumor suppressor genes, p53 and RB (retinoblastoma). Canji's initial product
development efforts have been targeted at certain cancers with high morbidity
and mortality and for which current therapy is inadequate. Long-term clinical
targets include non-malignant diseases caused by aberrant cell proliferation,
such as in certain cardiovascular and ophthalmic conditions. Canji has created a
broad enabling platform in tumor suppressor genes, related cell cycle regulators
and associated gene delivery technology. Canji's programs include: p53 gene
therapy in cancer; RB gene therapy in cancer; new tumor suppressor genes in
breast and prostate cancers; dominant cell cycle regulators for proliferative
cardiovascular and ophthalmic diseases; thymidine kinase gene in cancer, and
gene delivery systems (primarily novel adenoviral vectors).
Canji's technology is based upon the anti-cancer activity of tumor
suppressor genes. Tumor suppressor genes normally control cellular proliferation
and prevent malignancy. The existence of tumor suppressor genes was first
proposed when early studies demonstrated that malignant cells fused with normal
cells would result in cell hybrids that lost their ability to form tumors in
animals. This observation suggested that genes from a normal cell might be able
to "repair" a defective function in cancer cells and restore normal cellular
characteristics. This phenomenon has been termed "tumor suppression," and is the
foundation of Canji's core technology.
A critical requirement for gene therapy is the development of delivery
systems that safely transfer genes into human cells. Gene delivery can be
accomplished in two ways: (i) ex vivo, by inserting genes into cells which have
been removed from the body and then reintroducing those genetically-altered
cells into the patient; and (ii) in vivo, by introducing genes directly into the
body to be incorporated into target cells. Canji's product-based strategy is to
administer its gene therapies in vivo, locally, to critical disease sites in
order to maximize exposure to the therapeutic agent while minimizing systemic
exposure. Canji's goal is to apply its knowledge and technology in tumor
suppressor genes and gene delivery to develop effective therapies for a broad
range of cancers and other cell proliferative diseases.
Canji is actively pursuing its initial product development programs for p53
gene therapy of liver malignancies and RB gene therapy for bladder cancer. It
also has active research programs aiming to explore and prove the utility of
several other tumor suppressor candidates such as a prostate tumor suppressor
gene ("PTSG") for prostate and colon cancers, dominant RB variants ("dRB") for
restenosis, and Brush-1 and H-NUC/CDC27 for breast cancer.
The development of the p53 tumor suppressor gene, called the "guardian of
the genome" by many leading researchers because it detects mutations that occur
in a potentially cancerous cell, is being undertaken as a partnership between
Canji and Schering-Plough. Of the handful of tumor suppressor genes that have
been discovered to-date, p53 appears to have the broadest practical consequence
for cancer therapy because the inactivation of this gene underlies the
development of many human cancers. Cancer researchers have accumulated extensive
data linking p53 mutation to human tumorigenesis. Current estimates indicate as
many as 50% of all human cancers may be linked with p53 defects.
Several major tumors are associated with defects in the retinoblastoma
("RB") gene. Canji has made significant progress in preclinical development of
RB gene therapy. Canji's initial RB gene therapy disease target is bladder
cancer, which is an ideal target for locally administered gene therapy because
of its unique anatomic, pathophysiologic, and clinical aspects. Canji has
selected a lead molecule and demonstrated gene transfer and antitumor activity
in animal models.
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<PAGE> 39
Canji has designed a series of novel cell cycle regulators, including a
"dominant RB gene," that may be useful in targeting hyperproliferative diseases
other than cancer, including restenosis following coronary angioplasty, and
diabetic retinopathy.
The gene therapy products under development at Canji are mainly targeted at
various solid tumors that have high morbidity and mortality. There is strong
evidence that some of these tumor suppressor genes may be useful clinically in
some hyperproliferative diseases, including colorectal cancer, bladder cancer,
lung cancer, hepatocellular carcinoma, breast cancer, and prostate cancer.
Canji has focused its limited financial and human resources on the
identification of research opportunities and the translation of those
opportunities into product candidates. In order for Canji to continue to
identify research opportunities and achieve their commercialization, Canji has
entered into collaborative research and development work with academic
institutions, other biotechnology companies and Schering-Plough to leverage on
its own activities.
Canji currently operates no manufacturing facilities for the production of
clinical material. Canji relies on outside parties to manufacture its initial
drug candidates for clinical trials. This is done in close cooperation with
Canji scientists using Canji's own protocols and procedures.
In the specific case of p53 gene therapy, Canji developed a proprietary
manufacturing process which has been transferred to Schering-Plough, under which
they will manufacture all clinical and commercial quantities of ACN53. Canji is
presently in discussions with several contract manufacturers as well as the
National Cancer Institute regarding the arrangements for the manufacturing of
the RB gene for therapy. Using the ACN53 process already developed by Canji, the
RB gene and other adenoviral gene products can be manufactured in standard
pharmaceutical/biological facilities under existing regulations.
Canji currently occupies a 21,500 square foot facility under a lease
agreement which expires in November 1998. Contract manufacturing or additional
facilities may be required in the future to support expansion of research and
development or to manufacture products. As of November 30, 1995, Canji employed
56 individuals, 21 of whom hold Ph.D. or M.D. degrees. There are 48 employees
engaged in research and development activities. Canji's senior executives have
approximately 80 years of combined experience in pharmaceutical, biotechnology
or medical product companies.
The principal executive offices of Canji are located at 3030 Science Park
Road, Suite 302, San Diego, California 92121, and its telephone number is (619)
597-0177.
BUSINESS OF SCHERING-PLOUGH
Schering-Plough is a holding company which was incorporated in 1970.
Through its subsidiaries, Schering-Plough is engaged in the discovery,
development, manufacturing and marketing of pharmaceuticals and health care
products worldwide. These products include prescription drugs, animal health,
over-the-counter (OTC), foot care and sun care products.
The principal executive offices of Schering-Plough are located at One
Giralda Farms, Madison, New Jersey 07940, and its telephone number is (201)
822-7000.
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<PAGE> 40
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information should be
read in conjunction with the financial statements, including the notes thereto,
of Schering-Plough which are incorporated by reference in this Proxy
Statement/Prospectus and the financial statements of Canji, including the notes
thereto, set forth herein (see "Index to Financial Statements of Canji, Inc.").
The pro forma information is presented for illustration purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the Merger had been consummated in accordance with the
assumptions set forth below, nor is it necessarily indicative of future
operating results or financial position.
37
<PAGE> 41
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
The following unaudited pro forma combined balance sheet presents, under
the "purchase" method of accounting, the consolidated balance sheet of
Schering-Plough as of September 30, 1995, combined with the balance sheet of
Canji as of September 30, 1995.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SCHERING-
PLOUGH ADJUSTMENTS PRO FORMA
--------- ----------- ---------
<S> <C> <C> <C>
Cash and cash equivalents.................................. $ 336.7 $ 2.6(a) $ 339.3
Accounts receivable, net................................... 557.0 557.0
Inventories................................................ 468.1 468.1
Prepaid expenses, deferred income taxes and other current
assets................................................... 568.1 0.5(a) 568.6
-------- ----- --------
Total current assets............................. 1,929.9 3.1 1,933.0
Property, plant and equipment, net......................... 2,023.1 1.4(a) 2,024.5
Other assets............................................... 601.2 53.2(a) 654.4
-------- ----- --------
4,554.2 57.7 4,611.9
======== ===== ========
Accounts payable........................................... 282.2 0.5(a) 282.7
Short-term borrowing and current portion of long-term
debt..................................................... 791.8 791.8
Other accrued liabilities.................................. 1,145.4 1.8(a) 1,147.2
-------- ----- --------
Total current liabilities........................ 2,219.4 2.3 2,221.7
Long-term debt............................................. 86.3 0.6(a) 86.9
Other long-term liabilities................................ 553.0 0.3(a) 553.3
Shareholders' equity:
Common shares.............................................. 503.0 0.9(b) 503.9
Paid-in capital............................................ 24.5 53.6(b) 78.1
Retained earnings.......................................... 4,208.6 4,208.6
Foreign currency translation adjustment.................... (100.9) (100.9)
-------- ----- --------
Total............................................ 4,635.2 54.5 4,689.7
Less treasury shares....................................... 2,939.7 2,939.7
-------- ----- --------
1,695.5 54.5 1,750.0
-------- ----- --------
$ 4,554.2 $57.7 $4,611.9
======== ===== ========
</TABLE>
- ---------------
Notes to Pro Forma Combined Financial Statements
(a) The transaction will be accounted for using the purchase method of
accounting. The estimated purchase price has been allocated to the assets
acquired and liabilities assumed based on their estimated fair values and
includes amounts previously paid for Canji Preferred Stock. For purposes of
this presentation, the amount recorded to Other assets represents
intangible assets acquired for base technology for gene therapy. The
process of estimating fair values is not yet complete and, therefore, the
amounts shown are subject to change.
(b) Represents the fair value of Schering-Plough stock to be issued for the
acquisition.
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<PAGE> 42
UNAUDITED PRO FORMA COMBINED STATEMENTS OF EARNINGS
The following unaudited pro forma combined statements of earnings present,
under the "purchase" method of accounting, the consolidated statements of
earnings of Schering-Plough for the nine months ended September 30, 1995 and the
year ended December 31, 1994.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SCHERING-PLOUGH CANJI ADJUSTMENTS PRO FORMA
--------------- ----- ----------- ---------
<S> <C> <C> <C> <C>
Sales & revenue................................... $ 3,813.5 $ 4.7 $(4.5)(d) $3,813.7
Costs and expenses:
Cost of sales................................... 746.1 746.1
Selling, general and administrative............. 1,477.4 1.5 1,478.9
Research and development........................ 475.1 5.3 2.3(a) 480.7
(2.0)(d)
Other expense, net.............................. 37.3 0.1 37.4
-------- ----- ----- --------
Income (loss) before income taxes................. 1,077.6 (2.2) (4.8) 1,070.6
Income taxes...................................... 264.0 (1.6)(b) 262.4
-------- ----- ----- --------
Income (loss) from continuing operations.......... $ 813.6 $(2.2) $(3.2) $ 808.2
======== ===== ===== ========
Earnings (loss) per common share from continuing
operations...................................... $ 2.19 $(.91) $ 2.17 (c)
</TABLE>
- ---------------
Notes to Pro Forma Combined Financial Statements
(a) Represents nine months' amortization of intangible assets acquired.
(b) Represents the estimated tax benefit for Canji losses and pro forma
adjustments.
(c) Based on Schering-Plough average shares outstanding of 371.2 million plus an
estimated issuance of 0.9 million shares to acquire Canji.
(d) Elimination of amounts recorded under the Collaboration Agreement between
Schering-Plough and Canji.
(e) On June 28, 1995, Schering-Plough completed the sale of its worldwide
contact lens business. In connection therewith, Schering-Plough recorded a
loss on disposal of $156.2, net of tax benefits of $75.3 ($.42 per share).
Proceeds from the sale were $47.5. The contact lens business is reported as
a discontinued operation. Contact lens sales during 1995 through the date of
disposition were $46.2. Sales for the three and nine months ended September
30, 1994 were $30.5 and $100.3, respectively.
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<PAGE> 43
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SCHERING-PLOUGH CANJI ADJUSTMENTS PRO FORMA
--------------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Sales & revenue........................... $ 4,536.6 $ 2.9 $(1.2)(d) $4,538.3
Costs and expenses:
Cost of sales........................... 906.8 906.8
Selling, general and administrative..... 1,755.5 1.8 1,757.3
Research and development................ 610.1 6.8 3.0(a) 617.9
(2.0)(d)
Other expense, net...................... 37.5 0.2 37.7
-------- ----- ----- --------
Income (loss) before income taxes......... 1,226.7 (5.9) (2.2) 1,218.6
Income taxes.............................. 300.5 (1.8)(b) 298.7
-------- ----- ----- --------
Income (loss) from continuing
operations.............................. $ 926.2 $ (5.9) $ (.4) $ 919.9
======== ===== ===== ========
Earnings (loss) per common share from
continuing operations................... $ 2.42 $(2.61) $ 2.40(c)
</TABLE>
- ---------------
Notes to Pro Forma Combined Financial Statements
(a) Represents twelve months' amortization of intangible assets acquired.
(b) Represents the tax benefit for Canji losses and pro forma adjustments.
(c) Based on Schering-Plough average shares outstanding of 382.5 million plus an
estimated issuance of 0.9 million shares to acquire Canji.
(d) Elimination of amounts recorded under the Collaboration Agreement between
Schering-Plough and Canji.
SELECTED FINANCIAL DATA OF CANJI
CANJI, INC.
(A DEVELOPMENT STAGE COMPANY)
FIVE-YEAR SELECTED FINANCIAL & STATISTICAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
--------------- INCEPTION TO INCEPTION TO
SEPT. SEPT. DECEMBER 31, SEPTEMBER 30,
1995 1994 1994 1993 1992 1991 1990 1995
----- ------ ------ ------ ------ ----- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 4.7 $ 2.5 $ 2.9 $ 0.2 -- -- -- $ 7.8
Net loss............................. (2.2) (3.8) (5.9) (7.0) $ (3.6) $(1.7) $ (.8) (21.2)
Net loss per common share............ (.91) (1.70) (2.61) (3.53) (2.05) (.97) (.46) N/A
Total assets......................... 4.5 8.0 5.9 2.9 2.8 6.1 2.5 N/A
Long-term obligations................ .6 2.5 0.4 0.4 -- -- -- N/A
Cash dividends per common share...... -- -- -- -- -- -- -- --
</TABLE>
40
<PAGE> 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF CANJI
1992-1994
RESULTS OF OPERATIONS
Since Canji's inception in January 1990, Canji has applied substantially
all of its resources to research and development of its tumor suppressor
technology. Canji received its revenue from Federal grants starting in 1992 and
from licensing fees and research contracts commencing in 1994. Revenue increased
to $2,901,000 for 1994 from $186,000 in 1993 and $42,000 in 1992. The increase
in 1994 was due to $2,647,000 in licensing fees and research contracts received
from Schering-Plough and Amoco Technology (Vysis). Canji had two Federal grants
in 1994, a four-year National Cancer Institute (NCI) grant that commenced in
October 1992 totaling $725,000 and a six month Small Business Innovative
Research (SBIR) grant that began in August 1994 totaling $73,000.
Research and development expenses have increased each year since Canji's
inception from $2,978,000 in 1992 to $5,698,000 in 1993 and to $6,849,000 in
1994. These increases were primarily due to the addition of an average of ten
scientific personnel per year, associated increases in research supplies and
equipment, facility expansion to 21,000 square feet and outside manufacturing
and toxicology testing.
General and administrative expenses were $1,799,000, $1,597,000 and
$846,000 respectively in 1994, 1993 and 1992. The 89% increase from 1992 to 1993
was due to senior management additions, leasing of additional office space and
business development costs related to travel necessary for acquiring technology
and the development of corporate partners. During 1994, the 13% increase was
attributable to fund raising expenses and costs associated with settlement of a
wrongful termination suit. Net interest expense increased in 1994 because of
interest expense costs on newly acquired capital equipment under lease.
LIQUIDITY AND FINANCIAL RESOURCES
Canji has financed its operation primarily through the private placement of
equity securities, interest earned on short-term investments, capital lease
financing, grant revenue and beginning in 1994, revenue from research and
license agreements. From inception to December 31, 1994, Canji received $20.1
million in net proceeds from equity financing, $2.2 million from convertible
debt, $2.6 million in research contracts, $0.9 million from lease financing, and
$0.5 million from government grants.
Canji's primary uses of cash during 1994 included $5.1 million to finance
Canji's ongoing research projects and working capital requirements and the
purchase of $2.7 million in short-term investments. The primary sources of cash
during 1994 were $6.0 million in equity financing and $2.2 million in
convertible debt.
UNAUDITED INTERIM FINANCIAL RESULTS
RESULTS OF OPERATIONS
Prior to 1994, Canji derived most of its revenue from Federal research
grants. During 1994, Canji entered into licensing and research agreements with
Schering-Plough and Vysis. During the three and nine months ended September 30,
1995, Canji had revenues of $1,581,000 and $4,703,000, respectively compared
with $735,000 and $2,498,000 for the same periods in 1994. The increase for the
quarter and for the nine months ended September 30, 1995 when compared with the
same periods for 1994 is attributable to amounts received under the licensing
and research agreements.
Research and development costs decreased to $1,613,000 for the quarter
ended September 30, 1995 compared to $1,811,000 for the quarter ended September
30, 1994. However, research and development expenses increased to $5,311,000 in
1995 from $4,947,000 in 1994 for the comparative nine month periods ending
September 30. The decrease for the third quarter of 1995 compared to the prior
year is due to certain contract manufacturing expenses incurred by Canji during
the quarter ended September 30, 1994, while in 1995 these costs were incurred
during the first six months of the year. The increase in 1995 compared with 1994
for the nine month period is a result of increases in laboratory expenses to
support pre-clinical testing, an
41
<PAGE> 45
increase in licensing fees to acquire rights to technology and an increase in
legal fees to support Canji's patent portfolio.
General and administrative costs decreased 10% for the three months ended
September 30, 1995 compared with the same period in 1994. This decrease is
attributable to reductions in consulting fees and other outside services.
However, general and administrative expenses increased 23% for the nine months
ended September 30, 1995 compared with the same period in 1994. This increase is
a result of costs associated with management changes including severance,
recruiting and relocation.
Interest expense decreased for the three and nine month periods ended
September 30, 1995 compared with the same periods in 1994 due to the February
1995 conversion of $2.3 million in bridge financing to equity. The bridge loan
commenced in the first quarter of 1994. Interest income is derived solely from
investments and is dependent on Canji's cash/investment balance and interest
rates. A lower cash/investment balance during the third quarter of 1995 resulted
in a 30% decrease over the same period in 1994. For the nine month period, the
average cash/investment balance was higher in 1995 than 1994 resulting in a 23%
increase in interest income.
LIQUIDITY AND FINANCIAL RESOURCES
During the nine months ended September 30, 1995, Canji financed its
operations mainly through revenue proceeds and the use of short-term
investments. In addition, a capital equipment lease line of $1.0 million was
obtained of which $370,000 has been used. Subsequent to September 30, 1995,
Canji closed a private placement of $1.2 million in Series E Preferred Stock and
obtained a $3.0 million loan commitment from Schering-Plough. Schering-Plough
has advanced $2.0 million of this amount and has agreed to advance $1.0 million
on January 15, 1996.
Canji is a development stage enterprise which has incurred net losses from
its research and development activities since inception. The operations of Canji
are dependent on its ability to obtain continued financing, which to date has
been principally from sales of stock and collaborative research arrangements.
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<PAGE> 46
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Canji Common Stock (assuming conversion of each outstanding
share of Canji Preferred Stock) as of November 30, 1995, (i) by each person who
is known by Canji to own beneficially more than five percent of the Canji
Capital Stock, (ii) by each of Canji's directors and executive officers and
(iii) by all executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO THE MERGER(1)
-------------------------
OFFICERS, DIRECTORS AND 5% STOCKHOLDERS NUMBER PERCENT
- --------------------------------------------------------- --------- -------
<S> <C> <C>
H&Q Life Science Technology Fund I(2).................... 1,620,060 13.8
One Bush Street, 15th Floor
San Francisco, CA 94104
H&Q London Ventures(3)................................... 690,240 5.9
One Bush Street
San Francisco, CA 94104
Schering-Plough Ltd...................................... 1,000,000 8.5
One Giralda Farms
Madison, NJ 07940
A/S Industriforsikring................................... 607,000 5.2
Bygdoy Alle 2
N-0257 Oslo, Norway
Gateway Ventures(4)...................................... 850,582 7.2
8000 Maryland Avenue
Suite 1190
St. Louis, MO 63105
Wen-Hwa Lee, Ph.D.(5).................................... 1,351,000 11.5
11718 Jarvis Drive
San Antonio, TX 78253
Kenneth M. Cohen(6)...................................... 154,535 1.3
Bryan Finkle, Ph.D.(7)................................... 92,345 *
Roger Headrick(8)........................................ 80,538 *
Theodor H. Heinrichs(2).................................. 1,620,060 13.8
M. Blake Ingle, Ph.D.(9)................................. 621,400 5.3
Gregory Johnson, Ph.D.(4)................................ 850,582 7.2
Jui-Lien Li, Ph.D.(10)................................... 371,250 3.2
Erkki I. Ruoslahti, M.D.(11)............................. 49,500 *
Michael Shepard, Ph.D.(12)............................... 142,000 1.2
All officers and directors............................... 5,333,210 45.3
(9 persons) as a group(13)
</TABLE>
- ---------------
* Less than 1%.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of capital
stock. Certain executive officers and directors hold their shares or
options in trusts for the benefit of their spouses or children. In
addition, the percent ownership of each officer, director and 5%
stockholder represents a percentage of Canji Common Stock on a
fully-diluted basis.
(2) Theodor H. Heinrichs is a general partner of H&Q Life Science Technology
Fund I, a venture capital fund. Mr. Heinrichs disclaims beneficial
ownership of the 1,490,060 shares held directly by the fund, except to the
extent of his individual interest, but may be deemed to share voting and
investment power with respect to such shares. Includes 10,000 shares
issuable upon exercise of stock options that will be accelerated and
exercisable immediately as a result of the Merger. Also includes 120,000
shares issuable upon exercise of vested options issued to a trust of which
Mr. Heinrichs is trustee. Does not include 80,000 shares issuable to the
trust upon exercise of unvested options which are to be exchanged for
restricted Schering-Plough Common Shares in the Merger.
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<PAGE> 47
(3) Includes 34,200 shares issuable upon exercise of warrants.
(4) Includes 50,000 shares issuable to Gateway Ventures upon exercise of
warrants. Gregory Johnson, a director of Canji, is a general partner of
Gateway Ventures, a venture capital firm. Dr. Johnson disclaims beneficial
ownership of the 832,582 shares held directly by Gateway Ventures, except
to the extent of his individual partnership interest, but may be deemed to
exercise shared voting and investment power with respect to these shares.
Includes 10,000 shares issuable to Dr. Johnson upon exercise of stock
options that will be accelerated and exercisable immediately as a result of
the Merger and includes 8,000 shares issuable upon exercise of vested stock
options, but does not include 12,000 shares issuable to Dr. Johnson upon
exercise of unvested options which are to be exchanged for restricted
Schering-Plough Common Shares in the Merger.
(5) Includes 10,000 shares issuable upon exercise of stock options that will be
accelerated and exercisable immediately as a result of the Merger and
10,000 shares issuable upon exercise of vested options. Also includes
1,000,000 shares held by members of Dr. Lee's family. Dr. Lee disclaims
beneficial ownership of such shares.
(6) Includes 150,000 shares issuable upon exercise of stock options that will
be accelerated and exercisable immediately as a result of the Merger.
(7) Includes 5,000 shares issuable upon exercise of warrants, 28,600 shares
issuable upon exercise of vested options, 42,000 shares issuable upon
exercise of stock options that will be accelerated and exercisable
immediately as a result of the Merger, but does not include 10,400 unvested
options to be exchanged for restricted Schering-Plough Common Shares in the
Merger.
(8) Includes 12,000 shares issuable upon exercise of vested options, 10,000
shares issuable upon exercise of stock options that will be accelerated and
exercisable immediately as a result of the Merger, but does not include
8,000 shares issuable upon exercise of unvested options which are to be
exchanged for restricted Schering-Plough Common Shares in the Merger.
(9) Includes 5,000 shares issuable upon exercise of warrants, 260,000 shares
issuable upon exercise of stock options that will be accelerated and
exercisable immediately as a result of the Merger, but does not include
75,000 shares issuable upon exercise of unvested options which are to be
exchanged for restricted Schering-Plough Common Shares in the Merger.
(10) Includes 5,000 shares issuable upon exercise of stock options that will be
accelerated and exercisable immediately as a result of the Merger.
(11) Includes 2,000 shares owned beneficially by Dr. Ruoslahti's children. Also
includes 2,000 shares issuable upon exercise of warrants, 35,000 shares
issuable upon exercise of vested options, 10,000 shares issuable upon
exercise of stock options that will be accelerated and exercisable
immediately as a result of the Merger, but does not include 18,000 shares
issuable upon exercise of unvested options which are to be exchanged for
restricted Schering-Plough Common Shares in the Merger.
(12) Includes 92,000 shares issuable upon exercise of vested options, but does
not include 88,000 shares issuable upon exercise of unvested stock options
which are to be exchanged for restricted Schering-Plough Common Shares in
the Merger.
(13) Includes 62,000 shares issuable upon exercise of warrants, 305,600 shares
issuable upon exercise of vested options, 507,000 shares issuable upon
exercise of stock options that will be accelerated and exercisable
immediately as a result of the Merger, but does not include 291,400 shares
issuable upon exercise of unvested options which are to be exchanged for
restricted Schering-Plough Common Shares in the Merger.
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<PAGE> 48
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stock Purchase Agreement. On May 31, 1994, Canji entered into a Stock
Purchase Agreement with an affiliate of Schering-Plough pursuant to which such
affiliate purchased 1,000,000 shares of Canji Preferred Stock for $6 million.
License Agreement. On May 31, 1994, Canji entered into a License Agreement
with Schering Corporation and Schering-Plough, Ltd., each a wholly-owned
subsidiary of Schering-Plough (collectively called "Licensee"). The agreement
provides that Canji grant Licensee certain license rights with respect to
certain patents, know-how and technology which Canji owns or has certain rights
to. The license rights being granted to Licensee relate to making, using and
selling any pharmaceutical product, device, biological material, method or
process derived from the p53 Gene Technology (as defined under the caption
"Description of the Participation Rights -- Certain Definitions"), and which
includes the p53 Gene (as defined under the caption "Description of the
Participation Rights -- Certain Definitions") as an active ingredient or a
material element of an active ingredient, for use, with certain exceptions, in
prophylactic or therapeutic medical care or treatment of any disease or
condition in humans or animals. In return, pursuant to the License Agreement,
Licensee is required to pay Canji certain royalty payments with substantially
the same terms as those in the Participation Rights Agreement and certain
milestone payments, and Licensee is required to perform certain tasks toward
achieving the milestones. The "R&D Collaboration License Agreement" states that
Licensee will pay Canji up to $35 million of milestone payments, as the
milestones described therein are achieved. See "Description of the Participation
Rights."
R&D Collaboration and License Agreement. On May 31, 1994, Canji entered
into a R&D Collaboration and License Agreement with Licensee. The agreement
forms a research program which will continue for up to five (5) years after the
effective date of the agreement as long as Licensee makes certain payments. The
parties to the agreement have certain goals which they plan to achieve through
the research program. These goals, which relate to Products (as defined under
the caption "Description of the Participation Rights -- Certain Definitions"),
are called the milestones and are described generally in the agreement. After
the effective date of the agreement, Canji and Licensee established a
coordinating committee to assist with the planning and evolution of the research
program with respect to Products. As is set forth in the agreement, each party
has specified principal responsibilities for performing particular tasks and
milestones within the research program with respect to Products.
Licensee paid to Canji $2 million upon the signing of the agreement for
Canji's general use in conducting the research program. Upon each of the first,
second, third and fourth anniversaries of the effective date of the agreement,
Licensee is required to pay to Canji $2 million for Canji's general use in
conducting the research program; provided, however, Licensee has the right not
to make the first anniversary payment in the event of a significant adverse
event. Upon any such non-payment by Licensee, the agreement, the License
Agreement and the First Refusal Agreement terminate automatically. Licensee also
has the right to terminate the agreement any time after the first anniversary
payment has been paid in the exercise of its sole discretion. If Licensee
exercises its termination right prior to Licensee having paid to Canji the
milestone payment for milestones I, II and III, then the License Agreement will
terminate automatically with the termination of the agreement, unless Licensee
agrees to assume the principal responsibility to perform the milestones, if
performance of said milestones is feasible under the agreement because of the
availability of Products, and agrees to make said milestone payments to Canji
once the milestones are achieved. In addition to the research funding specified
above, Licensee will pay to Canji up to $35 million of milestone payments, as
the milestones described in the agreement are achieved.
First Refusal Agreement. The First Refusal Agreement is entered into as of
May 31, 1994, by and between Canji and Licensee. Pursuant to this agreement,
Canji granted to Licensee rights of first refusal with respect to tumor
suppressor genes, and rights to related know-how, any tumor suppressor genes to
the extent owned and/or controlled by Canji or its affiliates, in whole or part,
whether by assignment, license or otherwise and conceived prior to the effective
date of the agreement or conceived thereafter, but prior to the expiration of
the term of the research program, excluding, however, Canji's Rb technology,
which includes (a) the Rb gene, Rb protein, Rb mimetic and any applicable patent
rights, patent applications, know-how, research and development, and (b) the p53
gene and the p53 gene technology which is covered by the R&D Agreement and
License Agreement between Canji and Licensee, except as otherwise provided in
the agreement.
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<PAGE> 49
Loan Agreement and Promissory Note. Schering-Plough agreed to loan to
Canji the principal sum of $3,000,000, with the sum to be advanced in three
increments of $1,000,000. The first increment was advanced on November 20, 1995
and the second increment was advanced on December 15, 1995. The third increment
is to be advanced on January 15, 1996. Canji promises thereunder to pay to
Schering-Plough the principal sum of $3,000,000, or such lesser sum as is
advanced by Schering-Plough, in accordance with the terms of the Note. Interest
accrues on the unpaid principal balance owing on the Note from time to time at
the rate of 6% per annum. The Note payments may be accelerated, under certain
circumstances, if (1) Canji fails to consummate a sale of its outstanding stock
consistent with the terms of the letter of intent dated November 13, 1995
between the parties relating to the Merger or (2) if Canji breaches its
obligations under the definitive agreement for consummating the purchase as
defined in the letter of intent. Canji agrees to use the funds loaned by
Schering-Plough pursuant to the Note only for Canji's ordinary course of
business expenditures and not for employee bonuses or unusual items.
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<PAGE> 50
DESCRIPTION OF SCHERING-PLOUGH CAPITAL STOCK
The following description of the material terms of the authorized capital
stock of Schering-Plough does not purport to be complete and is qualified in its
entirety by reference to Schering-Plough's Certificate of Incorporation and
By-laws. For information as to how to obtain Schering-Plough's Certificate of
Incorporation and By-laws, see "Available Information."
As of October 31, 1995, the authorized capital stock of Schering-Plough
consisted of: (i) 600,000,000 Schering-Plough Common Shares, of which
365,748,132 were issued and outstanding, 137,217,250 were issued and held in
treasury, and 26,931,205 were reserved for issuance under stock incentive plans
and pursuant to warrants and (ii) 50,000,000 Preferred Shares, consisting of
1,500,000 Preferred Shares designated as Series A Junior Participating Preferred
Stock and 48,500,000 Preferred Shares whose designations have not yet been
determined. As of October 31, 1995, no Preferred Shares were issued and
outstanding.
Holders of Schering-Plough Common Shares do not have preemptive rights and
have no rights to convert their shares into any other security. All
Schering-Plough Common Shares are entitled to participate equally and ratably in
dividends on Schering-Plough Common Shares as may be declared by
Schering-Plough's Board of Directors, subject to any dividend and other rights
of any Preferred Shares. In the event of the liquidation of Schering-Plough,
holders of Schering-Plough Common Shares are entitled to share ratably with
holders of Preferred Shares in assets remaining after payment of all
liabilities, subject to prior distribution rights of any Preferred Shares then
outstanding. Holders of Schering-Plough Common Shares are entitled to one vote
per share for the election of directors and upon all matters on which
shareholders are entitled to vote. Voting securities do not have cumulative
voting rights.
Each Schering-Plough Common Share has attached thereto a Right to purchase
one four-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $1.00 per share, of Schering-Plough at a price of $62.50 per one-four
hundredths of a Preferred Share, subject to adjustment. For a description and
terms of the Rights, see "Comparison of Stockholder Rights -- Rights Plan."
The Certificate of Incorporation, as amended, of Schering-Plough (the
"Schering-Plough Certificate") provides that the Schering-Plough Board is
authorized to issue the Preferred Shares from time to time in one or more series
without future authorization of its stockholders, and to fix the voting powers,
designations, preferences, rights, qualifications, limitations and restrictions
of each such series to the extent not fixed or limited by the provisions set
forth in the Schering-Plough Certificate and subject to the limitations
prescribed by law. Whenever accrued dividends on the Preferred Shares in an
amount equivalent to six quarterly dividends shall not have been paid or
declared and a sum sufficient for the payment thereof set aside, the holders of
the Preferred Shares, voting separately as a class, will be entitled to elect
two directors at the next annual or special meeting of the Schering-Plough
Shareholders. Such right to elect two directors may be exercised until dividends
in default on the Preferred Shares have been paid in full or declared and a sum
sufficient for the payment thereof set aside.
The Schering-Plough Certificate and the By-laws of Schering-Plough (the
"Schering-Plough By-laws") provide that the Board of Directors shall consist of
no fewer than nine and no greater than twenty-one members as determined from
time to time by the Board or the affirmative vote of the holders of at least 80%
of the voting power of all of the shares of the corporation entitled to vote in
the election of directors, voting together as a single class. The
Schering-Plough Certificate and the Schering-Plough By-laws further provide that
the Board shall be divided into three classes and require that any proposal to
either remove a director during his term of office or amend the Schering-Plough
Certificate or Schering-Plough By-laws with respect to the classification,
number, removal, and filling of vacancies, of directors be approved by the
affirmative vote of the holders of not less than 80% of the shares having voting
power of all the shares entitled to vote generally in the election of directors,
voting together as a single class. Subject to the rights of the holders of any
series of outstanding Preferred Shares, any vacancies in the Board may be filled
by the remaining directors. The purpose of these provisions is to prevent
directors from being removed from office prior to the expiration of their
respective terms, thus protecting the safeguards inherent in the classified
board structure unless dissatisfaction with the performance of one or more
directors is widely shared by holders of Schering-Plough
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<PAGE> 51
Common Shares. However, these provisions could also have the effect of
increasing from one year to two or three years (depending upon the number of
Schering-Plough Common Shares held) the amount of time required for an acquiror
to obtain control of Schering-Plough by electing a majority of the Board of
Directors and may also make the removal of incumbent management more difficult
and discourage or render more difficult certain mergers, tender offers, proxy
contests, or other potential takeover proposals. To the extent that these
provisions have the effect of giving management more bargaining power in
negotiations with a potential acquiror, they could result in management's using
the bargaining power not only to try to negotiate a favorable price for an
acquisition, but also to negotiate more favorable terms for management.
DESCRIPTION OF THE PARTICIPATION RIGHTS
The Participation Rights will be issued under the Participation Rights
Agreement, a form of which is filed as an exhibit to the Registration Statement
of which this Proxy Statement/Prospectus is a part. The following summaries of
certain provisions of the Participation Rights Agreement do not purport to be
complete, and where reference is made to particular provisions of the
Participation Rights Agreement, such provisions, including the definition of
certain terms, are incorporated by reference as a part of such summaries or
terms, which are qualified in their entirety by such reference. References to
sections in the following summaries are references to sections of the
Participation Rights Agreement. The definition of certain capitalized terms used
in the following summary are set forth under the caption " -- Certain
Definitions."
GENERAL
The Participation Rights will be unsecured obligations of Schering-Plough
and will rank equally with all other unsubordinated indebtedness of
Schering-Plough. The Participation Rights will not entitle any holder thereof to
any equity interest in Schering-Plough or to any economic benefit from
Schering-Plough's general business activities. The Participation Rights will
represent the right to receive a pro-rata share of a specified percentage of net
sales, if any, subject to certain adjustments, generated from certain Canji p53
gene technology. The Chase Manhattan Bank (National Association) will be the
Trustee, Security Registrar, and Paying Agent under the Participation Rights
Agreement.
The Participation Rights will be issued only in registered form. (Section
302). Payment of Contingent Payments (as defined below) on the Participation
Rights shall be made, net of any applicable withholding taxes, at the offices or
agencies of Schering-Plough maintained for that purpose in The City of New York,
New York, 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, that
such payments shall be made, unless the Trustee shall agree otherwise, by check
mailed to the address of the Holders (as defined below) entitled thereto by
first-class mail as such address shall appear on the Securities Register. The
Chase Manhattan Bank (National Association) has been appointed as paying agent
in The City of New York, New York. (Section 307). No service charge will be made
for any registration of transfer or exchange of Participation Rights, except for
any tax or other governmental charge that may be imposed in connection
therewith. (Section 305). The Participation Rights may be surrendered for
registration of transfer or exchange at the office of the Security Registrar at
Chase Trust Services, 4 Chase Metro Tech Center, Brooklyn, New York 11245 for
that purpose. (Sections 305 and 702).
After the execution and delivery of the Participation Rights Agreement,
Schering-Plough may deliver Participation Rights to the Trustee for
authentication, together with a Company Order (as defined below) for the
authentication and delivery of such Participation Rights. The Trustee in
accordance with such Company Order shall authenticate and deliver such
Participation Rights as provided in the Participation Rights Agreement and not
otherwise. (Section 303).
Upon any application or request by Schering-Plough to the Trustee to take
any action under any provision of the Participation Rights Agreement,
Schering-Plough shall furnish to the Trustee an Officers' Certificate (as
defined below) stating that all conditions precedent, if any, provided for in
the Participation Rights Agreement (including any covenants, compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with and an Opinion of Counsel (as defined below) stating that in
the
48
<PAGE> 52
opinion of such counsel all such conditions precedent, if any, have been
complied with. Every certificate or opinion with respect to compliance with a
condition or covenant provided for in the Participation Rights Agreement shall
include: (i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions therein relating
thereto; (ii) 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; (iii) a statement that, in the opinion of each
such individual, he 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 (iv) a statement as to whether or not,
in the opinion of each such individual, such condition or covenant has been
complied with. (Section 102).
PAYMENT TERMS OF PARTICIPATION RIGHTS
The Participation Rights Agreement provides that Schering-Plough shall pay
on each Contingent Payment Date (as defined below) to each Holder of record of a
Participation Right on a Record Date (as defined below), the Contingent Payment
(as defined below), if any, with respect to the Contingent Payment Period (as
defined below) last preceding such Record Date as determined by Schering-Plough.
Such determinations by Schering-Plough absent manifest error shall be final and
binding on Schering-Plough and the Holders. (Section 301).
NO INTEREST
Notwithstanding any provision of the Participation Rights Agreement or the
Participation Rights to the contrary, no interest shall accrue on any amounts
payable on the Participation Rights to any Holder. (Section 301).
NON-PAYMENT UNDER THE PARTICIPATION RIGHTS AGREEMENT
In case Schering-Plough shall default in the payment of any Contingent
Payment when and as the same shall have become due and payable and such default
continues for a period of 30 days, then upon demand of the Trustee,
Schering-Plough will pay to the Trustee for the benefit of the Holders of the
Participation Rights the whole amount then due and payable; 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.
(Section 802).
In case Schering-Plough 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 Schering-Plough or other obligor upon such
Participation Rights and collect in the manner provided by law out of the
property of Schering-Plough or other obligor upon such Participation Rights,
wherever situated, the moneys adjudged or decreed to be payable. (Section 802).
No Holder of any Participation Right shall have any right by virtue or by
availing of any provision of the Participation Rights Agreement to institute any
action or proceeding at law or in equity or in bankruptcy or otherwise upon or
under or with respect thereto, or for the appointment of a trustee, receiver,
liquidator, custodian or other similar official or for any other remedy
thereunder, unless such Holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, and unless also the
Holders of not less than 25% of the Participation Rights then Outstanding shall
have made written request upon the Trustee to institute such action or
proceedings in its own name as trustee under the Participation Rights Agreement
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby and the Trustee for 60 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 809. (Section 806).
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Notwithstanding any other provision in the Participation Rights Agreement
and any provision of any Participation Right, the right of any Holder of any
Participation Right to receive payment of the Contingent Payments payable in
respect of such Participation Right on or after the respective Contingent
Payment Dates, or to institute suit for the enforcement of any such payment on
or after such respective Contingent Payment Dates, shall not be impaired or
affected without the consent of such Holder. (Section 807).
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, such notice to be transmitted within 90 days after the
occurrence thereof, unless such defaults shall have been cured before the giving
of such notice (the term "default" or "defaults" defined to mean any event or
condition which is, or with notice or lapse of time or both would become, an
Event of Default (as defined below)); provided that, except in the case of
default in the payment of the amounts payable in respect of any of the
Participation Rights, 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. (Section 811).
TRANSFER OF PARTICIPATION RIGHTS
The Participation Rights will be fully transferable, subject to compliance
with the Securities Act and other applicable laws.
REPORTS TO HOLDERS OF PARTICIPATION RIGHTS; REASONABLE DILIGENCE
Schering-Plough will transmit by mail to all Holders at periodic intervals,
but no less frequently than annually, a report summarizing the present status of
Schering-Plough's p53 gene research and development and of Product production,
and describing any significant developments relating to the p53 gene project
which have occurred since the date of the last such report; provided, however,
that no such report shall contain any information that has not been disclosed to
Schering-Plough Shareholders generally. (Section 504).
Schering-Plough will use commercially reasonable, diligent and good faith
efforts to bring Products to market, and to make sales of such Products at
commercially reasonable volumes taking into due account applicable
considerations, if any, arising with respect to possible claims by any third
party alleging infringement of such third party's patent rights by Products sold
by Schering-Plough. Said reasonable diligence shall be at least up to the level
of efforts that Schering-Plough devotes to the commercialization of its other
products of similar market value and therapeutic and developmental status.
Without limiting the generality of the foregoing, Schering-Plough and its
Affiliates and sublicensees will not develop, manufacture or market any
pharmaceutical, therapeutic or prophylactic product for use in humans or animals
utilizing the p53 Gene, unless the same is done as a Product pursuant to the
Participation Rights Agreement and treated as such for all purposes thereunder,
including for purposes of calculating Net Sales. To the extent any such
pharmaceutical, therapeutic or prophylactic product is done or treated as a
Product as provided in the preceding sentence, although such product would not
otherwise be a Product as defined in the Participation Rights Agreement but for
this paragraph, all royalties owing from Schering-Plough or any of its
Affiliates to any third party related to any such product accrued or paid during
any Contingent Payment Period shall be included in and treated as part of the
Deductible Amount, so long as said royalties payable to said third parties,
together with any royalties (if any) payable to the Original Owners, do not
exceed 6% of the Net Sales of such product. (Section 704).
CERTAIN DEFINITIONS
"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 or cause the direction of 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.
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"Business Day" means any day (other than a Saturday or a Sunday) on which
banking institutions in The City of New York, New York are not authorized or
obligated by law or executive order to close and, if the Participation Rights
are listed on a national securities exchange, such exchange is open for trading.
"Combination Factor" means, on a country-by-country basis, a fraction, the
numerator and denominator of which shall be determined as follows:
(i) The numerator of the Combination Factor shall be the seller's
price of an equivalent unit price for the active ingredient which includes
the p53 Gene, and the denominator of the Combination Factor shall be the
sum of the numerator and the seller's price for an equivalent unit price of
each additional active ingredient contained therein.
(ii) If the numerator and denominator of the Combination Factor cannot
be determined in the manner set forth in clause (i) above, then the
numerator of the Combination Factor shall be the cost to seller of the
active ingredient which contains the p53 Gene, and the denominator shall be
the cost to seller of all active ingredients as customarily and
consistently applied by seller.
(iii) In no event shall the Combination Factor be less than fifty
percent (50%).
"Combination Product" means any product which utilizes a Product which
contains the p53 Gene as an active ingredient plus also utilizes other active
ingredients.
"Company Request" or "Company Order" means a written request or order
signed in the name of Schering-Plough 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 for each Contingent Payment Period the amount
payable with respect to each Participation Right equal to the product of (x) the
quotient obtained by dividing (I) one by (II) the number of Participation Rights
issued in the Merger and (y) (I) the product of (A) the contingent payment rate
of 11% and (B) Net Sales for such Contingent Payment Period reduced by (II) the
Deductible Amount.
"Contingent Payment Date" means with respect to each Contingent Payment
Period the date 60 days following the end of such Contingent Payment Period.
"Contingent Payment Periods" shall be the periods of three calendar months
ended March 31, June 30, September 30 and December 31 of each calendar year.
"Deductible Amount" shall be, with respect to each Contingent Payment
Period, the aggregate of (1), (2), (3) and (4) below:
(1) All royalties owing from Schering-Plough or any of its Affiliates
to any of the Original Owners under any of the Original Agreements accrued
or paid during the respective Contingent Payment Period.
(2) If there is a net reduction in the royalty rates payable by
Schering-Plough or any of its Affiliates to the Original Owners as a group,
because of future amendments to the Original Agreements, then half of any
such reduction shall be reflected as a reduction in the future contingent
payment rate payable by Schering-Plough under the Participation Rights
Agreement; provided, however, in no event shall this reduction cause the
contingent payment rate to be lower than 8%.
(3) (A) If it is ultimately determined (by final judgment, or by good
faith negotiations which also involve the Trustee) (i) that the Products
based upon Product Patent Rights do in fact infringe on a third party's
patent rights, and (ii) that Schering-Plough cannot reasonably make, use or
sell said Products without infringing on the third party's patent rights,
and (iii) that Schering-Plough becomes obligated to pay a royalty to such
third party, then one-half of any such royalty payable to such third party,
provided, however, in no event shall the reduction provided for in this
clause (A) cause the contingent payment rate to be lower than 1% of Net
Sales with respect to such Products, and (B) on a country-by-country basis,
and a Product-by-Product basis, one-half of any reasonable out-of-pocket
expense of defense
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against any third party's claim of a Product's infringement of such third
party's patent rights, which are reasonably documented, as such expenses
are incurred shall be deducted from the Contingent Payment.
(4) All royalties, other than royalties for which a reduction is made
pursuant to paragraph (1) above, owing from Schering-Plough or any of its
Affiliates to any third party with respect to any Product(s) as a result of
any arrangement, agreement or understanding between Canji and such third
party which is in effect as of the effective time of the Merger shall be
deducted from the Contingent Payment.
"Event of Default" with respect to Participation Rights, means any 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): (i) default in the payment of any
Contingent Payment when the same shall become due and payable, and continuance
of such default for a period of 30 days; or (ii) default in the performance, or
breach, of any covenant of Schering-Plough in the Participation Rights Agreement
(other than a covenant or a default in whose performance or whose breach is
specifically dealt with in the Participation Rights Agreement), and continuance
of such default or breach for a period of 90 days after there has been given, by
registered or certified mail, to Schering-Plough by the Trustee or to
Schering-Plough and the Trustee by the Holders of at least 25% of the
Outstanding Participation Rights, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a "Notice
of Default" under the Participation Rights Agreement; or (iii) a court having
jurisdiction in the premises shall enter a decree or order for relief in respect
of Schering-Plough 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 Schering-Plough 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 60 consecutive days; or (iv)
Schering-Plough shall commence a voluntary case under any applicable 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, liquidator,
assignee, custodian, trustee, sequestrator or similar official of
Schering-Plough or for any substantial part of its property, or make any general
assignment for the benefit of creditors.
"Field" means for prophylactic or therapeutic medical care or treatment of
any disease or condition in humans or animals. Expressly excluded from the Field
are (i) all diagnostic uses or products, and (ii) all research reagents or
research products.
"Holder" means a Person in whose name a Participation Right is registered
in the Security Register.
"Net Sales" means for any Contingent Payment Period the gross amount
invoiced by Schering-Plough, its Affiliates and their sublicensees on sales of
all Products the respective Terms of which have commenced and have not expired
as of the time of determination net of returns and rejections, less all actual
amounts which are included on said invoice or identified in other documentation
for (i) allowances for normal and customary quantity and cash discounts which
reduce the customer's invoice obligation, (ii) rebates including government
mandated rebates which reduce the customer's invoice obligation, (iii)
transportation costs and insurance while in transit which is actually paid by
Schering-Plough or its Affiliates or sublicensees, and (iv) any sales or similar
taxes, packaging charges, freight and insurance. For the purposes of determining
Net Sales, a sale shall be deemed to have occurred when an invoice therefor
shall be generated, the Product is shipped for delivery, or payment therefor is
received, whichever shall occur first. Sales to any Affiliate of Schering-Plough
shall be excluded until the subsequent sale by any such Affiliate to a
non-Affiliate, which shall then be included under the Participation Rights
Agreement in the determination of Net Sales. Notwithstanding the foregoing, Net
Sales with respect to any Combination Product shall be equal to Net Sales with
respect thereto, as calculated above, multiplied by the Combination Factor.
"Officers' Certificate" 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 Schering-Plough, and delivered to the Trustee.
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"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for Schering-Plough, and who shall be reasonably acceptable to the Trustee.
"Original Agreements" mean (i) the License Agreement, dated August 10,
1990, with the University of California, as licensor, and Canji, as licensee;
(ii) the Patent License and Option Agreement, dated December 11, 1992, with the
University of Texas, as licensor, and Canji, as licensee; and (iii) the
Assignment Agreement, dated April 22, 1993, with Research Development
Foundation, as assignor, and Canji, as assignee.
"Original Owners" mean the licensors and assignor under the Original
Agreements.
"p53 Gene" means the p53 gene sequence as published in Science
250:1576-1580, 1990, entitled "Genetic Mechanisms of tumor Suppression by the
Human p53 Gene", authored by Phang-Tanz Chen, et al., and any p53 gene fragment,
derivative or analog, or combination of p53 fragments, natural or synthetic or
by recombinant DNA technology and any p53 gene product (as is customarily
scientifically understood e.g., a p53 protein or transcript), and p53 gene
product fragment, derivative or analog, or mimetic or combination of p53 product
fragments, natural or synthetic or by recombinant DNA technology.
"p53 Gene Technology" means any and all technology owned or controlled in
whole or part by Canji or its Affiliates as of the Effective Time by license,
assignment or otherwise involving the p53 Gene, together with any vectors owned
or controlled by Canji in whole or in part by license, assignment or otherwise
useful with the p53 Gene.
"Participation Certificate" means a certificate representing any of the
Participation Rights.
"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.
"Product" means any pharmaceutical product, device, biological material,
method or process derived from the p53 Gene Technology, and which includes the
p53 Gene as an active ingredient or a material element of an active ingredient,
for use in the Field.
"Product Patent Rights" means (i) the patents or patent applications listed
in the Participation Rights Agreement, (ii) all existing and future patents and
patent applications owned or controlled in whole or part by license, assignment
or otherwise by Canji or its Affiliates which claim or relate to the p53 Gene,
the p53 Gene Technology or making, using and selling Products in the Field, and
(iii) any divisions, continuations, continuations-in-part, reissues,
reexaminations, extensions or other governmental actions which extend any
subject matter of a patent, and any substitutions, confirmations, registrations,
revalidations or additions of any of the foregoing that were in existence as of
the Effective Time.
"Record Date" means for the Contingent Payment payable on any Contingent
Payment Date on the Participation Rights, the fifteenth day prior to such
Contingent Payment Date whether or not such day shall be a Business Day.
"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.
"Term" with respect to any Product means, on a country-by-country basis,
(i) for a Product utilizing Product Patent Rights, the period commencing on the
date of the Participation Rights Agreement and ending on the last to expire
(and/or to be declared invalid in a proceeding from which no appeal is or can be
taken) of Product Patent Rights utilized by or in such Product in each such
country and (ii) for a Product not utilizing Product Patent Rights, the
twelve-year period commencing on the date of first commercial sale of the
initial Product in such country.
"Voting Stock" means stock 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.
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CONSIDERATIONS RELATING TO PARTICIPATION RIGHTS
As of the date of this Proxy Statement/Prospectus, there have been no sales
of Products for which Net Sales would have been generated under the terms of the
Participation Rights. Schering-Plough cannot predict whether or not or when, and
there can be no assurance that, any Products will be produced or sold or any Net
Sales will be generated in the future which will entitle holders of
Participation Rights to payments thereunder. Further, holders of Participation
Rights will not be entitled thereunder to payment of any amounts in respect of
the manufacture and sale of any gene product which is not derived from p53 Gene
Technology or does not include the p53 Gene as an active ingredient or a
material element of an active ingredient for use in the Field.
THERE IS CURRENTLY NO PUBLIC MARKET FOR THE PARTICIPATION RIGHTS, AND THE
PRICES AT WHICH THE PARTICIPATION RIGHTS MAY TRADE CANNOT BE PREDICTED. NO
ASSURANCE CAN BE GIVEN THAT AN ACTIVE PUBLIC MARKET FOR SUCH SECURITIES WILL
DEVELOP OR THAT ANY CONTINGENT PAYMENT WILL EVER BE PAID TO HOLDERS PURSUANT TO
THE PARTICIPATION RIGHTS. Until such securities are fully distributed and an
orderly market develops, the prices at which trading occurs may fluctuate
significantly. Trading prices will be determined by the marketplace and may be
influenced by many factors, including, among others, the depth and liquidity of
the market for such securities, investor perception of Schering-Plough, the
prospects for payment pursuant to the Participation Rights, and general economic
and market conditions.
The Participation Rights are not expected to be listed on a national
securities exchange or quoted for trading on the NASDAQ National Market
following the Merger, and Schering-Plough is not committed and has no present
intent to so list or quote the Participation Rights. Further, immediately
following the Merger, the Participation Rights will not be registered under the
Exchange Act and it is expected that the Participation Rights will only be so
registered to the extent required by the Exchange Act or other applicable law.
Schering-Plough believes that patent protection of p53-related products,
methods and processes is important to the possible commercialization of Product
candidates. Canji, and Schering-Plough (by virtue of the License Agreement),
have rights to p53-related patent applications; however, there can be no
assurance that any such patents will be issued. In addition, it is impossible to
predict the degree of protection that patents will afford Schering-Plough. It is
possible that patents to which Schering-Plough and Canji have rights will be
successfully challenged, that Products may infringe patents of third parties, or
that Schering-Plough and Canji may have to alter Products, methods or processes
related thereto or pay licensing fees or cease certain activities to take into
account patent rights of third parties, causing additional costs, delays and/or
interference with the commercialization of any Products.
Schering-Plough also attempts and will continue to attempt to protect its
proprietary products, methods and processes by relying on trade secret laws and
non-disclosure and confidentiality agreements and exclusive licensing
arrangements with its employees and certain other persons who have access to its
proprietary products, methods or processes or who have licensing or research
arrangements. Despite these protections, no assurance can be given that others
will not independently develop or obtain access to such products, methods or
processes or that Schering-Plough's competitive position will not be adversely
affected thereby.
Prior to marketing, any Products developed by Schering-Plough must undergo
an extensive regulatory approval process required by the Food and Drug
Administration (the "FDA") and by comparable other agencies, including those in
other countries, and gene therapy regulatory bodies such as the Recombinant
Advisory Committees and comparable other agencies, including those in other
countries, in each case as currently existing or hereafter constituted. This
process, which includes preclinical and clinical testing of each Product to
establish its safety and effectiveness and confirmation by the FDA that good
laboratory and clinical practices were maintained during testing, can take many
years and require the expenditure of substantial resources. Data obtained from
preclinical and clinical activities are subject to varying interpretations which
could delay, limit, or prevent FDA regulatory approval. In addition, delays or
rejections may be encountered based upon changes in FDA policy for drug approval
during the period of development and FDA regulatory review of each submitted new
drug application ("NDA") or product license application ("PLA"). Similar delays
may also be encountered in foreign countries. There can be no assurance that
even after such time and expenditures regulatory approval will be obtained for
any Products developed by Schering-Plough. Moreover, even if approval is
granted, such approval may entail limitations on the indicated uses for which a
Product may
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be marketed. Further, even if such regulatory approval is obtained, a marketed
Product and its manufacturer are subject to continual review, and later
discovery of previously unknown problems with a Product or manufacturer may
result in restrictions on such Product or manufacturer, including withdrawal of
the Product from the market.
There is substantial competition in the biopharmaceutical industry, both
from specialized firms and from major pharmaceutical companies, which have
substantial resources for research, product development, manufacturing and
promotion. Schering-Plough also experiences competition from smaller niche
companies in the development of technologies and processes and, in some
instances, competes with others in acquiring technology from universities. There
can be no assurance that Schering-Plough will be able to produce Products that
have commercial potential, and even if Schering-Plough achieves Product
commercialization, one or more of Schering-Plough's competitors may achieve
Product commercialization or patent protection earlier than Schering-Plough. In
addition, Schering-Plough's Products may be subject to competition from related
products developed by competitors or different products developed using
techniques other than those developed by Schering-Plough or based on advances
that may render Schering-Plough's Products less competitive or obsolete.
Recruiting and retaining qualified scientific personnel to perform research
and development work is critical to Schering-Plough's success. Although
Schering-Plough believes it will be successful in attracting and retaining
skilled and experienced scientific personnel, including Canji's key scientific
personnel, there can be no assurance that Schering-Plough will be able to
continue to attract and retain such personnel on acceptable terms. See "The
Merger -- Interests of Certain Persons in the Merger -- Employment Agreements."
CERTAIN SECURITIES LAW CONSIDERATIONS
Due to the lack of authority under the Federal securities laws, it is
unclear whether the Participation Rights would be treated as evidences of
indebtedness or equity securities for purposes of such laws. Further, because of
the lack of legal precedent, it is uncertain how the Participation Rights would
be treated under the "short-swing" trading or other provisions of Section 16 of
the Exchange Act.
COMPARISON OF STOCKHOLDER RIGHTS
As a result of the Merger, Canji Stockholders will receive common shares of
Schering-Plough, a New Jersey corporation, in exchange for their shares of
common stock and preferred stock in Canji, a Delaware corporation. The following
is a summary of certain material differences between the rights of holders of
Canji Capital Stock and the rights of holders of Schering-Plough Common Shares.
These differences arise in part from the differences between the DGCL and the
New Jersey Business Corporation Act (the "NJBCA"). Additional differences arise
from the governing instruments of the two companies (in the case of Canji, the
Canji Certificate and the Canji Bylaws, and, in the case of Schering-Plough, the
Schering-Plough Certificate, and the Schering-Plough By-laws). Although it is
impractical to compare all of the aspects in which the DGCL and the NJBCA and
the companies' respective governing instruments differ with respect to
stockholders' rights, the following discussion summarizes certain significant
differences between them. This summary is not intended to be complete and is
qualified in its entirety by reference to applicable provisions of the NJBCA,
the DGCL, the Schering-Plough Certificate, the Schering-Plough By-laws, the
Canji Certificate and the Canji Bylaws.
LIQUIDATION RIGHTS
Schering-Plough. The Schering-Plough Certificate provides that in the
event of any liquidation or dissolution, after the full preferential amounts to
which the holders of preferred shares and any other class having preference over
the Schering-Plough Common Shares have been paid or set aside, the holders of
the Schering-Plough Common Shares shall be entitled to receive the remaining
assets of the Corporation available for distribution. The Schering-Plough
Certificate further provides that holders of Series A Preferred Stock receive
$100 per share plus any accrued and unpaid dividends and distributions thereon,
provided that such holders of such preferred shares are entitled to receive an
amount per share equal to 400 times the
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aggregate amount to be distributed per share to holders of Schering-Plough
Common Shares in the event of any liquidation, dissolution or winding up of the
corporation. There are currently no outstanding shares of preferred stock of
Schering-Plough.
Canji. The Canji Certificate similarly provides that, in the event of any
liquidation, dissolution, or winding up of the corporation (including a merger
or consolidation in which Canji shareholders own less than a majority of the
voting securities of the surviving corporation), holders of the Preferred Stock
of Canji receive preferential rights to assets, ranging from $1.00 to $6.00 per
share of Preferred Stock, plus all declared and unpaid dividends thereon. To the
extent holders of Preferred Stock are paid, or funds are otherwise set aside,
any remaining assets of the corporation shall be distributed to all holders of
Common Stock and Preferred Stock, entitling each share to an equal proportion of
such remaining assets.
SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
Schering-Plough. The Schering-Plough Certificate and Schering-Plough
By-laws provide that the total number of directors shall be not less than 9 nor
more than 21 as determined from time to time by either the Schering-Plough Board
of Directors or the affirmative vote of the holders of at least 80% of the
voting power of all of the shares of the corporation entitled to vote generally
in the election of directors, voting together as a single class. Schering-Plough
currently has 14 directors. The Schering-Plough Board is divided into three
classes, and the directors are elected by classes to staggered three-year terms,
so that one of the three classes of the directors of Schering-Plough will be
elected at each annual meeting of Schering-Plough Shareholders.
Canji. The Canji Certificate provides that the number of directors shall
be fixed from time to time by a vote of the majority of the entire Board. The
Canji Bylaws further provide that the number of Canji Directors shall be
determined by resolution of the stockholders or the Canji Board, but in no event
shall be less than one. Canji currently has 7 Directors. Pursuant to the Canji
Certificate, the Canji Board is likewise divided into three classes of
Directors, with each class being elected to a staggered three-year term.
VACANCIES ON THE BOARD
Schering-Plough. The Schering-Plough Certificate and the Schering-Plough
By-laws provide that, subject to the rights of the holders of any series of
outstanding Preferred Shares, vacancies in the board, including as a result of
newly-created directorships, may be filled by a majority vote of the directors
then in office, even though less than a quorum, or by a sole remaining director.
Canji. The Canji Bylaws similarly provide that any vacancies in the Board
may be filled by the vote of a majority of the remaining directors, although
less than a quorum, or by a sole remaining director.
REMOVAL OF DIRECTORS
Schering-Plough. The Schering-Plough Certificate and Schering-Plough
By-laws provide that directors of Schering-Plough may be removed only for cause
and only by the affirmative vote of the holders of at least 80% of the voting
power of all of the shares of the corporation entitled to vote generally in the
election of directors, voting together as a single class.
Canji. The Canji Bylaws provide that, subject to Section 141(k) of the
DGCL, Directors of Canji may be removed, with or without cause, by the holders
of a majority of the shares of Canji capital stock then entitled to vote at an
election of Directors, except that the Directors elected by the holders of a
particular class or series of stock may be removed only by vote of the holders
of a majority of the outstanding shares of such class or series. Section 141(k)
of the DGCL provides that, unless the certificate of incorporation otherwise
provides, which the Canji Certificate does not, in the case of a corporation
whose board is classified, stockholders may effect such removal of Directors
only for cause.
SPECIAL MEETING OF STOCKHOLDERS; ACTION BY WRITTEN CONSENT
Schering-Plough. Under the Schering-Plough By-laws, a special meeting of
the Schering-Plough Shareholders may be called only by the Chairman of the
Board, the President or the Board of Directors of
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Schering-Plough and shall be held at such time and at such place and for such
purpose(s) as stated in the notice of the meeting. Business transacted at any
such special meeting is confined to the purpose or purposes stated in the notice
thereof.
The Schering-Plough Certificate and Schering-Plough By-laws provide that,
subject to the rights of the holders of any series of preferred shares then
outstanding, any action required or permitted to be taken by the shareholders of
Schering-Plough must be effected at a duly called annual or special meeting of
shareholders and may not be effected by any consent in writing by such
shareholders unless all of the shareholders entitled to vote thereon consent
thereto in writing.
Canji. Under the Canji Bylaws, a special meeting of stockholders may be
called at any time only by the Chairman of the Board, the President, a majority
of the Directors then in office, or by the Board of Directors of Canji, and
shall be held on such date and at such time and place and for such purpose(s) as
stated in the notice of the meeting.
Pursuant to the DGCL, stockholders of a corporation may take any action
required to be taken or which may be taken at any annual or special meeting of
stockholders by written consent without a meeting unless otherwise provided in
the certificate of incorporation. The Canji Certificate and the Canji Bylaws
provide that, following the date that any equity securities of Canji are
registered under the Exchange Act, no action required to be taken or which may
be taken at an annual or special meeting of stockholders of Canji may be taken
without a meeting.
STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
Schering-Plough. Under the NJBCA, a shareholder who has been a shareholder
for at least six months or who holds at least five percent of the outstanding
shares of any class of stock of Schering-Plough has the right for any proper
purpose to inspect the minutes of the proceedings of Schering-Plough and
Schering-Plough's record of shareholders. Irrespective of the period such
shareholder has held his stock or the amount of stock such shareholder holds, a
court is empowered, upon proof of proper purpose, to compel production for
examination by the shareholder the books and records of account, minutes and
record of shareholders of Schering-Plough.
Canji. Under the DGCL, any stockholder, in person or by attorney or other
agent, may, upon written demand given under oath and stating the purpose
thereof, inspect for any proper purpose a corporation's stock ledger, a list of
its stockholders and its other books and records. A proper purpose is a purpose
reasonably related to such person's interest as a stockholder. A list of
stockholders is to be open to the examination of any stockholder, for any
purpose germane to a meeting of stockholders, for a period of at least 10 days
prior to such meeting. The list is also to be produced and kept at the place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
AMENDMENT OF GOVERNING DOCUMENTS
Schering-Plough. The NJBCA provides that a corporation's board has the
power to make, alter and repeal by-laws unless such power is reserved to the
shareholders in the certificate of incorporation, provided that any by-laws made
by the board may be altered or repealed by the shareholders. While the Schering-
Plough Certificate does not generally reserve power to amend the By-laws to the
shareholders, the Schering-Plough Certificate and the Schering-Plough By-laws do
provide that any provisions governing shareholder action by written consent,
board number and classification, removal of directors, board vacancies,
nominations of directors and supermajority vote requirements may be amended,
supplemented or repealed only by the affirmative vote of 80% or more of the
voting power of all of the shares of the corporation entitled to vote generally
in the election of directors, voting together as a single class.
In addition, the Schering-Plough Certificate may not be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Series A Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of at least two-thirds of the outstanding
shares of Series A Preferred Stock, voting together as a single class.
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<PAGE> 61
Canji. The DGCL provides that a corporation's by-laws may be adopted,
amended or repealed by the stockholders, and if authorized in the corporation's
certificate of incorporation, by such corporation's Board of Directors. The
Canji Certificate expressly authorizes the Board to amend, alter or repeal the
Canji Bylaws. The Canji Bylaws further specify that such Bylaws may be altered,
amended or repealed or new Bylaws adopted by the affirmative vote of a majority
of the directors present at any regular or special meeting of the Canji Board at
which a quorum is present. The Canji Certificate and Canji Bylaws also provide
that any amendment, alteration or repeal of the Bylaws by the stockholders of
the corporation may be effected only if such action is approved by the holders
of shares representing at least two-thirds of all the votes entitled to be cast.
The Canji Certificate further provides that the affirmative vote of the
holders of shares representing at least 66 2/3% of all the votes entitled to be
cast by the holders of outstanding shares of capital stock shall be required to
alter, amend or repeal the provisions of the Canji Certificate that govern
amendment to the Canji Certificate, amendment to the Canji Bylaws, shareholder
action by written consent, number and classification of the Board and amendment
to the business combination provisions.
CORPORATION'S BEST INTEREST
Schering-Plough. Under the NJBCA, the director of a New Jersey corporation
may consider, in discharging his or her duties to the corporation and in
determining what he or she reasonably believes to be in the best interest of the
corporation, any of the following (in addition to the effects of any action on
shareholders): (i) the effects of the action on the corporation's employees,
suppliers, creditors and customers, (ii) the effects of the action on the
community in which the corporation operates and (iii) the long-term as well as
the short-term interest of the corporation and its shareholders, including the
possibility that these interests may best be served by the continued
independence of the corporation. If, on the basis of the foregoing factors, the
Board of Directors determines that any proposal or offer to acquire the
corporation is not in the best interest of the corporation, it may reject such
proposal or offer, in which event the Board of Directors will have no duty to
remove any obstacles to, or refrain from impeding, such proposal or offer.
Canji. The DGCL does not include a comparable provision.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
Schering-Plough. Under the NJBCA, the consummation of a merger or
consolidation of a New Jersey corporation organized subsequent to January 1,
1969, such as Schering-Plough, requires the approval of such corporation's Board
of Directors and the affirmative vote of a majority of the votes cast by each of
the holders of shares of the corporation entitled to vote thereon and any class
or series entitled to vote thereon as a class, unless such corporation is the
surviving corporation and (i) such corporation's certificate of incorporation is
not amended, (ii) the stockholders of the surviving corporation whose shares
were outstanding immediately before the effective date of the merger will hold
the same number of shares, with identical designations, preferences,
limitations, and rights, immediately after, and (iii) the number of voting
shares and participating shares outstanding after the merger will not exceed by
more than 40% the total number of voting or participating shares of the
surviving corporation immediately before the merger. Similarly, in the case of a
New Jersey corporation organized subsequent to 1969, such as Schering-Plough, a
sale of all or substantially all of a corporation's assets other than in the
ordinary course of business, or a voluntary dissolution of a corporation,
requires the approval of such corporation's Board of Directors and the
affirmative vote of a majority of the votes cast by each of the holders of
shares of the corporation entitled to vote thereon and any class or series
entitled to vote thereon as a class.
The Schering-Plough Certificate contains an anti-greenmail provision
pursuant to which the corporation or its subsidiaries may not purchase shares of
voting stock from a 5% or greater shareholder in excess of the market price
unless approved by the affirmative voting power equal to the sum of the voting
power of such 5% or greater shareholder and a majority of the voting power of
the remaining outstanding shares of voting stock, voting together as a single
class.
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<PAGE> 62
Canji. The DGCL requires the affirmative vote of a majority of the Board
of directors of a Delaware corporation and of at least a majority of such
corporation's outstanding shares entitled to vote thereon to authorize a merger
or consolidation, unless (i) such corporation is the surviving corporation, (ii)
such corporation's certificate of incorporation is not amended, (iii) each share
of stock of such corporation outstanding immediately prior to the effective date
of the merger is to be an identical outstanding share of such corporation after
the effective date of the merger and (iv) either no shares of common stock of
such corporation and no shares, securities or obligations convertible into such
stock are to be issued or delivered under the plan of merger, or the authorized
unissued shares or the treasury shares of common stock of such corporation to be
issued or delivered under the plan of merger plus those initially issuable upon
conversion of any other shares, securities or obligations to be issued or
delivered under such plan, do not exceed 20% of the shares of common stock of
such corporation outstanding immediately prior to the effective date of the
merger. A sale of all or substantially all of a Delaware corporation's assets or
a voluntary dissolution of a Delaware corporation requires the affirmative vote
of a majority of the Board of Directors and at least a majority of such
corporation's outstanding shares entitled to vote thereon.
BUSINESS COMBINATIONS
Schering-Plough. The NJBCA provides that no corporation organized under
the laws of New Jersey with its principal executive offices or significant
operations located in New Jersey (a "resident domestic corporation") may engage
in any "business combination" (as defined in the NJBCA) with any interested
stockholder (generally, a 10% or greater stockholder) of such corporation for a
period of five years following such interested stockholder's stock acquisition,
unless such business combination is approved by the Board of directors of such
corporation prior to the stock acquisition. A resident domestic corporation,
such as Schering-Plough, cannot opt out of the foregoing provisions of the
NJBCA.
In addition, no resident domestic corporation may engage, at any time, in
any business combination with any interested stockholder of such corporation
other than: (i) a business combination approved by the Board of Directors of
such corporation prior to the stock acquisition, (ii) a business combination
approved by the affirmative vote of the holders of two-thirds of the voting
stock not beneficially owned by such interested stockholder at a meeting called
for such purpose, or (iii) a business combination in which the interested
stockholder pays a formula price designed to ensure that all other stockholders
receive at least the highest price per share paid by such interested
stockholder. In connection with business combinations with any five percent
stockholder, the Schering-Plough Certificate contains provisions requiring the
approval of at least 80% of the voting power of all of the then outstanding
shares of capital stock of the corporation entitled to vote in the election of
directors voting together as a single class; provided, however, that such higher
vote requirements do not apply if the business combination (i) is approved by a
majority of directors in office prior to the stock acquisition and not
affiliated with the interested stockholders or by their successors recommended
by a majority of such unaffiliated, pre-stock-acquisition date directors, or
(ii) meets certain fair price formulas set forth in the Schering-Plough
Certificate. Any amendments or repeal of the business combination provisions
require the affirmative vote of the holders of 80% or more of the voting power
of all the shares of the then outstanding shares of the corporation entitled to
vote, voting together as a single class.
Canji. In general, Section 203 of the DGCL prohibits an "interested
stockholder" (defined generally as a person holding 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in the DGCL) with a Delaware corporation for three
years following the date such person became an interested stockholder.
The provision is not applicable when (i) prior to the date the stockholder
became an interested stockholder, the Board of Directors of the corporation
approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder, (ii) upon consummation of the
transaction that resulted in the stockholder becoming an interested stockholder,
such interested stockholder owned at least 85% of the outstanding voting stock
of the corporation, not including shares owned by directors who are also
officers and by certain employee stock plans or (iii) on or subsequent to the
date the stockholder becomes an interested stockholder, the business combination
is approved by the Board of Directors of the corporation and authorized at a
meeting of stockholders, and not by written consent, by the
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<PAGE> 63
affirmative vote of the holders of at least two-thirds of the outstanding voting
stock entitled to vote thereon, excluding shares owned by the interested
stockholder.
Section 203's restrictions generally do not apply to business combinations
with an interested stockholder that are proposed subsequent to the public
announcement of, and prior to the consummation or abandonment of, certain
mergers, sales of a majority of a corporation's assets or tender offers for 50%
or more of a corporation's voting stock.
The DGCL allows corporations, through their bylaws, to make an irrevocable
election not to be subject to these provisions of the DGCL. Canji did not make
such an election.
The Canji Certificate further places additional restrictions on business
combinations. The Canji Certificate provides that neither the Corporation nor
its subsidiaries shall enter into a business combination (as defined in the
Canji Certificate) with a major shareholder (defined generally as a person
holding 20% or more of Canji's outstanding voting stock) unless (i) the business
combination was approved by the Board prior to the major shareholder becoming
such, (ii) the major shareholder sought and obtained the unanimous prior
approval of the Board to become such and the business combination was approved
by at least 80% of the Board, (iii) the business combination was approved by not
less than 90% of the Board, or (iv) the business combination followed the
delivery of proxy statements, meets certain fair price formulas and was approved
by the vote of at least 66 2/3% of the shares of voting stock.
RIGHTS PLAN
Schering-Plough. On July 25, 1989, the Board of Directors of
Schering-Plough declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of Schering-Plough Common Shares. The
dividend was paid on August 7, 1989 (the "Record Date") to shareholders of
record on that date. The description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") dated as of July 25, 1989, between
Schering-Plough and The Bank of New York, as Rights Agent (the "Rights Agent"),
subject, however, to the adjustments made on account of two 2-for-1 stock
splits. (Each Right originally entitled the registered holder to purchase from
the Company one one-hundredth of a share of Series A Junior participating
Preferred Stock, par value $1.00 per share, of the Company at a price of $250
per one one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment.) This summary description of the Rights and the Rights Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement, and the certificates of adjustments with respect thereto,
each of which is incorporated by reference into this Proxy Statement/Prospectus.
The following description of the Rights reflects the cumulative adjustments
heretofore made, and the description of the Preferred Shares (as defined herein)
reflects corresponding adjustments pursuant to the anti-dilution provisions of
the Preferred Shares.
Each Right entitles the registered holder to purchase from Schering-Plough
one four-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $1.00 per share (the "Preferred Shares"), of Schering-Plough at an
exercise price of $62.50.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 20% or more of the outstanding
Schering-Plough Common Shares or (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors prior to such time as any
Person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of such outstanding Schering-Plough Common Shares (the
earlier of such dates being called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Schering-Plough Common Share certificates
outstanding as of the Record Date, by such Schering-Plough Common Share
certificates with a copy of the Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Schering-Plough Common Shares. Until
the Distribution Date (or earlier redemption or
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<PAGE> 64
expiration of the Rights), new Schering-Plough Common Share certificates issued
after the Record Date upon transfer or new issuance of Schering-Plough Common
Shares will contain a notation incorporating the Rights Agreement by reference.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
the surrender for transfer of any certificates for Schering-Plough Common Shares
outstanding as of the Record Date, even without such notation or a copy of the
Summary of Rights being attached thereto, will also constitute the transfer of
the Rights associated with the Schering-Plough Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Schering-Plough Common Shares as of the close of
business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on August 9, 1999 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by Schering-Plough, in each case as described below.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 400 times the dividend declared per Schering-Plough Common Share. In
the event of liquidation, the holders of the Preferred Shares will be entitled
to a minimum preferential liquidation payment of $100 per share but will be
entitled to an aggregate payment of 400 times the payment made per Schering-
Plough Common Share. Each Preferred Share will have 400 votes, voting together
with the Schering-Plough Common Shares. Finally, in the event of any merger,
consolidation or other transaction in which Schering-Plough Common Shares are
exchanged, each Preferred Share will be entitled to receive 400 times the amount
received per Schering-Plough Common Share. These rights are protected by
customary anti-dilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one four-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Schering-Plough Common Share.
In the event that Schering-Plough is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event that (i) any
person or group of affiliated or associated persons becomes the beneficial owner
of 20% or more of the outstanding Schering-Plough Common Shares or (ii) during
such time as there is an Acquiring Person, there shall be a reclassification of
securities or a recapitalization or reorganization of Schering-Plough or other
transaction or series of transactions involving Schering-Plough which has the
effect of increasing by more than 1% the proportionate share of the outstanding
shares of any class of equity securities of Schering-Plough or any of its
subsidiaries beneficially owned by the Acquiring Person, proper provision shall
be made so that each holder of a Right, other than Rights beneficially owned by
the Acquiring Person (which will thereafter be void), will thereafter have the
right to receive upon exercise that number of Schering-Plough Common Shares
having a market value of two times the exercise price of the Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Schering-Plough Common Shares and prior to the acquisition by such person or
group of 50% or more of the outstanding Schering-Plough Common Shares, the Board
of Directors of Schering-Plough may exchange the Rights (other than Rights owned
by such person or group which have become void), in whole or in part, at an
exchange ratio of one Schering-Plough Common Share, or one four-hundredth of a
Preferred Share (or of a share of a class or series of Schering-Plough's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Schering-Plough Common Shares, the Board of Directors of Schering-Plough may
redeem the Rights in whole, but not in part, at a price of $.0025 per Right (the
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<PAGE> 65
"Redemption Price"). The redemption of the Rights may be made effective at such
time on such basis with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of
Schering-Plough without the consent of the holders of the Rights, including an
amendment to lower certain thresholds described above to not less than the
greater of (i) any percentage greater than the largest percentage of the
outstanding Schering-Plough Common Shares then known to Schering-Plough to be
beneficially owned by any person or group of affiliated or associated persons
and (ii) 10%, except that from and after such time as any person or group of
affiliated or associated persons becomes an Acquiring Person no such amendment
may adversely affect the interests of the holders of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Schering-Plough Board of Directors, except pursuant
to an offer conditioned on a substantial number of Rights being acquired. The
Rights should not interfere with any merger or other business combination
approved by the Board of Directors since the Rights may be redeemed by
Schering-Plough at the Redemption Price prior to the time that a person or group
has acquired beneficial ownership of 20% or more of the Schering-Plough Common
Shares.
Canji. Canji has not adopted a rights plan and has not declared a stock
purchase right dividend with respect to its Common Stock.
LEGAL MATTERS
The validity of the Schering-Plough Common Shares and Participation Rights
to be issued in the Merger will be passed upon for Schering-Plough by Kevin A.
Quinn, Esq., Staff Vice President, Associate General Counsel and Corporate
Secretary of Schering-Plough. As of the Record Date, Mr. Quinn beneficially
owned, directly or indirectly, approximately 12,380 Schering-Plough Common
Shares (including shares issuable upon exercise of Schering-Plough stock
options).
EXPERTS
The financial statements and related financial statement schedules
incorporated in this Proxy Statement/Prospectus by reference from
Schering-Plough's Annual Report on Form 10-K for the year ended December 31,
1994 have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of Canji as of December 31, 1993 and 1994 and for
each of the three years in the period ended December 31, 1994 and from inception
to December 31, 1994 included in this Proxy Statement/Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
Representatives of Price Waterhouse LLP are expected to be present at the
Canji Special Meeting with the opportunity to make statements if they so desire.
Such representatives are also expected to be available to respond to appropriate
questions.
STOCKHOLDER PROPOSALS
If the Merger is consummated, stockholders of Canji will become
shareholders of Schering-Plough at the Effective Time. Shareholders of
Schering-Plough will be able to submit to Schering-Plough proposals for formal
consideration at the 1997 annual meeting of Schering-Plough's shareholders and
inclusion in Schering-Plough's proxy statement and proxy for such meeting in the
manner and at the time to be set forth in Schering-Plough's proxy statement for
its 1996 annual meeting of shareholders. Schering-Plough shareholder proposals
in respect of the 1996 annual meeting were required to have been submitted by
November 25, 1995 for inclusion in Schering-Plough's proxy statement and proxy
for such meeting.
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INDEX TO FINANCIAL STATEMENTS OF CANJI, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ANNUAL FINANCIAL STATEMENTS:
Report of Independent Accountants................................................... F-2
Balance Sheet at December 31, 1993 and 1994......................................... F-3
Statement of Operations for the years ended December 31, 1992, 1993 and 1994, and
from inception (January 1990) to December 31, 1994............................... F-4
Statement of Stockholders' Equity for the years ended December 31, 1992, 1993 and
1994............................................................................. F-5
Statement of Cash Flows for the years ended December 31, 1992, 1993 and 1994, and
from inception (January 1990) to December 31, 1994............................... F-6
Notes to Financial Statements....................................................... F-7
INTERIM FINANCIAL STATEMENTS:
Balance Sheet (Unaudited) at September 30, 1995 and December 31, 1994............... F-15
Statement of Operations (Unaudited) for the three months ended September 30, 1995
and 1994, for the nine months ended September 30, 1995 and 1994, and for
inception to September 30, 1995.................................................. F-16
Statement of Cash Flows (Unaudited) for the nine months ended September 30, 1995
and 1994 and for inception to September 30, 1995................................. F-17
Notes to Financial Statements (Unaudited)........................................... F-18
</TABLE>
F-1
<PAGE> 67
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Canji, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Canji, Inc., a development stage
enterprise (Note 1), at December 31, 1993 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994 and from inception to December 31, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Diego, California
February 27, 1995
F-2
<PAGE> 68
CANJI, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1993 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 298,000 $ 445,000
Short-term investments........................................ 892,000 3,544,000
Other current assets.......................................... 337,000 328,000
---------- ----------
Total current assets.................................. 1,527,000 4,317,000
Property and equipment, net..................................... 1,340,000 1,526,000
Other assets.................................................... 28,000 28,000
---------- ----------
$ 2,895,000 $ 5,871,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................. $ 242,000 $ 267,000
Accrued liabilities........................................... 332,000 494,000
Deferred contract revenue..................................... 833,000
Current portion of capital lease obligations.................. 121,000 232,000
Notes payable................................................. 2,061,000
---------- ----------
Total current liabilities............................. 695,000 3,887,000
Deferred rent................................................... 302,000 315,000
Capital lease obligations, less current portion................. 352,000 447,000
Commitments (Note 8)
Stockholders' equity:
Convertible preferred stock, $.01 par value, 20,000,000 shares
authorized:
Series A preferred stock, 250,000 shares issued and
outstanding.............................................. 2,000 2,000
Series B preferred stock, 1,500,000 shares issued and
outstanding.............................................. 15,000 15,000
Series C preferred stock, 1,818,182 and 1,745,068 shares
issued and outstanding, respectively..................... 18,000 17,000
Series C-1 preferred stock, 103,449 shares issued and
outstanding.............................................. 1,000
Series D preferred stock, 1,877,142 and 1,756,705 shares
issued and outstanding, respectively..................... 19,000 18,000
Series I preferred stock, 1,000,000 shares issued and
outstanding.............................................. 10,000
Common stock, $.01 par value, 30,000,000 shares authorized,
2,098,420 and 2,287,370 shares issued and outstanding in
1993 and 1994.............................................. 21,000 23,000
Additional paid-in capital.................................... 14,640,000 20,197,000
Less note receivable for purchase of common stock............. (17,000) (17,000)
Accumulated deficit during development stage.................. (13,153,000) (19,043,000)
---------- ----------
1,546,000 1,222,000
---------- ----------
$ 2,895,000 $ 5,871,000
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 69
CANJI, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
INCEPTION
(JANUARY 1990) TO
DECEMBER 31, DECEMBER 31,
------------------------------------------- -----------------
1992 1993 1994 1994
----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
Revenues........................... $ 42,000 $ 186,000 $ 2,901,000 $ 3,129,000
Expenses:
Research and development......... 2,978,000 5,698,000 6,849,000 17,631,000
General and administrative....... 846,000 1,597,000 1,799,000 4,867,000
----------- ----------- ----------- ------------
Total expenses........... 3,824,000 7,295,000 8,648,000 22,498,000
----------- ----------- ----------- ------------
Net loss from operations........... (3,782,000) (7,109,000) (5,747,000) (19,369,000)
Interest expense................... (37,000) (345,000) (382,000)
Interest income.................... 175,000 139,000 202,000 708,000
----------- ----------- ----------- ------------
Net loss........................... $(3,607,000) $(7,007,000) $(5,890,000) $ (19,043,000)
=========== =========== =========== ============
Net loss per common share.......... $(2.05) $(3.53) $(2.61)
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 70
CANJI, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE SERIES NOTE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
------------------- ------------------- PAID-IN FROM ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS DEFICIT EQUITY
---------- ------- ---------- ------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1991.................... 3,671,631 $37,000 1,751,050 $17,000 $ 8,458,000 $(17,000) $(2,539,000) $ 5,956,000
Exercise of stock
options................. 45,070 1,000 3,000 4,000
Net loss for the year
ended December 31,
1992.................... (3,607,000) (3,607,000)
--------- ------- --------- ------- ----------- -------- ------------ -----------
Balance at December 31,
1992.................... 3,671,631 37,000 1,796,120 18,000 8,461,000 (17,000) (6,146,000) 2,353,000
Issuance of common stock
for acquired
technology.............. 200,000 2,000 62,000 64,000
Exercise of stock
options................. 102,300 1,000 17,000 18,000
Issuance of Series D
preferred stock, $.01
par value net of
issuance costs of
$16,867................. 1,745,892 17,000 5,553,000 5,570,000
Issuance of Series D
preferred stock for
acquired technology..... 131,250 1,000 419,000 420,000
Issuance of preferred
stock warrants for
acquired technology..... 100,000 100,000
Issuance of preferred
stock warrants for
research services....... 28,000 28,000
Net loss for the year
ended December 31,
1993.................... (7,007,000) (7,007,000)
--------- ------- --------- ------- ----------- -------- ------------ -----------
Balance at December 31,
1993.................... 5,548,773 55,000 2,098,420 21,000 14,640,000 (17,000) (13,153,000) 1,546,000
Exercise of stock
options................. 188,950 2,000 45,000 47,000
Surrender of Series D
preferred stock as
consideration for
license fee............. (123,437) (1,000) (394,000) (395,000)
Surrender of Series C
preferred stock as
consideration for
license fee............. (176,563) (2,000) (484,000) (486,000)
Issuance of Series I
preferred stock, $.01
par value............... 1,000,000 10,000 5,990,000 6,000,000
Issuance of Series D
preferred stock for
acquired technology..... 3,000 10,000 10,000
Issuance of stock warrants
for research services... 172,000 172,000
Issuance of stock warrants
in conjunction with
bridge loan............. 218,000 218,000
Net loss for the year
ended December 31,
1994.................... (5,890,000) (5,890,000)
--------- ------- --------- ------- ----------- -------- ------------ -----------
Balance at December 31,
1994.................... 6,251,773 $62,000 2,287,370 $23,000 $20,197,000 $(17,000) $(19,043,000) $ 1,222,000
========= ======= ========= ======= =========== ======== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 71
CANJI, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
INCEPTION
YEAR ENDED DECEMBER 31, (JANUARY 1990)
--------------------------------------------- TO DECEMBER 31,
1992 1993 1994 1994
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Net cash flows from operating activities:
Net loss................................................... $(3,607,000) $(7,007,000) $(5,890,000) $ (19,043,000)
Adjustments to reconcile net loss to net cash used in
operations:
Surrender of preferred stock as consideration for license
fee.................................................... (881,000) (881,000)
Depreciation and amortization............................ 164,000 281,000 376,000 890,000
Stock and warrants issued for acquired technology and
research services...................................... 613,000 182,000 795,000
Non cash interest........................................ 104,000 104,000
Change in:
Receivables............................................ (102,000) 102,000
Other current assets................................... (47,000) (136,000) 9,000 (228,000)
Other assets........................................... (27,000) (27,000)
Accounts payable and accrued liabilities............... 202,000 295,000 186,000 761,000
Deferred rent.......................................... 126,000 117,000 13,000 315,000
Deferred revenue....................................... 833,000 833,000
----------- ----------- ----------- ------------
Total adjustments.................................... 343,000 1,245,000 822,000 2,562,000
----------- ----------- ----------- ------------
Net cash used in operating activities................ (3,264,000) (5,762,000) (5,068,000) (16,481,000)
----------- ----------- ----------- ------------
Cash flows from investing activities:
Purchases of property and equipment........................ (506,000) (112,000) (185,000) (1,501,000)
Net change in short-term investments....................... 613,000 (595,000) (2,652,000) (3,544,000)
Other assets............................................... (104,000)
----------- ----------- ----------- ------------
Net cash (used) provided in investing activities........... 107,000 (707,000) (2,837,000) (5,149,000)
----------- ----------- ----------- ------------
Cash flows from financing activities:
Payments under capital lease obligations................... (63,000) (170,000) (233,000)
Proceeds from exercise of stock
options.................................................. 3,000 18,000 47,000 68,000
Proceeds from borrowings and
warrants................................................. 2,175,000 2,175,000
Proceeds from issuance of Series A convertible preferred
stock, net of issuance costs............................. 245,000
Proceeds from issuance of Series B convertible preferred
stock, net of issuance costs............................. 2,990,000
Proceeds from issuance of Series C and C-1 preferred stock,
net of issuance costs.................................... 5,263,000
Proceeds from issuance of Series D preferred stock, net of
issuance costs........................................... 5,570,000 5,570,000
Proceeds from issuance of Series I preferred stock......... 6,000,000 6,000,000
Costs in connection with issuance of common stock in
exchange
for a note............................................... (3,000)
----------- ----------- ----------- ------------
Net cash provided by financing activities................ 3,000 5,525,000 8,052,000 22,075,000
----------- ----------- ----------- ------------
Increase (decrease) in cash and cash equivalents............. (3,154,000) (944,000) 147,000 445,000
Cash and cash equivalents at beginning of period............. 4,396,000 1,242,000 298,000
----------- ----------- ----------- ------------
Cash and cash equivalents at end of period................... $ 1,242,000 $ 298,000 $ 445,000 $ 445,000
=========== =========== =========== ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Assets financed via capital leases......................... $ 536,000 $ 372,000 $ 908,000
=========== =========== ============
Common stock issued for note receivable.................... $ 17,000
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 72
CANJI, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY
Canji, Inc. (the "Company") was established for the purpose of developing,
manufacturing and marketing new discoveries and technology in cancer therapeutic
and diagnostic products. The initial technology for tumor suppressor genes was
obtained from the University of California, San Diego.
The Company is a development stage enterprise which has incurred net losses
from its research and development activities since inception. The operations of
the Company are dependent on its ability to obtain continued financing, which to
date has been principally from sales of stock and collaborative research
arrangements. The Company is currently pursuing various financing arrangements
including corporate partnerships. Based on the Company's present business plan,
it is dependent on such financing arrangements to continue operations.
The Company was awarded two research grants in 1993 and 1992 by agencies of
the Federal government relating to its research in tumor suppressor genes. The
awards totaled $785,000 of which $42,000, $186,000 and $250,000 were earned in
1992, 1993 and 1994, respectively. The Company received $478,000 for the period
January 18, 1990 (inception) to December 31, 1994.
The Company was incorporated on January 18, 1990 in California. During
1993, the Company reincorporated under the laws of Delaware. In connection
therewith, the Company's common and preferred stock were established with a par
value of $.01 per share each. All data in these financial statements reflects
the reincorporation.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH, CASH EQUIVALENTS AND INVESTMENTS
Cash equivalents consist of highly liquid investments with original
maturities of 90 days or less.
Effective January 1, 1994, the Company adopted statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" prospectively. Adoption of SFAS 115 did not have an effect on
the Company's financial position or results of operations in 1994. Short-term
investments consist of U.S. Treasury Securities and certificates of deposit with
original maturities in excess of 90 days and less than one year and are
classified as "held-to-maturity". The carrying amount of these investments
approximates fair value. Gross unrealized gains (losses) for fiscal 1994 are not
material.
PROPERTY AND EQUIPMENT
Equipment is stated at cost and depreciated over the estimated useful lives
of the assets (five years) using the straight-line method. Leasehold
improvements are capitalized at cost and amortized over the lesser of the useful
life of the asset or the remaining lease term.
REVENUE RECOGNITION
Revenue from grants and research agreements is recognized on a cost
reimbursement basis consistent with the performance requirement of the related
agreement.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). Under SFAS 109, a deferred tax asset and/
F-7
<PAGE> 73
CANJI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
or liability is computed for both the expected future impact of differences
between the financial statement and tax bases of assets and liabilities, and for
the expected future tax to be demanded from tax loss and tax credit
carryforwards. SFAS 109 also requires the establishment of a valuation
allowance, if necessary, to reflect the likelihood of realization of deferred
tax assets. The effect of tax rate changes are to be reflected in income in the
period such changes are enacted.
NOTE 3 -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1994
---------- ----------
<S> <C> <C>
Other current assets
Security deposits................................................... $ 137,000 $ 3,000
Employee receivables................................................ 78,000
Other receivables................................................... 64,000
Other............................................................... 200,000 183,000
---------- ----------
$ 337,000 $ 328,000
========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1994
---------- ----------
<S> <C> <C>
Property and equipment
Equipment........................................................... $1,429,000 $1,974,000
Leasehold improvements.............................................. 419,000 430,000
---------- ----------
1,848,000 2,404,000
Accumulated depreciation............................................ (508,000) (878,000)
---------- ----------
$1,340,000 $1,526,000
========== ==========
Accrued liabilities
Accrued interest expense............................................ $ 158,000
Accrued maintenance fee............................................. $ 100,000 22,000
Accrued vacation.................................................... 76,000 98,000
Accrued license fee................................................. 60,000
Other............................................................... 96,000 216,000
---------- ----------
$ 332,000 $ 494,000
========== ==========
</TABLE>
Equipment at December 31, 1994 and 1993 includes $1,001,000 and $588,000
under capital leases with related accumulated depreciation of $221,000 and
$71,000, respectively.
F-8
<PAGE> 74
CANJI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- CAPITAL LEASE OBLIGATIONS
Certain of the Company's leases qualify as capital leases. The present
value of the future minimum lease payments as of December 31, 1994 under these
capital leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MINIMUM LEASE
DECEMBER 31, PAYMENTS
- ------------ -------------
<S> <C>
1995......................................................................... $ 321,000
1996......................................................................... 312,000
1997......................................................................... 168,000
1998......................................................................... 38,000
-------------
Total minimum lease payments................................................... 839,000
Less amounts representing interest............................................. 160,000
-------------
Present value of minimum lease payments........................................ 679,000
Less current portion........................................................... 232,000
-------------
Long-term capitalized lease obligations........................................ $ 447,000
===========
</TABLE>
The Company has an equipment leasing arrangement which allows the Company
to finance up to $1,100,000. The annual interest rate under this leasing
arrangement ranges from 14.3% to 15.9%. Interest paid during 1994 and 1993 was
$85,000 and $37,000, respectively.
NOTE 5 -- NOTES PAYABLE
During 1994, the Company entered into an unsecured convertible bridge loan
financing arrangement with certain of its existing shareholders. The arrangement
allows the Company to borrow up to $4 million with interest at 8%. At December
31, 1994, $2,061,000 is outstanding under this arrangement. Subsequent to
December 31, 1994, the note holders agreed to convert the then outstanding
balance of $2,155,000 plus accrued interest into 718,854 shares of Series D
convertible preferred stock (Notes 6 and 10).
NOTE 6 -- CONVERTIBLE PREFERRED STOCK
The Series A, Series B, Series C, and Series D and Series I convertible
preferred stock (collectively the "Preferred Shares") are convertible at the
option of the holder, into a total of 6,251,773 shares of common stock subject
to certain antidilution adjustments. Each of the Preferred Shares shall have the
number of votes equal to the number of shares of common stock into which it is
convertible. Each Preferred Share has a liquidation preference equal to its
original purchase price. Such liquidation preference has priority over all
distributions for common shares.
The Preferred Shares are not entitled to mandatory or cumulative dividends,
but if the Board of Directors declares a dividend in a particular year, the
Preferred Shares shall have an 8% preferred dividend payable prior to any
dividends being paid on the common shares. Thereafter, the Preferred Shares and
the common shares will receive the same dividends.
At such time as the Company has a public offering of its common stock with
the Company receiving at least $5,000,000 in proceeds from the stock offering,
and with the common stock selling price of at least $5 per share, all Preferred
Shares shall be converted automatically into common shares on a one-for-one
basis, subject to certain antidilution provisions.
During 1994, the Company issued 1,000,000 shares of Series I preferred
stock pursuant to a licensing agreement (Note 8).
F-9
<PAGE> 75
CANJI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During 1994, shareholders holding 176,563 shares of Series C and 123,437
shares of Series D convertible preferred stock surrendered such shares for
cancellation pursuant to a license agreement (Note 8).
During 1994, the Company issued 3,000 shares of Series D preferred stock
pursuant to a license agreement (Note 8).
During 1993, the Company issued 131,250 shares of Series D preferred stock
and a warrant to purchase 100,000 shares of Series D preferred stock pursuant to
certain license agreements (Note 8).
NOTE 7 -- COMMON STOCK
During 1993, the Company issued 200,000 shares of common stock and common
stock options to purchase 100,000 shares of common stock pursuant to certain
license agreements (Note 8).
During 1990, the Company adopted the 1990 Stock Option Plan (the "Plan"),
which provides for the grant of incentive stock options ("ISO's"), nonqualified
options and stock appreciation rights to officers, directors, employees and
certain non-employees. As of December 31, 1994, an aggregate of 2,000,000 shares
of common stock have been allocated to the Plan.
The exercise price of ISO's is not less than the fair market value of the
underlying shares on the date of grant. The exercise price of nonqualified
options may not be less than 85% of the fair market value of the underlying
shares on the date of grant. Options vest annually at the rate of 20% per year
from the date of grant. Options may be exercised during a ten year period from
the date of grant.
There have been no stock appreciation rights issued under the Plan. The
following summarizes activity with respect to the options through December 31,
1994:
<TABLE>
<CAPTION>
ISO NONQUALIFIED
---------------------------- -------------------------
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- -------------- ------- -------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1991.......... 222,750 $.05 - $.275 145,000 $.05 - $ .20
Granted................................... 268,150 .275 296,000 .275
Exercised................................. (43,070) .05 - .20 (2,000) .05
Canceled.................................. (12,880) .05 - .275
--------- -------
Outstanding at December 31, 1992.......... 434,950 .05 - .275 439,000 05 - .275
Granted................................... 483,750 .275 - .32 130,000 .32
Exercised................................. (69,300) .10 - .275 (33,000) .05 - .275
Canceled.................................. (25,850) .20 - .32 (20,000) .275
--------- -------
Outstanding at December 31, 1993.......... 823,550 .05 - .32 516,000 .05 - .32
Granted................................... 397,500 .32 12,000 .32
Exercised................................. (183,950) .05 - .32 (5,000) .05 - .275
Canceled.................................. (16,650) .20 - .32 (30,000) .05 - .20
--------- -------
Outstanding at December 31, 1994.......... 1,020,450 $.05 - $ .32 493,000 $.05 - $ .32
========= =======
Exercisable at December 31, 1994.......... 87,430 $.10 - $ .32 251,600 $.05 - $ .20
========= =======
</TABLE>
During 1992, the Company adopted the 1992 Non-employee Director Stock
Option Plan, which allows for each non-employee director to be granted an option
to purchase 5,000 shares of common stock annually during the ten year term of
the plan. For directors appointed during the year, a ratable number of shares
will be issued. The exercise price of such options is the fair market value of
the underlying shares on the date of grant. The options vest on the earlier of
one year from the date of grant or on the date of the next annual
F-10
<PAGE> 76
CANJI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
shareholders' meeting and expire ten years from the date of grant. As of
December 31, 1994, 200,000 shares of common stock were reserved for grant and no
options had been issued under this plan.
WARRANTS
In connection with the convertible bridge loan financing agreement entered
into during 1994, the Company issued warrants for the purchase of 217,503 shares
of Series D preferred stock at the lesser of $4.00 or the most recent price per
share paid in a private placement. The fair value of the warrants which expire
in December 1997 was recorded as debt discount and is amortized over the life of
the loan. Subsequent to December 31, 1994 and in conjunction with the conversion
of the bridge financing debt to equity, the exercise price of the warrants was
reduced to the lesser of $2.25 per share or the price of the Company's stock
sold in a future public offering (Notes 5 and 10).
During 1994, in accordance with the terms of ongoing consulting agreements,
the Company issued warrants to outside consultants to purchase 44,406 shares of
Series D preferred stock at $.32 per share. The warrants expire in 5 years. The
Company recognized a charge to operations of $172,000 based on the estimated
fair value of warrants.
NOTE 8 -- COMMITMENTS
OPERATING LEASE AGREEMENTS
In November 1991, the Company entered into a lease agreement for office and
research facilities. The lease term is seven years and includes one three year
option to renew. In connection with the lease agreement, the Company has
executed a $100,000 letter of credit to the landlord in lieu of a security
deposit. The Company has pledged $100,000 in the form of a certificate of
deposit, which is included in other current assets at December 31, 1994 and
1993. Rent expense for the years ended December 31, 1992, 1993 and 1994 and for
the period January 18, 1990 (inception) to December 31, 1994 for facilities was
$304,000, $642,000, $640,000, and $1,791,000, respectively. The lease agreement
includes provisions for rent abatement. The difference between straight-line
rent expense and amounts paid for rent is included on the balance sheet as
deferred rent.
Future minimum operating lease payments for facilities and equipment are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
- ------------
<S> <C>
1995............................................................... $ 574,000
1996............................................................... 555,000
1997............................................................... 601,000
1998............................................................... 551,000
</TABLE>
LICENSE AND RESEARCH AGREEMENTS
Schering Corporation -- Schering-Plough Ltd.
In May 1994, the Company entered agreements with Schering Corporation and
Schering-Plough Ltd. (collectively referred to as Schering-Plough) for
collaboration on the research and development of certain tumor suppressor gene
technology developed by the Company, and provides Schering-Plough the exclusive,
world-wide license rights to such technology. Upon signing the agreement,
Schering-Plough paid to the Company $2,000,000 and will pay the Company
$2,000,000 annually, through 1998 and subject to termination of the agreement,
for research funding. Additionally, Schering-Plough shall pay the Company
specified amounts based on milestones achieved as outlined in the agreement. As
partial consideration for the world-wide license rights, Schering-Plough shall
pay to the Company royalties of 11% on all products related to the technology.
Schering-Plough also has the first right to refusal to enter into similar
collaboration and license agreements for tumor suppressor genes subsequently
developed by the Company.
F-11
<PAGE> 77
CANJI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Vysis, Inc.
In June 1994, the Company entered into an agreement with Vysis, Inc.
(formerly, Imagenetics Incorporated) which provides Vysis with an exclusive
world-wide license to use and sell certain research technology in the field of
diagnostic uses and diagnostic research owned by the Company, as defined in the
agreement. As consideration for the license the Company received $600,000 from
Vysis and Vysis surrendered 176,563 and 123,437 of the Company's Series C and
Series D convertible preferred stock, respectively. Additionally, Vysis shall
pay royalties to the Company in the range of 3%-5% on net sales of the licensed
products which will offset royalties owed by the Company to the original
licensor.
Research Development Foundation
In October 1994, the Company entered into an agreement with Research
Development Foundation (RDF) whereby RDF has granted the Company an exclusive
world-wide license to make, have made, use and sell certain licensed property,
as outlined in the agreement, in consideration for 3,000 shares of Series D
preferred stock and royalties of 6% of gross revenues on sales of the licensed
products. Additionally, the Company shall make milestone payments to RDF based
upon milestones achieved as outlined in the agreement.
In April 1993, the Company entered into an agreement with RDF, pursuant to
which RDF assigned to the Company license rights of four inventions related to
retinoblastoma gene technology. As consideration for the assignment and first
right of refusal for future inventions, the Company granted to RDF 200,000
shares of common stock valued at $64,000 and a warrant to purchase 100,000
shares of Series D preferred stock at $3.20 per share, valued at $100,000, which
expires in April 1996. The aggregate value of the common stock and warrant for
preferred stock of $164,000 has been charged to research and development
expense.
The Company is required to pay royalties to RDF based on a percentage of
gross sales or sublicensee income from certain products utilizing the assigned
inventions. To satisfy commercialization requirements of the agreement, the
Company should incur $1,000,000 per year of research and development expenses
related to retinoblastoma gene technology or have revenues of $1,000,000 per
year of products utilizing retinoblastoma gene technology. The agreement shall
be in force through the later of ten years from the first year the Company
generates commercial gross revenue or the expiration of the last-to-expire
patent licensed under the agreement. The agreement contains cancellation clauses
whereby the Company may relinquish its rights to the technology and be relieved
of its commercialization obligation.
IMCERA and American Gene Therapy Inc.
In September 1993, the Company entered into agreements with IMCERA Group
and American Gene Therapy Inc. (AGTI) to acquire the license rights for an
artificial mammalian mini-chromosome technology. The Company issued 131,250
shares of Series D convertible preferred stock to IMCERA in exchange for such
rights. The Company also granted options to purchase 100,000 shares of common
stock to two principal scientists of AGTI as consideration for performing
certain agreed-upon research activities. The value of the preferred stock of
$420,000 has been charged to research and development expense; there was no
charge for common stock options due to their immateriality.
The Company is required to pay royalties to IMCERA and AGTI based on a
percentage of net sales or sublicensee income from products utilizing the gene
delivery technology. The agreements shall be in force through the expiration of
the last-to-expire patent licensed under the agreements.
University of Texas
In December 1992, the Company entered into a patent option and license
agreement with the University of Texas, pursuant to which the University granted
to the Company an exclusive, world-wide license for
F-12
<PAGE> 78
CANJI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
certain inventions. The Company paid a $10,000 license fee for entering into the
license agreement and $40,000 for an option to acquire exclusive, world-wide
license rights to certain future inventions. The license remains in effect for
the life of the licensed patents.
University of California
In August 1990, the Company was granted an exclusive license by the
University of California for the commercial development, use and sale of certain
technology. As part of that agreement, the Company paid a non-refundable license
fee of $75,000 during the period ended December 31, 1990 which was charged to
operations. The Company is required to pay minimum annual royalties of $25,000
in 1993 through 1995 and $50,000 beginning in 1996 through the remaining term of
the license. The minimum royalty payment is to be credited against earned
royalties based on a percentage of net sales due in a given year. The license
agreement shall be in force through the expiration of the last-to-expire patent
licensed under the agreement. The Company, at its option, can terminate the
agreement with 90 days notice. Payments to the University of California related
to the license totaled $25,000 in 1993 and 1994, respectively and $135,000 for
the period January 18, 1990 (inception) to December 31, 1994.
Immunopharmaceutics, Inc.
In November 1992, the Company entered into a research contract whereby it
secured the services of Immunopharmaceutics, Inc. (IPI) to conduct research in
exchange for payments over an eighteen month period. The agreement as amended in
1993, requires payments totalling $60,000 during 1994 and is cancellable by the
Company upon 30 days written notice. Pursuant to this agreement, the Company
paid IPI $100,000, $120,000 and $220,000 in 1992, 1993 and for the period
January 18, 1990 (inception) to December 31, 1994, respectively. These amounts
are included in research and development expense. All technical results of the
research will be the sole and exclusive property of the Company.
NOTE 9 -- INCOME TAXES
Deferred tax assets are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1993 1994
----------- -----------
<S> <C> <C>
Net operating loss carryforward................................... $ 3,917,000 $ 5,694,000
Capitalized research and development.............................. 888,000 1,377,000
Research and development credit................................... 675,000 1,051,000
Deferred rent..................................................... 200,000 231,000
Compensation accruals............................................. 45,000 42,000
Depreciation...................................................... 134,000 236,000
Patent costs...................................................... 434,000 526,000
Other............................................................. 56,000
----------- -----------
6,293,000 9,213,000
Valuation allowance............................................... (6,293,000) (9,213,000)
----------- -----------
Deferred taxes.................................................... $ -- $ --
=========== ===========
</TABLE>
The Company is in a net operating loss position for 1992, 1993 and 1994 for
both Federal and state tax purposes. At December 31, 1994, the Company has net
operating loss carryforwards of $16,514,000 and $853,000 for Federal and state
income tax reporting purposes, respectively. The net operating losses will
expire beginning in 2005 and 1998 for Federal and state purposes, respectively,
if not previously utilized.
F-13
<PAGE> 79
CANJI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1994, the Company has $676,000 and $375,000 in Federal and
state research and development credit carryforwards, respectively. The credits
will begin to expire in 2005 if not previously utilized.
As specified in the Internal Revenue Code, a 50% or more ownership change
by a combination of the Company's significant stockholders during any three year
period would result in certain limitations on the Company's ability to utilize
its net operating loss carryforward and research and development credit
carryforwards. Such a change has occurred and may occur again, therefore,
utilization of net operating loss carryforwards will be subject to limitations.
The Company paid taxes of $800 during 1992, 1993 and $2,900 during 1994.
NOTE 10 -- SUBSEQUENT EVENTS
Subsequent to December 31, 1994, the outstanding principal balance of the
bridge loan and accrued interest thereon were converted into Series D preferred
stock.
NOTE 11 -- NET LOSS PER COMMON SHARE
Net loss per common share is computed by dividing net loss for the period
by the weighted average number of common shares outstanding. Shares issuable
through the exercise of stock options and warrants and the conversion of
convertible securities are not considered in the calculation, since they would
be anti-dilutive to the net loss per common share. The weighted-average number
of shares used in the computation of net loss per common share for the years
ended December 31, 1992, 1993 and 1994 were 1,755,022, 1,984,235 and 2,254,751,
respectively.
F-14
<PAGE> 80
UNAUDITED FINANCIAL STATEMENTS OF CANJI, INC.
CANJI, INC.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents..................................... $ 2,595,000 $ 445,000
Short-term investments........................................ 198,000 3,544,000
Other current assets.......................................... 275,000 328,000
------------ ------------
Total current assets.................................. 3,068,000 4,317,000
Property and equipment, net..................................... 1,392,000 1,526,000
Other assets.................................................... 20,000 28,000
------------ ------------
$ 4,480,000 $ 5,871,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities...................... $ 496,000 $ 761,000
Deferred contract revenue..................................... 1,333,000 833,000
Current portion of capital lease obligations.................. 310,000 232,000
Notes payable................................................. 20,000 2,061,000
------------ ------------
Total current liabilities............................. 2,159,000 3,887,000
Deferred rent................................................... 275,000 315,000
Capital lease obligations, less current portion................. 543,000 447,000
Stockholder's equity:
Series convertible preferred stock, $.01 par value, 20,000,000
shares authorized, 6,970,627 and 6,251,773 shares issued
and outstanding in 1995 and 1994, respectively............. 70,000 62,000
Common stock, $.01 par value, 30,000,000 shares authorized,
2,494,930 and 2,287,370 shares issued and outstanding in
1995 and 1994, respectively................................ 25,000 23,000
Additional paid-in capital.................................... 22,649,000 20,197,000
Less note receivable for purchase of common stock............. -- (17,000)
Accumulated deficit........................................... (21,241,000) (19,043,000)
------------ ------------
1,503,000 1,222,000
------------ ------------
$ 4,480,000 $ 5,871,000
============ ============
</TABLE>
See Notes to Financial Statements (Unaudited)
F-15
<PAGE> 81
CANJI, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPT. 30, ENDED SEPT. 30,
------------------------ -------------------------- INCEPTION TO
1995 1994 1995 1994 SEPT. 30, 1995
---------- ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Revenues................... $1,581,000 $ 735,000 $ 4,703,000 $ 2,498,000 $ 7,832,000
---------- ----------- ----------- ----------- ------------
Expenses
Research and
development........... 1,613,000 1,811,000 5,311,000 4,947,000 22,942,000
General and
administrative........ 361,000 401,000 1,535,000 1,249,000 6,402,000
---------- ----------- ----------- ----------- ------------
Total Operating Expenses... 1,974,000 2,212,000 6,846,000 6,196,000 29,344,000
Net Operating Loss......... (393,000) (1,477,000) (2,143,000) (3,698,000) (21,512,000)
Interest expense......... (50,000) (92,000) (216,000) (248,000) (598,000)
Interest income.......... 53,000 77,000 161,000 131,000 869,000
---------- ----------- ----------- ----------- ------------
Net Loss................... $ (390,000) $(1,492,000) $(2,198,000) $ (3,815,000) $(21,241,000)
========== =========== =========== =========== ============
Net loss per common
share.................... $(.91) $(1.70)
=========== ===========
</TABLE>
See Notes to Financial Statements (Unaudited)
F-16
<PAGE> 82
CANJI, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------- INCEPTION TO
SEPT. 30, 1995 SEPT. 30, 1994 SEPT. 30, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net cash flows from operating activities:
Net loss......................................... $ (2,198,000) $ (3,815,000) $ (21,241,000)
----------- ----------- ------------
Adjustments to reconcile net loss to net cash
used in operations:
Surrender of preferred stock as consideration
for license fee............................. -- (881,000) (881,000)
Depreciation and amortization................. 339,000 262,000 1,229,000
Stock and warrants issued for acquired
technology and research services............ -- -- 795,000
Non cash interest............................. 114,000 75,000 218,000
Change in:
Accounts payable and accrued liabilities.... (265,000) -- 496,000
Deferred rent............................... (40,000) 18,000 275,000
Deferred revenue............................ 500,000 1,142,000 1,333,000
Other, net.................................. 47,000 226,000 (208,000)
----------- ----------- ------------
Total adjustments............................. 695,000 842,000 3,257,000
----------- ----------- ------------
Net Cash used in operating activities......... (1,503,000) (2,973,000) (17,984,000)
----------- ----------- ------------
Cash flows from investing activities:
Purchases and sales of property and equipment,
net........................................... 161,000 (32,000) (1,340,000)
Other assets..................................... 8,000 (3,000) (96,000)
Net change in short-term investments............. 3,346,000 (2,456,000) (198,000)
----------- ----------- ------------
Net cash (used) provided in investing
activities.................................. 3,515,000 (2,491,000) (1,634,000)
----------- ----------- ------------
Cash flows from financing activities:
Payments under capital lease obligations......... (191,000) (127,000) (424,000)
Proceeds from exercise of stock options.......... 52,000 44,000 120,000
Proceeds from borrowings and warrants............ -- 2,175,000 2,175,000
Proceeds from issuance of preferred stock, net... -- 6,000,000 20,068,000
Costs in connection with issuance of common stock
in exchange for note and other................ 277,000 -- 274,000
----------- ----------- ------------
Net cash provided by financing activities........ 138,000 8,092,000 22,213,000
----------- ----------- ------------
Increase in cash and cash equivalents.............. 2,150,000 2,628,000 2,595,000
Cash and cash equivalents at beginning of period... 445,000 298,000 --
----------- ----------- ------------
Cash and cash equivalents at end of period......... $ 2,595,000 $ 2,926,000 $ 2,595,000
=========== =========== ============
</TABLE>
See Notes to Financial Statements (Unaudited)
F-17
<PAGE> 83
CANJI, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The unaudited financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-Q, although the Company is not subject thereto. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The statements
should be read in conjunction with the accounting policies and notes to the
Company's 1994 financial statements.
In the opinion of management, the financial statements reflect all
adjustments necessary for a fair statement of the operations for the interim
periods presented.
Canji is a development stage enterprise which has incurred net losses from
its research and development activities since inception. The operations of Canji
are dependent on its ability to obtain continued financing, which to date has
been principally from sales of stock and collaborative research arrangements.
Based on Canji's present business plan, it is dependent on such financing
arrangements to continue operations.
NET LOSS PER COMMON SHARE
Net loss per common share is computed by dividing net loss for the period
by the weighted-average number of common shares outstanding. Shares issuable
through the exercise of stock options and warrants and the conversion of
convertible securities are not considered in the calculation since they would be
anti-dilutive to the net loss per share. The weighted-average number of shares
used in the computation of net loss per common share for the nine months ended
September 30, 1995 and 1994 were 2,417,000 and 2,247,000, respectively.
NOTES PAYABLE AND WARRANTS
During the first quarter of 1995, the note holders converted the
outstanding loan balance plus accrued interest into 718,854 shares of Series D
convertible preferred stock. In conjunction with the conversion, the exercise
price of the warrants issued with the debt was reduced to the lesser of $2.25
per share or the price of the Company's stock in a future public offering.
SUBSEQUENT EVENTS
In November 1995, the Company issued 693,723 shares of Series E convertible
preferred stock. Proceeds from the offering, net of expenses, totaled $1.2
million. In November 1995, Canji received a $3.0 million loan commitment from
Schering-Plough. Schering-Plough has advanced $2.0 million of this amount and
has agreed to advance $1.0 million on January 15, 1996. Also, in November 1995,
the Company signed a letter of intent to be acquired by Schering-Plough for
approximately $54.5 million.
F-18
<PAGE> 84
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
SCHERING-PLOUGH CORPORATION
("S-P"),
CANJI MERGER CORP.
a wholly owned direct subsidiary of S-P
("Subcorp"),
AND
CANJI, INC.
("Canji")
December 8, 1995
<PAGE> 85
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I THE MERGER................................................................ A-1
1.1 The Merger...................................................... A-1
1.2 Effective Time.................................................. A-1
1.3 Effects of the Merger........................................... A-1
1.4 Certificate of Incorporation and Bylaws......................... A-1
1.5 Directors and Officers.......................................... A-2
1.6 Additional Actions.............................................. A-2
ARTICLE II CONVERSION OF SECURITIES................................................. A-2
2.1 Conversion of Capital Stock..................................... A-2
2.2 Exchange of Certificates........................................ A-3
(a)Exchange Agent............................................... A-3
(b)Exchange Procedures.......................................... A-3
(c)Distributions with Respect to Unexchanged Certificates....... A-4
(d)No Further Ownership Rights in Canji Equity Securities....... A-4
(e)Termination of Exchange Fund................................. A-4
(f)No Liability................................................. A-4
(g)Investment of Exchange Fund.................................. A-5
(h)Treatment of Proceeds........................................ A-5
2.3 Treatment of Stock Options, Warrants and Other Rights........... A-5
2.4 Canji p53 Participation Certificates............................ A-5
2.5 Dissenting Shares............................................... A-5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF S-P AND SUBCORP....................... A-5
3.1 Organization and Standing....................................... A-5
3.2 Corporate Power and Authority................................... A-6
3.3 Capitalization of S-P........................................... A-6
3.4 Conflicts, Consents and Approval................................ A-6
3.5 S-P SEC Documents............................................... A-7
3.6 Registration Statement.......................................... A-7
3.7 Compliance with Law............................................. A-7
3.8 No Material Adverse Change...................................... A-7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CANJI.................................. A-7
4.1 Organization and Standing....................................... A-7
4.2 Subsidiaries.................................................... A-8
4.3 Corporate Power and Authority................................... A-8
4.4 Capitalization of Canji......................................... A-8
4.5 Conflicts; Consents and Approvals............................... A-8
4.6 Taxes........................................................... A-9
4.7 Compliance with Law............................................. A-10
4.8 Proprietary Rights.............................................. A-10
4.9 Title to and Condition of Properties............................ A-11
</TABLE>
i
<PAGE> 86
<TABLE>
<S> <C>
4.10 Registration Statement.......................................... A-11
4.11 Litigation...................................................... A-11
4.12 Employee Benefit Plans.......................................... A-11
4.13 Contracts....................................................... A-13
4.14 Officers and Employees.......................................... A-13
4.15 Labor Relations................................................. A-13
4.16 Undisclosed Liabilities......................................... A-14
4.17 Collaborator and Supplier Relationships......................... A-14
4.18 Operation of Canji's Business................................... A-14
4.19 Permits; Compliance............................................. A-14
4.20 Environmental Matters........................................... A-14
4.21 OSHA Matters.................................................... A-15
4.22 Insurance....................................................... A-15
4.23 DGCL Section 203 and State Takeover Laws........................ A-16
4.24 Brokerage and Finder's Fees..................................... A-16
4.25 Financial Data.................................................. A-16
4.26 Future Sales by Canji Stockholders of S-P Common Shares......... A-16
ARTICLE V COVENANTS OF THE PARTIES.................................................. A-16
5.1 Mutual Covenants................................................ A-16
(a) General..................................................... A-16
(b) Other Matters............................................... A-16
(c) Public Announcements........................................ A-17
(d) Certificate of Merger....................................... A-17
(e) Tax Treatment of Merger..................................... A-17
(f) Conveyance Taxes............................................ A-17
5.2 Covenants of S-P................................................ A-17
(a) Preparation of S-P Registration Statement................... A-17
(b) Notification of Certain Matters............................. A-17
(c) Listing of S-P Common Stock................................. A-17
(d) Canji Employees............................................. A-17
(e) San Diego Location.......................................... A-18
(f) Reorganization Status....................................... A-18
5.3 Covenants of Canji.............................................. A-18
(a) Canji Stockholders Meeting and Other Matters................ A-18
(b) Information for the Registration Statement and Preparation
of Canji Proxy Statement........................................ A-18
(c) Conduct of Canji's Operations............................... A-18
(d) Access...................................................... A-20
(e) No Solicitation............................................. A-20
(f) Affiliates of Canji......................................... A-20
(g) Notification of Certain Matters............................. A-20
(h) Appraisal Rights............................................ A-20
</TABLE>
ii
<PAGE> 87
<TABLE>
<S> <C>
(i) Unvested Canji Options...................................... A-21
(j) Proxy Statement/Prospectus Delivery......................... A-21
(k) Environmental Compliance.................................... A-21
ARTICLE VI CONDITIONS............................................................... A-22
6.1 Mutual Conditions............................................... A-22
6.2 Conditions to Obligations of Canji.............................. A-22
6.3 Conditions to Obligations of S-P and Subcorp.................... A-23
ARTICLE VII TERMINATION AND AMENDMENT............................................... A-23
7.1 Termination..................................................... A-23
7.2 Effect of Termination........................................... A-24
7.3 Amendment....................................................... A-24
7.4 Extension; Waiver............................................... A-24
7.5 Procedure Upon Termination...................................... A-24
ARTICLE VIII CONFIDENTIALITY........................................................ A-24
8.1 Confidentiality................................................. A-24
8.2 No Publicity.................................................... A-25
ARTICLE IX MISCELLANEOUS............................................................ A-25
9.1 Survival of Representations and Warranties...................... A-25
9.2 Notices......................................................... A-25
9.3 Interpretation.................................................. A-26
9.4 Counterparts.................................................... A-26
9.5 Entire Agreement................................................ A-26
9.6 Third Party Beneficiaries....................................... A-26
9.7 Governing Law and Jurisdiction.................................. A-26
9.8 Specific Performance............................................ A-26
9.9 Assignment...................................................... A-26
9.10 Expenses........................................................ A-26
</TABLE>
iii
<PAGE> 88
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of the 8th day of December, 1995, by and among Schering-Plough
Corporation, a New Jersey corporation ("S-P"), Canji Merger Corp., a Delaware
corporation and a wholly owned direct subsidiary of S-P ("Subcorp"), and Canji,
Inc., a Delaware corporation ("Canji").
PRELIMINARY STATEMENTS
A. S-P desires to acquire Canji and the research and development operations
of Canji through the merger of Subcorp with and into Canji, with Canji as the
surviving corporation, (the "Merger") pursuant to which each share of Canji
Common Stock (as defined in Section 2.1(b)) and each share of Canji Preferred
Stock (as defined in Section 2.1(c)) outstanding at the Effective Time (as
defined in Section 1.2) will be converted into the right to receive S-P Common
Shares (as defined in Section 2.1(b)) as more fully provided herein.
B. Canji desires to combine its research and development in the field of
gene therapy with the worldwide pharmaceutical research and marketing
capabilities of S-P and for the holders of shares of Canji Common Stock and
Canji Preferred Stock (collectively, "Canji Stockholders") to receive additional
consideration based upon their proportionate share of an amount, if any,
determined as a percentage of the net sales (minus existing payment obligations)
generated by any pharmaceutical product, device, biological material, method or
process derived from the p53 gene technology, and which includes the p53 gene as
an active ingredient or a material element of an active ingredient, as provided
for in this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the mutual and
dependent promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, and
in accordance with the provisions of the Delaware General Corporation Law (the
"DGCL"), Subcorp shall be merged with and into Canji as soon as practicable
following the satisfaction or waiver of each of the conditions set forth in
Article VI. Following the Merger, the separate corporate existence of Subcorp
shall cease and Canji shall continue its existence under the laws of the State
of Delaware under the name "Canji, Inc.". Canji, in its capacity as the
corporation surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2 Effective Time. The Merger shall be consummated by filing with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State")
a certificate of merger (the "Certificate of Merger") in such form as is
required by and executed in accordance with Section 252(c) of the DGCL. The
Merger shall become effective (the "Effective Time") when the Certificate of
Merger has been filed with the Delaware Secretary of State or at such later time
as shall be specified in the Certificate of Merger. Prior to the filing referred
to in this Section 1.2, a closing (the "Closing") shall be held at the offices
of S-P, One Giralda Farms, Madison, New Jersey 07940, or such other place as the
parties may agree on the date (the "Closing Date") set by S-P, which date shall
be as soon as practicable following the satisfaction or waiver of all of the
conditions set forth in Article VI hereof.
1.3 Effects of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL.
1.4 Certificate of Incorporation and Bylaws. The Certificate of Merger
shall provide that at the Effective Time (a) the Certificate of Incorporation of
Subcorp as in effect immediately prior to the Effective Time and as attached
hereto as Exhibit 1.4(i) shall be the Certificate of Incorporation of the
Surviving
A-1
<PAGE> 89
Corporation and (b) the By-laws of Subcorp in effect immediately prior to the
Effective Time and as attached hereto as Exhibit 1.4(ii) shall be the By-laws of
the Surviving Corporation, in each case until amended in accordance with the
DGCL.
1.5 Directors and Officers. From and after the Effective Time, the
officers and directors of Subcorp shall be the officers and directors of the
Surviving Corporation, in each case until their respective successors are duly
elected and qualified.
1.6 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Canji, or (b) otherwise carry out the provisions of this
Agreement, Canji and its officers and directors immediately prior to the
Effective Time shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such deeds, assignments
or assurances in law and to take all acts necessary, proper or desirable to
vest, perfect or confirm title to and possession of such rights, properties or
assets in the Surviving Corporation and otherwise to carry out the provisions of
this Agreement, and the officers and directors of the Surviving Corporation are
authorized in the name of Canji or otherwise to take any and all such action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger, automatically and without any action on the part of S-P, Subcorp, Canji
or any Canji Stockholder:
(a) Each share of common stock, $10.00 par value, of Subcorp issued
and outstanding immediately prior to the Effective Time shall be converted
into one share of common stock, no par value, of the Surviving Corporation.
Such newly issued shares shall thereafter constitute all of the issued and
outstanding common stock of the Surviving Corporation.
(b) Each share of common stock $0.01 par value of Canji ("Canji Common
Stock") and each share of preferred stock $0.01 par value of Canji ("Canji
Preferred Stock") issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares, as such term is defined in Section 2.5,
and other than any shares ("S-P Canji Shares") of Canji Common Stock or
Canji Preferred Stock which are held, directly or indirectly, by Subcorp or
any direct or indirect parent of Subcorp, including the one million shares
of Canji Series I Preferred Stock held by S-P), shall be converted into and
represent (i) the number of common shares, $1.00 par value, of S-P, fully
paid and non-assessable ("S-P Common Shares") rounded to the nearest
ten-thousandth of a share) (the "Exchange Ratio") equal to the quotient
obtained (x) by dividing $54.5 million by the sum of the total number of
shares of Canji Common Stock and the total number of shares of Canji
Preferred Stock issued and outstanding immediately prior to the Effective
Time (including Dissenting Shares, but excluding the S-P Canji Shares), the
total number of shares of Canji Common Stock and Canji Preferred Stock
required to be reserved for issuance upon the exercise of all warrants,
options (excluding the Unvested Canji Options (as defined in Section
5.3(i)(A)) to purchase up to 600,000 shares of Canji Common Stock and/or
Canji Preferred Stock identified on Exhibit 5.3(i)(A)) and other rights to
purchase or otherwise receive such shares outstanding at the Effective Time
(collectively, "Canji Equity Securities") and then dividing that amount by
(y) the average of the closing prices of S-P Common Shares as reported on
the New York Stock Exchange ("NYSE") Composite Tape ("NYSE Composite Tape")
on each of the previous fifteen trading days ending on the second trading
day prior to the Closing Date (the "Average Share Price") and (ii) one
Participation Certificate (as defined in Section 2.4) (collectively, the
"Merger Consideration"). No certificates for fractional S-P Common Shares
shall be issued as a result of the conversion provided for in this Section
2.1(b). To the extent that an outstanding share of Canji Common Stock or
Canji Preferred Stock would otherwise have become a fractional S-P Common
Share, the holder thereof, upon presentation of such fractional interest
represented by an appropriate certificate for
A-2
<PAGE> 90
Canji Common Stock or Canji Preferred Stock to the Exchange Agent pursuant
to Section 2.2, shall be entitled to receive a cash payment therefor in an
amount equal to the value (determined with reference to the Average Share
Price) of such fractional interest. Such payment with respect to fractional
shares is merely intended to provide a mechanical rounding off of, and is
not a separately bargained for, consideration. If more than one certificate
representing shares of Canji Common Stock or Canji Preferred Stock shall be
surrendered for the account of the same holder, the number of S-P Common
Shares for which certificates have been surrendered shall be computed on
the basis of the aggregate number of shares represented by the certificates
so surrendered.
(c) Exercisable options to purchase Canji Common Stock and/or Canji
Preferred Stock will be exercised immediately prior to the Merger or
canceled.
(d) Exercisable warrants and other rights, if any, to purchase Canji
Common Stock and/or Canji Preferred Stock which shall not have been
exercised prior to the Effective Time (and any rights to receive such
shares, if any, which have not been exercised or effected prior to the
Effective Time) shall be converted into and represent the right to receive
the Merger Consideration less the amount of any exercise price thereof.
(e) Each share of capital stock of Canji held in the treasury of Canji
and each share of Canji Common Stock or Canji Preferred Stock which is
held, directly or indirectly, by Subcorp or any direct or indirect parent
of Subcorp (including the one million shares of Series I Preferred Stock
held by S-P), shall be canceled and retired and no Merger Consideration or
other payment shall be made in respect thereof.
(f) In the event that prior to the Effective Time S-P shall declare a
stock dividend or other distribution payable in S-P Common Shares or
securities convertible into S-P Common Shares, or effect a stock split,
reclassification, combination or other change with respect to S-P Common
Shares, the Average Share Price and Exchange Ratio value set forth in
Section 2.1(b) shall be adjusted to reflect such stock dividend,
distribution, stock split, reclassification, combination or other change.
2.2 Exchange of Certificates.
(a) Exchange Agent. Promptly following the Effective Time, S-P shall
deposit with Bank of New York, or such other exchange agent as may be designated
by S-P (the "Exchange Agent"), for the benefit of holders of Canji Equity
Securities, for exchange in accordance with this Section 2.2, certificates
representing S-P Common Shares and Participation Certificates issuable pursuant
to Section 2.1(b) in exchange for outstanding Canji Equity Securities and shall
from time-to-time deposit cash in an amount reasonably expected to be paid
pursuant to Section 2.1(b) (such S-P Common Shares, Participation Certificates
and cash, together with any stock dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective Time
represented outstanding Canji Equity Securities (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 such form and have such other provisions as S-P
may reasonably specify) and (ii) instructions for effecting the surrender of the
Certificates in exchange for certificates representing S-P Common Shares and
Participation Certificates. Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with a duly executed letter of transmittal, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of S-P Common Shares which such holder
has the right to receive pursuant to Section 2.1(b), (y) that number of
Participation Certificates which such holder has the right to receive pursuant
to Sections 2.1(b) and 2.4 and (z) a check representing the amount of cash in
lieu of fractional shares, if any, and unpaid dividends and distributions if
any, 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
Canji Equity Securities represented by the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the cash in lieu
of
A-3
<PAGE> 91
fractional shares and unpaid dividends and distributions, if any, payable to
holders of Certificates. In the event of a transfer of ownership of Canji Equity
Securities which is not registered on the transfer records of Canji, a
certificate representing the proper number of S-P Common Shares and
Participation Certificates, together with a check for the cash to be paid in
lieu of fractional shares, if any, and unpaid dividends and distributions, if
any, may be issued to such transferee if the Certificate representing such Canji
Equity Securities held by such transferee is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon surrender certificates representing S-P Common Shares and
Participation Certificates and cash in lieu of fractional shares thereof as
provided in Section 2.1(b).
(c) Distributions with Respect to Unexchanged Certificates. Notwithstand-
ing any other provisions of this Agreement, no dividends or other distributions
declared or made after the Effective Time with respect to S-P Common Shares and
the Participation Certificates having a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate, and no cash
payment in lieu of fractional shares shall be paid to any such holder, until the
holder shall surrender such Certificate as provided in this Section 2.2. Subject
to the effect of the DGCL, following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing whole S-P Common
Shares and the Participation Certificates issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole S-P Common Shares and the Participation Certificates
and not paid, less the amount of any withholding taxes which may be required
thereon, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole S-P Common Shares and the Participation Certificates, less the amount
of any withholding taxes which may be required thereon.
(d) No Further Ownership Rights in Canji Equity Securities. All S-P Common
Shares and the Participation Certificates issued upon surrender of Certificates
in accordance with the terms hereof (including any cash paid pursuant to Section
2.1(b)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Canji Equity Securities represented thereby, and there shall
be no further registration of transfers on the securities transfer books of
Canji Equity Securities outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.2. Certificates surrendered for exchange by any person
constituting an "affiliate" of Canji for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until S-P has received a written undertaking from such person as
provided in Exhibit A hereto.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to holders of Certificates for six months after the
Effective Time shall be delivered to S-P, upon demand thereby, and holders of
Certificates who have not theretofore complied with this Section 2.2 shall
thereafter look only to S-P for payment of any claim to S-P Common Shares,
Participation Certificates, cash in lieu of fractional shares thereof, or
dividends or distributions, if any, in respect thereof.
(f) No Liability. None of S-P, the Surviving Corporation or the Exchange
Agent shall be liable to any person in respect of any Canji Equity Securities
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall not have been
surrendered prior to seven years after the Effective Time of the Merger (or
immediately prior to such earlier date on which any cash, any cash in lieu of
fractional shares of retained Canji Equity Securities or any dividends or
distributions with respect to whole Canji Equity Securities in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Authority (as defined in Section 3.4(d)), any such cash, dividends
or distributions in respect of such Certificate shall, to the extent permitted
by Applicable Law, become the property of S-P, free and clear of all claims or
interest of any person previously entitled thereto.
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(g) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by S-P, on a daily basis. Any
interest and other income resulting from such investments shall be paid to S-P
upon termination of the Exchange Fund pursuant to Section 2.2(e).
(h) Treatment of Proceeds. The proceeds of the exercise of all vested
options, warrants and other rights to purchase or otherwise receive Canji Common
Stock and/or Canji Preferred Stock shall remain as an asset of Canji at the
Effective Time.
2.3 Treatment of Stock Options, Warrants and Other Rights. Canji agrees to
issue shares of Canji Common Stock and/or Canji Preferred Stock upon the
exercise of vested Canji options, warrants and any other rights to purchase or
otherwise receive such shares prior to the Effective Time.
2.4 Canji p53 Participation Certificates. At the Effective Time, as
provided by and in accordance with Section 2.1(b), each holder of Canji Equity
Securities issued and outstanding immediately prior to the Effective Time shall
be entitled to receive as part of the Merger Consideration a participation
certificate ("Participation Certificate") which represents a corresponding and
pro-rata payment of an amount, if any, determined as a percentage of the net
sales (minus existing payment obligations) generated by any pharmaceutical
product, device, biological material, method or process derived from the p53
gene technology, and which includes the p53 gene as an active ingredient or a
material element of an active ingredient. The specific terms and conditions of
the Participation Certificates will be more fully set forth in a Participation
Rights Agreement substantially in the form of Exhibit 2.4 attached hereto.
2.5 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Canji Common Stock and Canji Preferred Stock which are
outstanding immediately prior to the Effective Time and which are held by Canji
Stockholders (other than Subcorp or any direct or indirect parent of Subcorp)
who shall not have voted such shares in favor of the Merger and who shall have
delivered to Canji a written demand for appraisal of such shares in the manner
provided in Section 262 of the DGCL ("Dissenting Shares") shall not be converted
into the right to receive, or be exchangeable for the Merger Consideration but,
instead, the holders thereof shall be entitled to payment of the appraised value
of such shares in accordance with the provisions of Section 262 of the DGCL;
provided, however, that (a) if any holder of Dissenting Shares shall
subsequently deliver a written withdrawal of his demand for appraisal of such
shares (with the written approval of Canji, if such withdrawal is not tendered
within 60 days after the Effective Time), or (b) if any holder fails to
establish his entitlement to appraisal rights as provided in such Section 262,
or (c) if neither any holder of Dissenting Shares nor the Surviving Corporation
has filed a petition demanding a determination of the value of all Dissenting
Shares within the time provided in Section 262 of the DGCL, such holder or
holders (as the case may be) shall forfeit the right to appraisal of such shares
and such shares shall thereupon be deemed to have been converted into the right
to receive, and to have become exchangeable for, as of the Effective Time, the
Merger Consideration.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF S-P AND SUBCORP
In order to induce Canji to enter into this Agreement, S-P and Subcorp
hereby represent and warrant to Canji, subject to exceptions as set forth in the
S-P Disclosure Schedule (as defined in Section 3.3), the following:
3.1 Organization and Standing. Each of S-P and Subcorp is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation with full power and authority (corporate and other) to
own, lease, use and operate its properties and to conduct its business as and
where now owned, leased, used, operated and conducted. S-P is duly qualified to
do business and in good standing in each jurisdiction in which the nature of the
business conducted by it or the property it owns, leases or operates, makes such
qualification necessary, except where the failure to be so qualified or in good
standing in such jurisdiction would not have a material adverse effect on S-P.
Subcorp is not required to be qualified to do business as a foreign corporation
in any other jurisdiction. Neither S-P nor Subcorp is in default in the
performance, observance or fulfillment of any provision of its respective
Certificate of Incorporation or Bylaws.
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3.2 Corporate Power and Authority. Each of S-P and Subcorp has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of each of S-P and Subcorp, subject only to receipt of requisite approvals from
Canji Stockholders and Canji's, S-P's and Subcorp's Board of Directors. This
Agreement has been duly executed and delivered by each of S-P and Subcorp, and
constitutes the legal, valid and (subject to such stockholders' and Board of
Directors' approval) binding obligation of each of Subcorp and S-P enforceable
against each of them in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency or other similar laws affecting the rights of
creditors generally or as may be limited by the availability of equitable
remedies, including specific performance, subject to the discretion of the court
before which any proceeding thereof may be brought.
3.3 Capitalization of S-P. As of October 31, 1995, S-P's authorized
capital stock consisted solely of (a) 600,000,000 Common Shares, of which (i)
365,748,132 shares were issued and outstanding and (ii) 137,217,250 shares were
issued and held in treasury. S-P is authorized to issue 50,000,000 Preferred
Shares, consisting of 1,500,000 Preferred Shares designated as Series A Junior
Participating Preferred Stock and 48,500,000 Preferred Shares whose designations
have not yet been determined. Each outstanding share of S-P capital stock is,
and all S-P Common Shares to be issued in connection with the Merger will be,
duly authorized and validly issued, fully paid and nonassessable, and each
outstanding share of S-P capital stock has not been, and all S-P Common Shares
to be issued in connection with the Merger will not be, issued in violation of
any preemptive or similar rights. Each Participation Certificate will be duly
authorized and validly issued and not in violation of any preemptive or similar
rights. Other than as set forth above or in Section 3.3 to the disclosure
schedule (the "S-P Disclosure Schedule") delivered by S-P to Canji and dated the
date hereof, there are no outstanding subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer by S-P of any securities of S-P,
nor are there outstanding any securities which are convertible into or
exchangeable for any shares of capital stock of S-P.
3.4 Conflicts, Consents and Approval. Neither the execution and delivery
of this Agreement by S-P or Subcorp nor the consummation of the transactions
contemplated hereby will:
(a) subject only to the requisite Board of Directors' approval,
conflict with, or result in a breach of any provision of S-P's Certificate
of Incorporation or Bylaws or the Certificate of Incorporation or Bylaws of
Subcorp;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate or call a default under, or result in
the creation of any lien, security interest, charge or encumbrance upon any
of the properties or assets of S-P, Subcorp or any of its subsidiaries
under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which S-P, Subcorp or
any of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation, applicable to S-P or Subcorp or any of its respective
subsidiaries or their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing with or other notice to any third party or any
court, arbitral tribunal, administrative agency or commission or other
governmental or regulatory body, agency, instrumentality or authority (a
"Governmental Authority") by S-P or Subcorp other than registrations or
other actions required under federal and state securities laws as are
contemplated by this Agreement;
except in the case of (b), (c) and (d) for any of the foregoing that would not
have a material adverse effect on S-P.
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3.5 S-P SEC Documents. S-P has timely filed with the Securities and
Exchange Commission (the "Commission") all forms, reports, schedules, statements
and other documents required to be filed by it since January 1, 1993 under the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act") or the Securities Act (such
documents, as amended since the time of filing, collectively, the "S-P SEC
Documents"). The S-P SEC Documents, including, without limitation, any financial
statements or schedules included therein, at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) (a) 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, and (b) complied in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be. The financial statements of S-P included
in the S-P SEC Documents at the time filed (and, in the case of registration
statements and proxy statements, on the date of effectiveness and the date of
mailing, respectively) complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the Commission), and
fairly present (subject in the case of unaudited statements to normal, recurring
audit adjustments) the consolidated financial position of S-P and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
3.6 Registration Statement. None of the information provided by S-P for
inclusion in the registration statement on Form S-4 to be filed with the
Commission by S-P under the Securities Act, including the prospectus (as
amended, supplemented or modified, the "Prospectus") relating to S-P Common
Shares and Participation Certificates to be issued in the Merger and the proxy
statement and form of proxy relating to the vote of Canji Stockholders with
respect to the Merger and the Canji Preferred Stockholders Vote (as defined in
Section 5.3(a)) (collectively and as amended, supplemented or modified, the
"Proxy Statement") contained therein (such registration statement as amended,
supplemented or modified, the "Registration Statement"), at the time the
Registration Statement becomes effective or, in the case of the Proxy Statement,
at the date of mailing, will be false or misleading with respect to any material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form in all material
respects with the provisions of the Securities Act.
3.7 Compliance with Law. Each of S-P and Subcorp is in compliance with all
applicable laws, statutes, orders, rules, regulations, policies or guidelines
promulgated, or judgments, decisions or orders entered by any Governmental
Authority (collectively, "Applicable Laws") relating to it or its business or
properties, except where the failure to be in compliance therewith could not
reasonably be expected to have a material adverse effect on S-P.
3.8 No Material Adverse Change. Since September 30, 1995, there has been
no material adverse change in the consolidated financial position, business,
operations or consolidated results of operations of S-P and its subsidiaries
taken as a whole, from that reflected in the financial statements of S-P
included in the most recent S-P SEC Documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CANJI
In order to induce S-P and Subcorp to enter into this Agreement, Canji
hereby represents and warrants to S-P and Subcorp, subject to exceptions as set
forth in the Canji Disclosure Schedule (as defined in Section 4.1), the
following:
4.1 Organization and Standing. Canji is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full power and authority (corporate and other) to own,
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lease, use and operate its properties and to conduct its business as and where
now owned, leased, used, operated and conducted. Canji is duly qualified to do
business and in good standing in each jurisdiction listed in Section 4.1 to the
disclosure schedule (the "Canji Disclosure Schedule") delivered by Canji to S-P
and dated the date hereof, is not qualified to do business in any other
jurisdiction and neither the nature of the business conducted by it nor the
property it owns, leases or operates requires it to qualify to do business as a
foreign corporation in any other jurisdiction. Canji is not in default in the
performance, observance or fulfillment of any provision of its Certificate of
Incorporation, as amended, or Bylaws. The merger of Canji, Inc. a California
corporation ("Canji California") with and into Canji whereby Canji was the
surviving corporation was duly authorized and validly consummated in accordance
with the DGCL. For purposes of this entire Section 4, references to Canji shall
include Canji California for the applicable time period.
4.2 Subsidiaries. Canji does not own, and has never owned, directly or
indirectly, any equity or other ownership interest in any corporation,
partnership, joint venture or other entity or enterprise. Canji is not subject
to any obligation or requirement to provide funds to or make any investment (in
the form of a loan, capital contribution or otherwise) in any such entity.
4.3 Corporate Power and Authority. Canji has all requisite corporate power
and authority to enter into this Agreement and, subject to authorization of the
Merger and the other transactions contemplated hereby by Canji Stockholders and
the Board of Directors of Canji, to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Canji, subject to authorization
of the Merger and the other transactions contemplated hereby by Canji
Stockholders and the Board of Directors of Canji. This Agreement has been duly
executed and delivered by Canji and constitutes the legal, valid and (subject to
such Canji Stockholders' and Board of Directors' approval) binding obligation of
Canji enforceable against it in accordance with its terms, subject to the effect
of applicable bankruptcy, insolvency or other similar laws affecting the rights
of creditors generally or as may be limited by the availability of equitable
remedies, including specific performance, subject to the discretion of the court
before which any proceeding therefor may be brought.
4.4 Capitalization of Canji. Section 4.4 to the Canji Disclosure Schedule
sets forth the authorized and outstanding capital stock of Canji. Each
outstanding share of Canji capital stock is duly authorized and validly issued,
fully paid and nonassessable, and has not been issued in violation of any
preemptive or similar rights. Canji has a sufficient number of duly authorized
shares of Canji Preferred Stock and Canji Common Stock reserved, but unissued,
to permit the exercise of all warrants, options and other rights that are
exercisable for or convertible into such shares. Such shares of Canji Common
Stock and Canji Preferred Stock, upon issuance, will be validly issued, fully
paid and nonassessable and not issued in violation of any preemptive or similar
rights. Other than as set forth in Section 4.4 to the Canji Disclosure Schedule,
there are no outstanding subscriptions, options, warrants, puts, calls,
agreements, understandings, claims or other commitments or rights of any type
relating to the issuance, sale or transfer of any securities of Canji, nor are
there outstanding any securities which are convertible into or exchangeable for
any shares of capital stock of Canji; and Canji has no obligation of any kind to
issue any additional securities or to pay for securities of Canji or any
predecessor (including Canji California). The issuance and sale of all of the
securities described in this Section 4.4 have been in compliance with federal
and state securities laws. Section 4.4(a) to the Canji Disclosure Schedule
accurately sets forth the names of, and the amount of securities of each class
held by, all holders of options or warrants or other rights to purchase or which
are otherwise exercisable for or convertible into Canji capital stock and the
number of shares for which they are exercisable or convertible.
4.5 Conflicts; Consents and Approvals. Neither the execution and delivery
of this Agreement by Canji, nor the consummation of the transactions
contemplated hereby will:
(a) subject only to the requisite Board of Directors' approval and
Canji Stockholders' approval, conflict with, or result in a breach of any
provision of the Certificate of Incorporation or Bylaws of Canji;
(b) except as set forth in Section 4.5(b) of the Canji Disclosure
Schedule, violate, or conflict with, or result in a breach of any provision
of or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the
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giving of notice, the passage of time or otherwise) to terminate,
accelerate or call a default under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of Canji under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which
Canji is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Canji or any of its respective properties or
assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing with or other notice to any third party or any
Governmental Authority, other than (i) authorization of the Merger and the
other transactions contemplated hereby by Canji Stockholders, (ii) the
Canji Preferred Stockholders Vote and (iii) registrations or other actions
required under federal and state securities laws as are contemplated by
this Agreement.
4.6 Taxes.
(a) Canji has heretofore delivered or will make available to S-P true,
correct and complete copies of all federal, state, local and foreign
income, franchise, sales and other Tax Returns (as defined in (b) below)
filed by Canji for all taxable periods ending on or after January 1, 1990;
(b) All returns, declarations, reports, estimates, statements,
schedules or other information or document with respect to Taxes (as
defined in (u) below) (collectively, "Tax Returns") required to be filed by
Canji have been timely filed (giving effect to extensions granted with
respect thereto), and all such Tax Returns are true, correct and complete.
Canji is not required to file any state Tax Returns other than in the
States of California and Delaware;
(c) Canji has timely paid all Taxes due or claimed to be due from it
by any federal, state, local, foreign or other taxing authority;
(d) There are no liens for Taxes upon any of the assets of Canji
except liens for taxes not yet due and payable;
(e) No Tax Returns of Canji have been examined by the Internal Revenue
Service (the "Service"). No deficiency for any Taxes has been proposed,
asserted or assessed against Canji that has not been resolved and paid in
full. There are no outstanding waivers, extensions, or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns that have been given by Canji (including the time for
filing of Tax Returns or paying Taxes) and Canji has no pending requests
for any such waivers, extensions, or comparable consents;
(f) Canji has not made any change in accounting methods, received a
ruling from any taxing authority or signed an agreement with any taxing
authority that could reasonably be expected to have a material adverse
effect on Canji;
(g) Canji has complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of
Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441 and 1442 of the Internal Revenue Code of 1986, as amended
(the "Code") or similar provisions under any foreign laws) and has, within
the time and the manner prescribed by law, withheld from employee wages and
paid over to the proper governmental authorities all amounts required to be
so withheld and paid over under applicable laws;
(h) Other than as set forth in Schedule 4.6(h) to the Canji Disclosure
Schedule, no audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar
authority is presently pending with respect to any Taxes or Tax Return of
Canji, and Canji has not received a written notice of any pending audits or
proceedings. Schedule 4.6(h) to the Canji Disclosure Schedule sets forth
the nature of any such audit or proceeding, the type of Tax Return, any
deficiencies proposed, asserted or assessed and the amount thereof and the
tax year in question;
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(i) Canji is not a party to and Canji is not bound by or has any
obligation under, any Tax sharing, allocation or indemnity agreement or
similar contract or arrangement;
(j) There are no outstanding requests, agreement, consents or waivers
to extend the statutory period of limitations applicable to the assessment
of any Taxes or deficiencies against Canji;
(k) No power of attorney granted by Canji with respect to any Taxes is
currently is force;
(l) Canji has not, with regard to any assets or property held,
acquired or to be acquired, filed a consent to the application of Section
341(f) of the Code, or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by Canji;
(m) Canji is not and has not been a "United States real property
holding company" (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(n) As of the Effective Time, the requirements of Section
1445(b)(3)(B) of the Code will be satisfied with respect to Canji;
(o) Canji has not filed any election to be an "S corporation" within
the meaning of Section 1362(a) of the Code or under any analogous provision
of state or local law;
(p) Canji had available as of December 31, 1994 "net operating losses"
(within the meaning of Section 172(c) of the Code) in excess of
approximately $16 million and as of November 30, 1995 "net operating
losses" of approximately $2 million for financial statement purposes;
(q) Canji has not participated in, or cooperated with, an
"international boycott" within the meaning of Section 999 of the Code;
(r) The charges, accruals and reserves for Taxes reflected on the
books of Canji are adequate under GAAP to cover the Tax liabilities
accruing or payable by Canji in respect of periods prior to the date hereof
and Canji will not have any liability for Taxes in excess of the amounts
paid or reserved;
(s) Canji is not subject to any joint venture, partnership or other
arrangement or contract that is treated as a partnership for U.S. federal
income tax purposes;
(t) Canji is not subject to liability for Taxes of any other person,
including, without limitation, liability arising from the application of
U.S. Treasury Regulation sec.1.1502-6 or any analogous provision of Tax
law.
(u) For purposes of this Agreement, "Taxes" (including, with
correlative meaning, the term "Tax") shall include all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, service, service use, ad
valorem, transfer, franchise, profits, license, withholding, social
security, payroll, employment, excise, estimated, severance, stamp,
recording, occupation, property or other taxes, customs duties, fees,
assessments or charges of any kind whatsoever, whether computed on a
separate consolidated, unitary, combined or other basis, together with any
interest, fines, penalties, additions to tax or other additional amounts
imposed thereon or with respect thereto imposed by any taxing authority
(domestic or foreign).
4.7 Compliance with Law. To the best knowledge of Canji, Canji is in
compliance with, and at all times since January, 1990 has been in compliance
with, all Applicable Laws relating to Canji or its business or properties,
including, without limitation, laws regarding the provision of insurance, third
party administration and primary health care services, the Federal Controlled
Substances Act of 1970, the Food, Drug and Cosmetic Act (including, but not
limited to, Good Laboratory Practices), Controlled Substance Acts and Dangerous
Drugs Acts, except for immaterial failures to be in compliance therewith which,
to the extent known, have been remedied.
4.8 Proprietary Rights. To the best knowledge of Canji, none of the
Proprietary Rights (defined below and more fully set forth in Section 4.8 to the
Canji Disclosure Schedule) of Canji infringe upon or violate the
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rights of any person, firm, corporation, or other legal entity. For purposes of
this Agreement, the term "Proprietary Rights" shall mean with respect to any
person or entity: (a) all material names, patents, inventions, trade secrets,
proprietary rights, computer software, trademarks, trade names, service marks,
logos and copyrights and all applications therefor, registrations thereof and
licenses, sublicenses or agreements in respect thereof which such person or
entity owns or has the right to use or to which such person or entity is a
party; and (b) all filings, registrations or issuances of any of the foregoing
with or by any Governmental Authority. To the best knowledge of Canji, all
applications relating to its Proprietary Rights which have been filed have been
properly filed and Section 4.8 to the Canji Disclosure Schedule lists all filed
and pending patent applications, the territories where filed, the date and the
status of each such application. Canji has no reason to believe (subject to
normal prosecution before the Patent and Trademark Office) that any pending
patent application will not issue and Canji has made available to S-P all
relevant documents relating to all Proprietary Rights. Other than the
Proprietary Rights set forth in Section 4.8 to the Canji Disclosure Schedule, no
material name, patent, invention, trade secret, proprietary right, computer
software, trademark, trade name, service mark, logo, copyright, license,
sublicense, or other such right is necessary for the operation of the business
of Canji. Canji owns all Proprietary Rights necessary for the operation of the
business of Canji. To the best knowledge of Canji, the business of Canji has not
been and is not conducted in contravention of any Proprietary Right of any third
party. Except as set forth in Section 4.8(a) to the Canji Disclosure Schedule,
(i) no person or entity has a right to receive from, or has an obligation to pay
to, Canji a royalty or similar payment in respect of any Proprietary Right,
whether or not pursuant to any contractual arrangement entered into by Canji and
(ii) Canji has not licensed any of its Proprietary Rights.
4.9 Title to and Condition of Properties. Canji owns or holds under valid
leases all real property, machinery and equipment necessary for the conduct of
the business of Canji as presently conducted. Section 4.9 to the Canji
Disclosure Schedule lists all real property, machinery and equipment leases
which have a value in excess of $25,000 or which provide for annual payments in
excess of $25,000.
4.10 Registration Statement. None of the information provided by Canji for
inclusion in the Registration Statement at the time it becomes effective or, in
the case of the Proxy Statement, at the date of filing and mailing to Canji
Stockholders, will be false or misleading with respect to any material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Proxy Statement will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act.
4.11 Litigation. There is no suit, claim, action, proceeding or
investigation (an "Action") pending or, to the best knowledge of Canji,
threatened against Canji. Canji is not subject to any outstanding order, writ,
injunction or decree. Except as set forth in Section 4.11 to the Canji
Disclosure Schedule, since January, 1990 (i) there has not been any Action
asserted or, to the best knowledge of Canji, threatened against Canji relating
to Canji's method of doing business or its relationship with past, existing or
future licensees of any Proprietary Rights of Canji, (ii) Canji has not been
subject to any outstanding order, writ, injunction or decree relating to Canji's
method of doing business or its relationship with past, existing or future
licensees of any Proprietary Rights and (iii) there has not been any Action
asserted or, to the best knowledge of Canji, threatened against Canji relating
to any claim of infringement by Canji of any third party's intellectual property
rights.
4.12 Employee Benefit Plans.
(a) For purposes of this Section 4.12, the following terms have the
definitions given below:
"Controlled Group Liability" means any and all liabilities under (i)
Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971
of the Code, (iv) the continuation coverage requirements of section 601 et
seq. of ERISA and section 4980B of the Code, and (v) corresponding or
similar provisions of foreign laws or regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or
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Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the first
entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
"Plans" means all employee benefit plans, programs, policies,
practices, and other arrangements providing benefits to any employee or
former employee or beneficiary or dependent thereof, whether or not
written, and whether covering one person or more than one person, sponsored
or maintained by Canji or to which Canji contributes or is obligated to
contribute. Without limiting the generality of the foregoing, the term
"Plans" includes all employee welfare benefit plans within the meaning of
Section 3(1) of ERISA and all employee pension benefit plans within the
meaning of Section 3(2) of ERISA.
(b) Section 4.12 to the Canji Disclosure Schedule lists all Plans. With
respect to each Plan, Canji has made available to S-P a true, correct and
complete copy of: (i) each writing constituting a part of such Plan, including
without limitation all plan documents, benefit schedules, trust agreements, and
insurance contracts and other funding vehicles; (ii) the most recent Annual
Report (Form 5500 Series) and accompanying schedule, if any; (iii) the current
summary plan description, if any; (iv) the most recent annual financial report,
if any; and (v) the most recent determination letter from the Service, if any.
(c) The Service has issued a favorable determination letter with respect to
each Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code (a "Qualified Plan") and there are no existing
circumstances nor any events that have occurred that could adversely affect the
qualified status of any Qualified Plan the related trust.
(d) All contributions required to be made to any Plan by Applicable Laws or
by any plan document or other contractual undertaking, and all premiums required
to be paid with respect to insurance policies funding any Plan, for any period
through the date hereof have been timely made and through the Closing Date will
be timely made.
(e) To the best knowledge of Canji, Canji has complied, and is now in
compliance, in all material respects, with all provisions of ERISA, the Code and
all laws and regulations applicable to the Plans. There is not now, and there
are no existing, circumstances that could give rise to, any requirement for the
posting of security with respect to a Plan or the imposition of any lien on the
assets of Canji under ERISA or the Code.
(f) No Plan is subject to Title IV or Section 302 of ERISA or Section 412
or 4971 of the Code. No Plan is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or
more contributing sponsors at least two of whom are not under common control,
within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor
has Canji or any of its ERISA Affiliates, at any time within five years before
the date hereof, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no existing, circumstances that
could result in, any Controlled Group Liability that would be a liability of
Canji following the Closing. Without limiting the generality of the foregoing,
Neither Canji nor any of its ERISA Affiliates has engaged in any transaction
described in Section 4069 or Section 4204 of ERISA.
(h) Except for health continuation coverage as required by Section 4980B of
the Code or Part 6 of Title I of ERISA, Canji has no liability for life, health,
medical or other welfare benefits to former employees or beneficiaries or
dependents thereof.
(i) Except as described in Section 4.12(i) to the Canji Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee of Canji. Without limiting the generality of
the foregoing, no amount paid or payable by Canji (A) in connection with the
transactions contemplated hereby or (B) otherwise either solely as a result
thereof or as a result of such transactions in conjunction with any other
payments or events will be an "excess parachute payment" within the meaning of
Section 280G of the Code. Section 4.12(i) to the Canji Disclosure Schedule sets
forth a schedule of the accelerated vesting of Canji options.
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(j) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted against the Employee Plans, any fiduciaries thereof with
respect to their duties to the Employee Plans or the assets of any of the trusts
under any of the Employee Plans which could reasonably be expected to result in
any material liability of Canji to the Pension Benefit Guaranty Corporation, the
Department of Treasury, the Department of Labor or any multiemployer plan.
4.13 Contracts. Section 4.13 to the Canji Disclosure Schedule lists all
presently existing written or oral contracts, agreements, guarantees, leases and
executory commitments (each a "Contract") to which Canji is a party and which
fall within any of the following categories: (a) Contracts not entered into in
the ordinary course of Canji's business which have a remaining value in excess
of $25,000, (b) joint venture, partnership and like agreements, (c) Contracts
which are service contracts or equipment leases involving payments by Canji of
more than $25,000 per year, (d) Contracts containing covenants purporting to
limit the freedom of Canji to compete in any line of business in any geographic
area or to hire any individual or group of individuals, (e) Contracts which
after the Effective Time would have the effect of limiting the freedom of S-P or
its subsidiaries (other than Canji) to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (f) Contracts
which contain minimum purchase conditions or requirements or other terms that
restrict or limit the purchasing relationships of Canji, (g) Contracts relating
to any outstanding commitment for capital expenditures in excess of $25,000, (h)
Contracts relating to the lease or sublease of or sale or purchase of real or
personal property involving any annual expense or price in excess of $25,000 and
not cancelable by Canji (without premium or penalty) within one month, (i)
Contracts with any labor organization, (j) indentures, mortgages, promissory
notes, loan agreements, guarantees of amounts in excess of $25,000, letters of
credit or other agreements or instruments of Canji or commitments for the
borrowing or the lending of amounts in excess of $25,000 or by Canji or
providing for the creation of any charge, security interest, encumbrance or lien
upon any of the assets of Canji, (k) Contracts involving research
collaborations, joint ventures or contract research or any other arrangement
whereby Canji receives milestone payments or is entitled to a royalty or which
create any future obligations to or from Canji with respect to any Proprietary
Rights, (l) Contracts with or for the benefit of any Affiliate of Canji, (m)
Contracts for employment of any director, officer, employee or consultant of
Canji and (n) Any Contract whereby Canji would reasonably be expected to pay or
receive in excess of $25,000 annually. All such Contracts are valid and binding
obligations of Canji and, to the knowledge of Canji, the valid and binding
obligation of each other party thereto. Neither Canji nor, to the knowledge of
Canji, any other party thereto is in violation of or in default in respect of,
nor has there occurred an event or condition which with the passage of time or
giving of notice (or both) would constitute a default under, any such Contract.
For purposes of this Agreement, the term "Affiliate" shall mean any person,
association, partnership, corporation or other entity that directly or
indirectly through one or more intermediates controls, is controlled by, or is
under common control with such person, association, partnership, corporation or
other entity.
4.14 Officers and Employees. Section 4.14 to the Canji Disclosure Schedule
sets forth the names of all directors and officers of Canji, the total salary,
bonus, fringe benefits and perquisites each received in the year ended December
31, 1994, and any changes to the foregoing which have occurred subsequent to
December 31, 1994; Section 4.14 to the Canji Disclosure Schedule also lists and
describes the current compensation (including salary, bonus, fringe benefits and
perquisites, if applicable) of all other employees of Canji. Except as disclosed
in Section 4.14 to the Canji Disclosure Schedule, there are no other forms of
compensation paid to any such director, officer or employee of Canji. Except as
set forth in Section 4.14 to the Canji Disclosure Schedule, no officer,
director, or employee of Canji or any other Affiliate of Canji provides or
causes to be provided to Canji any material assets, services or facilities and
Canji does not provide or cause to be provided to any such officer, director,
employee or Affiliate any material assets, services or facilities.
4.15 Labor Relations. Canji is not a party to any collective bargaining
agreement and there is no unfair labor practice complaint against Canji pending
before the NLRB and there is no labor strike, dispute, slowdown or stoppage, or
any union organizing campaign, actually pending or, to the knowledge of Canji,
threatened against or involving Canji.
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4.16 Undisclosed Liabilities. Except (a) as and to the extent disclosed or
reserved against on the balance sheet of Canji as of October 31, 1995 or (b) as
incurred after the date thereof in the ordinary course of business consistent
with prior practice and not prohibited by this Agreement, Canji does not have
any liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due,
that, individually or in the aggregate, have or could have a material adverse
effect on Canji.
4.17 Collaborator and Supplier Relationships. The relationships of Canji
with its research collaborators and suppliers, under written contract or
otherwise, are valid and in full force and effect and no party thereto is in
default of any material obligation thereunder or has given notice of default to
any other party thereunder. Canji has not received notice that any party to such
contracts, agreements, arrangements or commitments intends to exercise any right
to cancellation or termination thereunder or to exercise or not exercise any
option thereunder. All liabilities and obligations of Canji required to be paid
or performed on or prior to the Effective Time under such contracts, agreements,
arrangements or commitments as to which Canji or any of its Affiliates will be
liable or bound after the Effective Time have been or will at the Effective Time
have been duly paid or performed in all material respects. The execution of this
Agreement, the Merger and the other transactions contemplated hereby will not
otherwise materially adversely affect the relationships of Canji with such
research collaborators or suppliers.
4.18 Operation of Canji's Business. Since January 1, 1995 through the date
of this Agreement, Canji has not engaged in any transaction which, if done after
execution of this Agreement, would violate Section 5.3(c) hereof except as
described or reflected in Canji's books and records or the Canji Disclosure
Schedule. Section 4.18 to the Canji Disclosure Schedule describes each
termination, nonrenewal or material amendment that has occurred with respect to
any Contract with any licensee of Proprietary Rights, from January 1, 1995 to
the date hereof.
4.19 Permits; Compliance. To the best knowledge of Canji, Canji is in
possession of all grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders necessary to
own, lease and operate its properties and to carry on its business as it is now
being conducted (collectively, the "Canji Permits"), and there is no Action
pending or, to the knowledge of Canji, threatened regarding suspension or
cancellation of any of the Canji Permits. Canji is not in conflict with, or in
default or violation of any Applicable Law (including, without limitation, the
Federal Controlled Substances Act of 1970, tit. II, 84 Stat. 1242, the Food,
Drug and Cosmetic Act, 21 U.S.C. sec. 301 et seq.(including, but not limited to,
Good Laboratory Practices), Controlled Substances Acts, Dangerous Drug Acts and
Food, Drug and Cosmetic Acts and all rules of professional conduct applicable
thereto and applicable to Canji or by which any of its properties is bound or
subject or (c) any of the Canji Permits. During the period commencing from
Canji's inception and ending on the date hereof, Canji has not received any
notification with respect to possible conflicts, defaults or violations of any
Applicable Laws.
4.20 Environmental Matters.
(a) As used herein, the term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances,
radioactive materials or isotopes, medical, biohazardous or infectious
materials, or other wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
ordinances, plans or regulations issued, entered, promulgated or approved
thereunder.
(b) Except as set forth on Section 4.20 (b) to the Canji Disclosure
Schedule, to the best knowledge of Canji, Canji is in compliance with the
Environmental Laws and there are, with respect to Canji or any predecessor, no
past or present violations of Environmental Laws, no releases of any Hazardous
Material into the environment that exceed permit levels or that exceed a
reportable quantity or otherwise would cause or
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trigger some response by a Governmental Authority, no actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any statutory or common law environmental liability, or no
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or similar federal, state, local or foreign laws and Canji
has received no notice with respect to any of the foregoing, nor is any Action
pending or threatened in connection with any of the foregoing.
(c) To the best knowledge of Canji, no Hazardous Materials, including,
without limitation, asbestos, asbestos-containing materials, polychlorinated
biphenyls (PCBs) or PCB compounds, in excess of legally permitted levels, were
or are contained on or about any real property currently or previously owned,
leased or used by Canji, nor have such substances in excess of legally permitted
levels been used in the construction, repair or alteration of any portion of any
of such real property.
(d) To the best knowledge of Canji, there are no underground storage tanks
on or under any real property currently or previously owned, leased or used by
Canji.
(e) To the best knowledge of Canji, Canji has obtained all the necessary
permits, licenses, financial assurances, authorizations, and similar approvals
for all of its operations that are required by the Environmental Laws and that
such permits, licenses, and authorizations will be valid at the Effective Time.
(f) Canji has no knowledge or reason to believe that there exists in the
area adjacent to and surrounding any real property owned, leased or used by
Canji any contamination or condition caused by Hazardous Materials, whether
caused by the owner of the real property, other tenants, neighbors, or third
parties.
(g) Canji has no knowledge or reason to believe that there is any
contamination or condition caused by the presence of Hazardous Materials, from
whatever source, that would affect its continued ownership, use or occupancy of
any real property.
(h) To the best knowledge of Canji, there are no regulatory or medical
problems caused by any single or multiple releases of radioactive isotopes or
similar materials within or around the premises and Canji is not aware of
conditions that could give rise to any medical or related claims by an employees
or third parties relating to the use, handling, or storage of radioactive
material.
(i) Section 4.20(i) to the Canji Disclosure Schedule lists, and Canji has
furnished or made available to S-P, copies of all third party environmental or
other reports prepared by or for Canji with respect to the real property owned,
leased or used by Canji.
4.21 OSHA Matters. To the best knowledge of Canji, Canji is in compliance
with the requirements of the Occupational Safety and Health Act and the
regulations promulgated thereunder and any similar laws or regulations of any
foreign, state or local jurisdiction ("OSHA"). Canji has not received any
citation from the Occupational Safety and Health Administration or any other
OSHA authority or inspector alleging non-compliance with OSHA, which
noncompliance has not been corrected or remedied to the satisfaction of such
OSHA authority or inspector. Regardless of their nature, Canji has heretofore
provided S-P with copies of all citations heretofore issued to Canji under OSHA
and copies of all material correspondence from and to the Occupational Safety
and Health Administration, any other OSHA authority and any inspectors during
the past three (3) years.
4.22 Insurance. Section 4.22 to the Canji Disclosure Schedule lists all
material insurance policies and binders and programs of self-insurance owned,
held or maintained by Canji on the date hereof and which afford coverage to
Canji, its assets or business. As of the date hereof, all such policies, binders
and programs are in full force and effect, and, as of the Effective Time, all
such policies, binders and programs (or renewals or replacements thereof, as
applicable) will be in full force and effect. All premiums with respect thereto
covering all periods up to and including the date hereof have been paid to the
extent due, and, as of the Effective Time, all premiums with respect thereto (or
with respect to renewals or replacements thereof, as applicable) will be paid to
the extent due. As of the date hereof, no notice of cancellation or termination
has been received with respect to any such policy or binder (or the renewals or
replacements thereof, as applicable) and, as of the Effective Time, no notice of
cancellation or termination will have been received with respect to any such
policy or binder (or the renewals or replacements thereof, as applicable).
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4.23 DGCL Section 203 and State Takeover Laws. Prior to the date hereof,
the Board of Directors of Canji has taken all action necessary to exempt or make
inapplicable under (a) Section 203 of the DGCL and (b) any other state takeover
law or state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares in favor of: (i) the execution of this
Agreement, (ii) the Merger, (iii) the Canji Preferred Stockholders Vote and (iv)
the other transactions contemplated hereby.
4.24 Brokerage and Finder's Fees. Neither Canji nor any shareholder,
director, officer or employee thereof, has incurred or will incur on behalf of
Canji, any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement. Section 4.24 to the Canji
Disclosure Statement discloses a bona fide estimate of the aggregate amount of
all fees and expenses currently owed as of the date of this Agreement to all
attorneys, accountants and investment bankers and reasonably expected to be
incurred by Canji on a going forward basis to all attorneys, accountants and
investment bankers in connection with the Merger regardless of when such
services were rendered ("Merger Fees").
4.25 Financial Data. Canji has provided to S-P unaudited financial
statements, including, but not limited to, an Income Statement and Statement of
Liabilities and Stockholders' Equity, for the six months ended June 30, 1994 and
June 30, 1995, and a Balance Sheet as of October 31, 1995 (collectively, the
"Financial Data"). Such Financial Data were prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in notes or schedules thereto) ("GAAP") and are true,
complete and correct as of or for the dates indicated therein and fairly present
the financial position of Canji as of the dates thereof and changes in financial
position for the periods then ended. Prior to the Closing Date, Canji agrees to
provide to S-P an Income Statement, Balance Sheet, Statement of Liabilities and
Stockholders' Equity and Statement of Cash Flow dated as of November 30, 1995
which financial statements shall be prepared in accordance with GAAP (excluding
footnotes or schedules thereto) subject to normal year-end adjustments and which
shall be true, complete and correct as of or for such date and shall fairly
present the financial position of Canji as of such date and changes in financial
position for the periods then ended. Canji further agrees to provide to S-P such
financial statements as are given to Canji Stockholders for Canji's Stockholder
meetings.
4.26 Future Sales by Canji Stockholders of S-P Common Shares. The officers
of Canji are not aware of any holders of Canji Equity Securities who have any
present intention or plan to sell or otherwise transfer the S-P Common Shares
that they will receive in the Merger in the near future following the Merger
which would reduce the Canji Stockholders' ownership of the S-P Common Shares
received in the Merger to less than 50% of the value of all Canji Common Stock
or Canji Preferred Stock outstanding immediately prior to the Merger.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period from and
after the execution of this Agreement.
5.1 Mutual Covenants.
(a) General. Each of the parties shall use its reasonable efforts to take
all action and to do all things necessary, proper or advisable to consummate the
Merger and the other transactions contemplated by this Agreement (including,
without limitation, using its reasonable efforts to cause the conditions set
forth in Article VI for which they are responsible to be satisfied as soon as
reasonably practicable and to prepare, execute and deliver such further
instruments and take or cause to be taken such other and further action as any
other party hereto shall reasonably request).
(b) Other Matters. Each of the parties shall use its reasonable efforts to
take any additional action that may be necessary, proper or advisable in
connection with any notices to, filings with, and authorizations, consents and
approvals of any Governmental Authority or other third party that it may be
required to give, make or obtain.
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(c) Public Announcements. Unless otherwise required by Applicable Laws or
requirements of the NYSE (and in that event only if time does not permit), at
all times prior to the earlier of the Effective Time or termination of this
Agreement pursuant to Section 7.1, S-P and Canji shall consult with each other
before issuing any press release with respect to the Merger and shall not issue
any such press release prior to such consultation.
(d) Certificate of Merger. Subject to the terms and conditions of this
Agreement, Subcorp and Canji shall cause the Certificate of Merger to be
prepared and properly executed and filed with the Secretary of State of the
State of Delaware in accordance with the DGCL at the Effective Time.
(e) Tax Treatment of Merger. The parties intend that the Merger constitute
a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code, by
reason of Section 368(a)(2)(E) of the Code. The parties shall use their
reasonable best efforts, to the extent permitted by the other terms and
conditions of this Agreement and the Exhibits hereto, to consummate the Merger
in a manner which will cause it to qualify as such a "reorganization."
(f) Conveyance Taxes. S-P and Canji shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications, or other
documents regarding (A) any real property transfer gains, sales, use, transfer,
value-added, stock transfer, and stamp taxes, (B) any recording, registration
and other fees, and (C) any similar taxes or fees that become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time.
5.2 Covenants of S-P.
(a) Preparation of S-P Registration Statement. S-P shall use all
reasonable efforts to prepare and file the Registration Statement with the
Commission as promptly as practicable following the Board of Directors'
approvals of S-P, Subcorp and Canji, as contemplated by this Agreement, and
shall use all reasonable efforts to have the Registration Statement declared
effective by the Commission as promptly as practicable and to maintain the
effectiveness of the Registration Statement through the Effective Time. As
promptly as practicable following the Board of Directors' approvals of S-P,
Subcorp and Canji, as contemplated by this Agreement, S-P shall prepare and file
any other filings required under the Exchange Act, the Securities Act or any
other Federal or state securities or "blue sky" laws relating to the Merger and
any applicable state laws of similar effect (collectively, "Other Filings"). S-P
will promptly notify Canji of the receipt of any comments from the Commission or
its staff and of any request of the Commission or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Proxy Statement included therein, or any Other Filings or for
additional information, and will supply Canji with copies of all correspondence
between S-P or any of its representatives, on the one hand, and the Commission,
or its staff or any other government officials, on the other hand, with respect
to the Registration Statement, the Proxy Statement, the Merger or any of the
Other Filings. The Registration Statement and the Other Filings shall comply in
all material respects with all applicable requirements of law. If at any time
prior to the Effective Time, to the best knowledge of S-P, any event shall occur
which would be required to be set forth in an amendment or supplement to the
Registration Statement, the Proxy Statement or any of the Other Filings, S-P
shall promptly inform Canji of such occurrence.
(b) Notification of Certain Matters. S-P shall give prompt notice to Canji
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate at or prior to the Effective Time and
(ii) any material failure of S-P to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
5.2(b) shall not limit or otherwise affect the remedies available hereunder to
Canji.
(c) Listing of S-P Common Stock. The S-P Common Stock to be issued in the
Merger shall have been authorized for inclusion on the NYSE, subject to official
notice of issuance.
(d) Canji Employees. S-P shall offer to employees of Canji the benefits
package as described in Exhibit 5.2(d) hereof, which includes certain
"pay-to-stay" benefits and certain "severance" benefits.
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(e) San Diego Location. S-P intends to retain most of the research
activities currently conducted by Canji in the San Diego area following the
Closing Date, and for an indefinite period thereafter. While S-P necessarily
retains the sole discretionary authority to relocate some or all of Canji's
research operations in the future, S-P hereby warrants that S-P has no present
intention to so relocate.
(f) Reorganization Status. On or prior to the first anniversary of the
Closing Date, S-P and the Surviving Corporation shall not (a) cease to conduct
the business of the Surviving Corporation, (b) dispose, transfer or distribute a
significant portion of the assets of the Surviving Corporation, other than sales
in the ordinary course of business, (c) dispose of the stock of the Surviving
Corporation, or (d) repurchase the S-P Common Shares issued to Canji
Stockholders in the Merger, unless prior to taking such action, S-P and the
Surviving Corporation shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom to the effect that such action should not cause the Merger to
fail to qualify as a reorganization within the meaning of Section 368(a) of the
Code.
5.3 Covenants of Canji.
(a) Canji Stockholders Meeting and Other Matters. At the earliest
practicable date, Canji shall take all requisite action in accordance with the
federal securities laws, the DGCL and its Certificate of Incorporation and
Bylaws necessary to obtain the requisite consent and approval of Canji
Stockholders with respect to the Merger, this Agreement and the other
transactions contemplated hereby and to obtain the requisite consent and
approval of holders of Canji Preferred Stock to the amendment to Canji's
Certificate of Incorporation to provide for the distribution of the Merger
Consideration among the holders of the Canji Common Stock and the Canji
Preferred Stock on an equal pro rata basis in accordance with Section 2.1(b),
without any preference to any share of Canji Preferred Stock (the "Canji
Preferred Stockholders Vote"). At the earliest practicable date, Canji shall
take all requisite action in accordance with the federal securities laws, the
DGCL and the operative certificates, documents and agreements governing the
rights of all holders of all warrants, options and other rights to purchase or
otherwise receive shares of Canji Common Stock and/or Canji Preferred Stock to
inform such holders of the Merger, the Canji Preferred Stockholders Vote and the
other transactions contemplated by this Agreement in order to permit them to
exercise their rights thereunder.
(b) Information for the Registration Statement and Preparation of Canji
Proxy Statement. Canji shall furnish S-P with all information concerning it as
may be required for inclusion in the Registration Statement. Canji shall
cooperate with S-P in the preparation of the Registration Statement in a timely
fashion and shall use all reasonable efforts to have the Registration Statement
declared effective by the Commission as promptly as practicable. If at any time
prior to the Effective Time, any information pertaining to Canji contained in or
omitted from the Registration Statement makes such statements contained in the
Registration Statement false or misleading, Canji shall promptly so inform S-P
and provide S-P with the information necessary to make statements contained
therein not false and misleading. Canji shall, as soon as is reasonably
practicable, prepare and deliver to S-P the Proxy Statement for inclusion in the
Registration Statement with the Commission on a confidential basis. Canji shall
use all reasonable efforts to mail at the earliest practicable date to holders
of Canji Equity Securities the Proxy Statement, which shall include all
information required under applicable law to be furnished to holders of Canji
Equity Securities in connection with the Merger and the transactions
contemplated thereby and shall include the recommendation of Canji's Board of
Directors in favor of the Merger.
(c) Conduct of Canji's Operations. During the period from the date of this
Agreement to the Effective Time, Canji shall conduct its normal operations and
shall use its reasonable efforts in order to maintain and preserve its business
organization and its material rights and to retain the services of its officers
and key employees and maintain relationships with research collaborators,
suppliers, licensees, licensors and other third parties to the end that their
goodwill and ongoing business shall not be impaired in any material respect. In
addition, during the period from the date of this Agreement to the Effective
Time, Canji shall permit a scientific advisor, designated by S-P, who is
reasonably satisfactory to Canji, to be present at Canji's premises, to be
consulted on all research and development activities, to monitor the day-to-day
operations of Canji and to oversee transitional matters prior to the Effective
Time. Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Effective Time, Canji shall not, except as
otherwise
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expressly contemplated by this Agreement and the transactions contemplated
hereby, without the prior written consent of S-P, which consent shall not be
unreasonably withheld:
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock, (B)
make, declare or pay any dividend or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable or
exercisable for any shares of its capital stock, (C) grant any person any
right to acquire any shares of its capital stock or any securities or
obligations convertible into or exchangeable or exercisable for any shares
of its capital stock, excepting, however, vesting of existing stock
options, as set forth in Section 5.3(c)(i) to the Canji Disclosure
Schedule, (D) issue, deliver or sell or agree to issue, deliver or sell any
additional shares of its capital stock or any securities or obligations
convertible into or exchangeable or exercisable for any shares of its
capital stock or such securities (except pursuant to the exercise of
outstanding options to purchase Canji Common Stock, exercise of warrants,
or conversion of preferred shares), or (E) enter into any agreement,
understanding or arrangement with respect to the sale or voting of its
capital stock;
(ii) sell, transfer, pledge, lien, mortgage, encumber or otherwise
dispose of any of its Proprietary Rights or other assets or make any
materials transfer thereof other than materials transfers required by valid
materials transfer agreements in existence on the date of this Agreement;
(iii) make or propose any changes in its Certificate of Incorporation
or Bylaws;
(iv) merge or consolidate with any other person or acquire a material
amount of assets or capital stock of any other person or enter into any
confidentiality agreement with any person in connection with any disclosure
of the Proprietary Rights;
(v) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or otherwise
as an accommodation become responsible or liable for the obligations of any
other individual, corporation or other entity;
(vi) create any subsidiaries or enter into any partnership agreements,
joint venture arrangement or any research collaborations;
(vii) enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee other than salary increases previously scheduled
which were granted in the ordinary course, or otherwise increase the
compensation or benefits provided to any officer, director, consultant or
employee except as may be required by Applicable Law or a binding written
contract in effect on the date of this Agreement;
(viii) change its method of doing business or change any method or
principle of accounting in a manner that is inconsistent with past
practice;
(ix) settle any Actions, whether now pending or hereafter made or
brought;
(x) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to, any Contract set forth in
Section 4.13 to the Canji Disclosure Schedule, any other material Contract
to which Canji is a party or any confidentiality agreement to which Canji
is a party;
(xi) incur or commit to any capital expenditures, obligations or
liabilities beyond the purchase or lease of the items listed on Section
5.3(c)(xi) to the Canji Disclosure Schedule;
(xii) grant any licenses to any third party of any of its Proprietary
Rights or any asset or property of Canji;
(xiii) pay any Merger Fees in excess of the amount set forth in
Section 4.24 to the Canji Disclosure Schedule;
(xiv) take any action to exempt or make inapplicable under (x) Section
203 of the DGCL or (y) any other state takeover law or state law that
purports to limit or restrict business combinations or the
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ability to acquire or vote shares, any person or entity (other than S-P or
its subsidiaries) or any action taken thereby, which person, entity or
action would have otherwise been subject to the restrictive provisions
thereof and not exempt therefrom;
(xv) enter into or carry out any other transaction other than in the
ordinary and usual course of business;
(xvi) agree in writing or otherwise to take any of the foregoing
actions; or
(xvii) make any Tax election or settle or compromise any income Tax
liability or file any income tax return prior to the last day (including
extensions) prescribed by law.
Notwithstanding the foregoing, Canji may make loans to Canji employees to enable
the employees to exercise options to purchase Canji Common Stock and/or Canji
Preferred Stock, so long as the aggregate of all such loans do not exceed
$75,000 and the loans provide that they are required to be repaid to the
Surviving Corporation within six (6) months.
(d) Access. From and after the date of this Agreement until the Effective
Time (or the termination of this Agreement), Canji shall permit representatives
of S-P, in conjunction with this Agreement, to have appropriate access at all
reasonable times to Canji's premises, properties, books, records, Contracts, tax
records, documents, and suppliers. Information obtained by S-P in connection
with this Agreement shall be subject to the confidentiality provisions set forth
in Article VIII.
(e) No Solicitation. Canji agrees that, prior to the Effective Time, it
shall not, and shall not authorize or permit any directors, officers, Canji
Stockholders, warrant holders, employees, agents or representatives, directly or
indirectly, to solicit, initiate, encourage or facilitate, or furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to any recapitalization, merger, consolidation or
other business combination involving Canji, or acquisition of any capital stock
or any material portion of the assets of Canji, or any combination of the
foregoing (a "Competing Transaction"), or negotiate, explore or otherwise engage
in discussions with any person (other than S-P, Subcorp or their respective
directors, officers, employees, agents and representatives) with respect to any
Competing Transaction or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement; provided that Canji may furnish
information to, and negotiate or otherwise engage in discussions with, any party
who delivers a written proposal for a Competing Transaction if the Board or
Directors of Canji determines in good faith by a majority vote, based upon a
written opinion from its outside legal counsel (a copy of which is provided to
S-P), that failing to take such action would constitute a breach of the
fiduciary duties of the Board and such a proposal is, in the written opinion of
its independent financial advisor more favorable to Canji Stockholders from a
financial point of view than the transactions contemplated by this Agreement.
From and after the execution of this Agreement, Canji shall immediately advise
S-P in writing of the receipt, directly or indirectly, of any inquiries or
proposals relating to a Competing Transaction and promptly furnish to S-P a copy
of any such proposal in addition to any information provided to or by any third
party relating thereto.
(f) Affiliates of Canji. Canji shall use all reasonable and good faith
efforts to cause each such person who may be at the Effective Time an
"affiliate" of Canji for purposes of Rule 145 under the Securities Act, to
execute and deliver to S-P the written undertakings in the form attached hereto
as Exhibit A as soon as practicable, but in no event later than the Closing
Date.
(g) Notification of Certain Matters. Canji shall give prompt notice to S-P
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate at or prior to the Effective Time and
(ii) any material failure of Canji to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
5.3(g) shall not limit or otherwise affect the remedies available hereunder to
S-P.
(h) Appraisal Rights. Canji shall not settle or compromise any claim for
appraisal rights prior to the Effective Time without the prior written consent
of S-P.
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(i) Unvested Canji Options.
(A) Prior to the Effective Time, the Board of Directors of Canji shall
take such action as is necessary to cause each of the Canji stock option
plans and each unvested option to purchase Canji Common Stock and/or Canji
Preferred Stock issued thereunder to be canceled immediately prior to the
Effective Time (an "Unvested Canji Option"). S-P agrees to offer to each
person identified on Exhibit 5.3(i)(A) to enter into a restricted stock
agreement with such person to provide them with restricted S-P Common
Shares of equivalent value to (and upon the same vesting schedule as) the
Unvested Canji Options that they had immediately prior to the Effective
Time. The S-P Common Shares shall be valued at the Average Share Price.
Holders of such Unvested Canji Options will not be entitled to receive
Participation Certificates in respect of such Unvested Canji Options.
Notwithstanding the foregoing, in no event shall S-P be obligated to offer
to enter into restricted stock agreements with the persons identified on
Exhibit 5.3(i)(A) for more than Unvested Canji Options to purchase 600,000
shares of Canji Common Stock and/or Canji Preferred Stock.
(B) Prior to the Effective Time, the Board of Directors of Canji shall
take such action as is necessary to cause each of the unvested Options to
purchase Canji Common Stock and/or Canji Preferred Stock listed in Section
5.3(i)(B) to be accelerated and exercised or otherwise canceled at the
Effective Time of the Merger. Holders of shares of Canji Common Stock
and/or Canji Preferred Stock received upon the exercise of such accelerated
unvested Canji options shall be entitled to receive the Merger
Consideration.
(j) Proxy Statement/Prospectus Delivery. Canji shall deliver to each
holder of Canji Equity Securities a copy of the Proxy Statement and the
Prospectus in accordance with all applicable provisions of the Securities Act.
(k) Environmental Compliance. Canji shall, in good faith, utilize all
reasonable efforts to commence performing the following tasks within ten (10)
days of the date of this Agreement, except where a different time period is
specifically indicated below, and shall, in good faith utilize all reasonable
efforts to complete such tasks prior to the Effective Time:
(A) Canji shall, if required, notify the Metropolitan Sewerage System
that Canji has increased its volume of discharge to the system and apply
for either a new permit or a modification or amendment to its existing
permit, which application shall correctly identify the characteristics and
quantity of the industrial discharge. Prior to the Effective Time, Canji
shall, in good faith, if required, utilize all reasonable efforts to obtain
the new or modified permit and to negotiate a resolution of any penalties
that may be imposed upon Canji as a result of Canji having exceeded the
permit limit for the volume of wastewater discharged to the sewer.
(B) Canji shall calculate the amount of radioactive material being
discharged to the sewer and determine if such amount exceeds any limit in
its permit. If any permit limit is being exceeded Canji shall, in good
faith, utilize all reasonable efforts to implement prior to the Effective
Time a system, protocol or operating procedure that prevents any exceedance
of its permit.
(C) Canji shall, in good faith, utilize all reasonable efforts prior
to the Effective Time to negotiate with the California Occupational &
Radiologic Health Division and resolve the items identified in the notice
of violation dated November 2, 1995.
(D) If Canji does not have an annual hazardous waste establishment
permit from the San Diego County Department of Environmental Health
("SDCDEH"), Canji shall, if required, apply for such a permit.
(E) If Canji does not have a hazardous materials permit from the
SDCDEH, Canji shall, if required, apply for such a permit.
(F) Canji shall review the local fire department rules to determine
whether a permit is required for its aboveground fuel tank and, if such a
permit is required, Canji shall apply for the permit.
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(G) Canji shall contact the SDCDEH and determine the status of its
application for a medical waste treatment permit, and, if necessary,
commence all appropriate activity to obtain a final permit.
(H) Canji shall perform the calculations necessary to determine
whether its is in compliance with Proposition 65 with respect to the
emissions of any solvents or radioactivity from its laboratory hoods and,
if necessary, initiate appropriate steps to comply with Proposition 65.
ARTICLE VI
CONDITIONS
6.1 Mutual Conditions. The obligations of the parties hereto to consummate
the Merger shall be subject to fulfillment of the following conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of the
Merger shall have been issued and remain in effect, no Action instituted by
any Governmental Authority which seeks to prevent consummation of the
Merger shall be outstanding and no statute, rule or regulation shall have
been enacted by any Governmental Authority which prevents the consummation
of the Merger.
(b) The Merger, this Agreement and the other transactions contemplated
hereby shall have been duly approved by Canji Stockholders in the manner
required by any Applicable Law and the requisite Canji Preferred
Stockholders Vote shall have been duly received in the manner required by
any Applicable Law.
(c) The Commission shall have declared the Registration Statement
effective. On the Closing Date and at the Effective Time, no stop order or
similar restraining order prohibiting the Merger shall have been threatened
by the Commission or entered by the Commission or any state securities
administrator.
6.2 Conditions to Obligations of Canji. The obligations of Canji to
consummate the Merger and the transactions contemplated hereby shall be subject
to the fulfillment of the following conditions unless waived by Canji:
(a) Each of the representations and warranties of each of S-P and
Subcorp set forth in Article III shall be true and correct on the date
hereof and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a
specified date, which need be true and correct only as of the specified
date).
(b) Each of S-P and Subcorp shall have performed in all material
respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with by
it hereunder at or prior to the Effective Time.
(c) The Merger and the transactions contemplated hereby shall have
been duly approved by the Boards of Directors of S-P and Subcorp in the
manner required by any Applicable Law.
(d) Each of S-P and Subcorp shall have furnished Canji with a
certificate dated the Closing Date signed on behalf of it by its Corporate
Secretary to the effect that the conditions set forth in Sections 6.2(a),
(b) and (c) have been satisfied.
(e) The S-P Common Shares to be issued in the Merger shall have been
authorized for inclusion on the NYSE, subject to official notice of
issuance.
(f) Canji shall have received the legal opinion of Kevin Quinn, Staff
Vice President, Associate General Counsel and Corporate Secretary, of S-P
as to the validity of the S-P Common Shares to be received by Canji
Stockholders in the Merger substantially in the form attached hereto as
Exhibit B-1.
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6.3 Conditions to Obligations of S-P and Subcorp. The obligations of S-P
to consummate the Merger and the other transactions contemplated hereby shall be
subject to the fulfillment of the following conditions unless waived by each of
S-P and Subcorp:
(a) Each of the representations and warranties of Canji set forth in
Article IV shall be true and correct on the date hereof and on and as of
the Closing Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, which need be
true and correct only as of the specified date).
(b) Canji shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects
with each covenant to be performed and complied with by it hereunder at or
prior to the Effective Time.
(c) The Board of Directors of Canji, at a meeting duly called and held
(i) determined that this Agreement and the transactions contemplated
hereby, including the Merger and the transactions contemplated thereby,
taken together, are fair to and in the best interests of the Canji
Stockholders, and (ii) resolved to recommend that the Canji Stockholders
approve this Agreement and the other transactions contemplated herein,
including the Merger and the holders of Canji Preferred Stock consent to
and approve the requisite Canji Preferred Stockholder Vote.
(d) Canji shall have furnished S-P with a certificate dated the
Closing Date signed on its behalf by its Chairman, to the effect that the
conditions set forth in Sections 6.3(a), (b) and (c) have been satisfied.
(e) S-P shall have received the legal opinion, dated the Closing Date,
of Gray Cary Ware Freidenrich substantially in the form attached hereto as
Exhibit B-2.
(f) Each of the employees of Canji identified to the Special Committee
of the Board of Directors of Canji shall have executed and delivered to S-P
an employment agreement in the form attached hereto as Exhibit C.
(g) Each person who may be at the Effective Time an "affiliate" of
Canji for purposes of Rule 145 under the Securities Act, shall have
executed and delivered to S-P the written undertakings in the form attached
hereto as Exhibit A no later than the Closing.
(h) Canji shall have delivered to S-P an affidavit, dated as of the
Closing Date, that is satisfactory to S-P and which satisfies the
requirements of Section 1445(b)(3) of the Code and U.S. Treasury Regulation
sec.1.1445-2(c)(3)(i).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval and adoption of the Merger and
this Agreement by Canji Stockholders:
(a) by mutual consent of S-P, Subcorp and Canji;
(b) by either S-P and Subcorp or Canji if any permanent injunction or
other order of a court or other competent Governmental Authority preventing
the consummation of the Merger shall have become final and nonappealable;
(c) by either S-P and Subcorp or Canji if each of their respective
Boards of Directors have not approved the Merger by December 15, 1995;
(d) by either S-P and Subcorp or Canji if the Merger shall not have
been consummated before March 31, 1996, unless extended by the Boards of
Directors of S-P, Subcorp and Canji (provided that the right to terminate
this Agreement under this Section 7.1(c) shall not be available to any
party whose
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failure or whose affiliate's failure to perform any material covenant or
obligation under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date);
(e) by S-P and Subcorp if the Board of Directors of Canji shall not
have, by December 15, 1995, adopted resolutions to recommend this
Agreement, the Merger and the Canji Preferred Stockholder Vote in the
manner set forth in Section 6.3(c), or following such date having so
recommended, shall thereafter withdraw, modify or change its
recommendations in a manner adverse to S-P at any time prior to the Canji
Stockholders meeting to vote on the Merger and the Canji Preferred
Stockholders Vote;
(f) by S-P and Subcorp if at the meeting of Canji Stockholders
(including any adjournment or postponement thereof) the requisite vote of
Canji Stockholders to approve this Agreement, the Merger and the other
transactions contemplated hereby and the requisite Canji Preferred
Stockholders Vote shall not have been obtained.
7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall become void and have no
effect, without any liability on the part of any party or its directors,
officers or stockholders. Notwithstanding the foregoing, nothing in this Section
7.2 shall relieve any party to this Agreement of liability for a material breach
of any provision of this Agreement and provided, further, however, that if it
shall be judicially determined that termination of this Agreement was caused by
an intentional breach of this Agreement, then, in addition to other remedies at
law or equity for breach of this Agreement, the party so found to have
intentionally breached this Agreement shall indemnify and hold harmless the
other parties for their respective costs, fees and expenses of their counsel,
accountants, financial advisors and other experts and advisors as well as fees
and expenses incident to negotiation, preparation and execution of this
Agreement and related documentation and shareholders' meetings and consents
("Costs").
7.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after adoption of this Agreement and the Merger by Canji Stockholders
and the requisite Canji Preferred Stockholders Vote, but after any such
approval, no amendment shall be made which by law requires further approval by
Canji Stockholders without such further approval. Notwithstanding the foregoing,
this Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, S-P (with
respect to Canji) and Canji (with respect to S-P and Subcorp) by action taken or
authorized by their respective Boards of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of such party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
7.5 Procedure Upon Termination. In the event of any termination of this
Agreement by any party pursuant to this Article VII, written notice thereof
promptly shall be given to the other party hereto in accordance with Section 9.2
and this Agreement shall terminate and the transactions contemplated hereby
shall be abandoned without further action by any party.
ARTICLE VIII
CONFIDENTIALITY
8.1 Confidentiality. S-P, Subcorp and Canji shall use only in accordance
with this Agreement and shall not disclose to any third party any confidential
or proprietary information, whether patentable or not, related to the subject
matter of this Agreement furnished by the other party in connection with this
Agreement or otherwise (the "Information") without the prior written consent of
the other party. The foregoing obligations shall survive the expiration or
termination of this Agreement for a period of twenty (20) years. These
obligations shall not apply to Information that is required to be disclosed by
law, regulation, rule, act or order of the Food and Drug Administration or any
Governmental Authority or agency or a court of competent
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jurisdiction; provided that the receiving party gives the other party sufficient
advance notice to permit it to seek a protective order or other similar order
with respect to such Information and thereafter discloses only the minimum
Information required to be disclosed in order to comply with the request,
whether or not a protective order or other similar order is obtained by the
other party.
8.2 No Publicity. A party may not use the name of the other party in any
publicity and, except as provided in section 8.1, may not issue a press release
or otherwise publicize or disclose any information related to this Agreement or
the terms or conditions hereof, without the prior written consent of the other
party. The parties shall agree on a form of initial press release that may be
used by either party to describe this Agreement and the transactions
contemplated hereby. Nothing in the foregoing, however, shall prohibit a party
from making such disclosures to the extent deemed necessary under applicable
federal or state securities laws or any rule or regulation of any nationally
recognized securities exchange; in such event, however, the disclosing party
shall use good faith efforts to consult with the other party prior to such
disclosure and, where applicable, shall request confidential treatment to the
extent available.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties. The representations and
warranties made herein by the parties hereto shall not survive the Effective
Time. This Section 9.1 shall not limit any covenant or agreement of the parties
hereto which by its terms contemplates performance after the Effective Time or
the termination of this Agreement.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or dispatched by a nationally recognized overnight courier service 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 S-P or Subcorp:
Schering-Plough Corporation
One Giralda Farms
Madison, NJ 07940
Attention: Kevin Quinn,
Staff Vice President,
Associate General Counsel and
Corporate Secretary
Telecopy No.: (201) 822-1960
(b) if to Canji:
Canji, Inc.
3030 Science Park Road
#302
San Diego, CA 92121
Attention: M. Blake Ingle
President, CEO and CFO
Telecopy No.: (619) 623-2036
with a copy to
Gray Cary Ware Freidenrich
4365 Executive Drive
Suite 1600
San Diego, CA 92121
Attention: T. Knox Bell
Telecopy No.: (619) 677-1477
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9.3 Interpretation. When a reference is made in this Agreement to an
Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.4 Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same Agreement. The parties may execute
more than one copy of the Agreement, each of which shall constitute an original.
Signatures exchanged by facsimile shall be treated as legally binding.
9.5 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein), and the Loan Agreement between the parties
dated November 13, 1995 constitute the entire agreement among the parties and
this Agreement supersedes all prior agreements and understandings, agreements or
representations by or among the parties, written and oral, (including, but not
limited to, the Letter of Intent) with respect to the subject matter hereof and
thereof.
9.6 Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended or shall be construed to create any third party
beneficiaries other than (i) the rights of Canji Stockholders to receive the
Merger Consideration, (ii) Sections 2.3, 5.2(d), 5.2(e), 5.2(f) and 5.3(i) and
(iii) the rights of creditors of Canji following the Merger.
9.7 Governing Law and Jurisdiction. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflict of laws. The parties acknowledge their diversity (Canji
having its principal place of business in California and S-P having its
principal place of business in New Jersey) and agree to accept the jurisdiction
of the Federal District Court in Delaware for the purposes of settling any
dispute hereunder.
9.8 Specific Performance. The transactions contemplated by this Agreement
are unique. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided such party is
not in material default hereunder.
9.9 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), (except by S-P to an affiliate of S-P), without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
Notwithstanding the foregoing, a holder of a Participation Certificate may
assign the same as specified in Exhibit 2.4 hereto.
9.10 Expenses. Subject to the provisions of Section 7.2., S-P, Subcorp and
Canji shall pay their own costs and expenses associated with the transactions
contemplated by this Agreement.
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IN WITNESS WHEREOF, Schering-Plough Corporation, Subcorp and Canji have
caused their duly authorized officers to execute this Agreement as of the date
first written above.
SCHERING-PLOUGH CORPORATION
By: /s/ Jack L. Wyszomierski
-----------------------------------
Jack L. Wyszomierski
CANJI MERGER CORP.
By: /s/ Jack L. Wyszomierski
-----------------------------------
Jack L. Wyszomierski
CANJI, INC.
By: /s/ M. Blake Ingle, Ph.D.
-----------------------------------
M. Blake Ingle, Ph.D.
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INDEX TO DEFINED TERMS
<TABLE>
<S> <C>
Action............................................................. Page 11, Section 4.11
Affiliate.......................................................... Page 13, Section 4.13
Agreement.......................................................... Page 1, 1st Paragraph
Applicable Laws.................................................... Page 17, Section 3.7
Average Share Price................................................ Page 2, Section 2.1(b)
Canji.............................................................. Page 1, 1st Paragraph
Canji California................................................... Page 8, Section 4.1
Canji Common Stock................................................. Page 2, Section 2.1(b)
Canji Disclosure Schedule.......................................... Page 8, Section 4.1
Canji Equity Securities............................................ Page 2, Section 2.1(b)
Canji Permits...................................................... Page 14, Section 4.19
Canji Preferred Stock.............................................. Page 2, Section 2.1(b)
Canji Preferred Stockholders Vote.................................. Page 18, Section 5.3(a)
Canji Stockholders................................................. Page 1, Paragraph B
Certificate of Merger.............................................. Page 1, Section 1.2
Certificates....................................................... Page 3, Section 2.2(b)
Closing............................................................ Page 1, Section 1.2
Closing Date....................................................... Page 1, Section 1.2
Code............................................................... Page 9, Section 4.6(g)
Commission......................................................... Page 7, Section 3.5
Competing Transaction.............................................. Page 20, Section 5.3(e)
Contract........................................................... Page 13, Section 4.13
Controlled Group Liability......................................... Page 11, Section 4.12(a)
Costs.............................................................. Page 24, Section 7.2
DGCL............................................................... Page 1, Section 1.1
Delaware Secretary of State........................................ Page 1, Section 1.2
Dissenting Shares.................................................. Page 5, Section 2.5
Effective Time..................................................... Page 1, Section 1.2
Environmental Laws................................................. Page 14, Section 4.20(a)
ERISA.............................................................. Page 11, Section 4.12(a)
ERISA Affiliate.................................................... Page 11, Section 4.12(a)
Exchange Act....................................................... Page 7, Section 3.5
Exchange Agent..................................................... Page 3, Section 2.2(a)
Exchange Fund...................................................... Page 3, Section 2.2(a)
Exchange Ratio..................................................... Page 2, Section 2.1(b)
Financial Data..................................................... Page 16, Section 4.25
GAAP............................................................... Page 16, Section 4.25
Governmental Authority............................................. Page 6, Section 3.4(d)
Hazardous Materials................................................ Page 14, Section 4.20(a)
Information........................................................ Page 24, Section 8.1
Merger............................................................. Page 1, Paragraph A
</TABLE>
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<PAGE> 116
<TABLE>
<S> <C>
Merger Consideration............................................... Page 2, Section 2.1(b)
Merger Fees........................................................ Page 16, Section 4.24
Multiemployer Plan................................................. Page 12, Section 4.12(f)
Multiple Employer Plan............................................. Page 12, Section 4.12(f)
NYSE............................................................... Page 2, Section 2.1(b)
NYSE Composite Tape................................................ Page 2, Section 2.1(b)
OSHA............................................................... Page 15, Section 4.21
Other Filings...................................................... Page 17, Section 5.2(a)
Participation Certificate.......................................... Page 5, Section 2.4
Plans.............................................................. Page 12, Section 4.12(a)
Proprietary Rights................................................. Page 11, Section 4.8
Prospectus......................................................... Page 7, Section 3.6
Proxy Statement.................................................... Page 7, Section 3.6
Qualified Plan..................................................... Page 12, Section 4.12(c)
Registration Statement............................................. Page 7, Section 3.6
SDCDEH............................................................. Page 21, Section 5.3(k)(D)
Securities Act..................................................... Page 4, Section 2.2(d)
Service............................................................ Page 9, Section 4.6(e)
S-P................................................................ Page 1, 1st Paragraph
S-P Common Shares.................................................. Page 2, Section 2.1(b)
S-P Disclosure Schedule............................................ Page 6, Section 3.3
S-P SEC Documents.................................................. Page 7, Section 3.5
Subcorp............................................................ Page 1, 1st Paragraph
Surviving Corporation.............................................. Page 1, Section 1.1
Tax................................................................ Page 10, Section 4.6(u)
Tax Returns........................................................ Page 9, Section 4.6(b)
Unvested Canji Option.............................................. Page 21, Section 5.3(iA)
</TABLE>
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ANNEX B
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
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 his 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 a 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 section 251, 252, 254, 257, 258, 263 or 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 holders of the surviving corporation as
provided in subsection (f) or (g) of section 251 of this title.
(2) Notwithstanding paragraph (1) 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
section section 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 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 section 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.
(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
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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 section
228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
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.
(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
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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, 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 THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The New Jersey Business Corporation Act provides that a New Jersey
corporation has the power to indemnify a director or officer against his or her
expenses and liabilities in connection with any proceeding involving the
director or officer by reason of his or her being or having been such a director
or officer, other than a proceeding by or in the right of the corporation, if
such a director or officer acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation; and with respect to any criminal proceeding, such director or
officer had no reasonable cause to believe his or her conduct was unlawful.
The indemnification and advancement of expenses shall not exclude any other
rights, including the right to be indemnified against liabilities and expenses
incurred in proceedings by or in the right of the corporation, to which a
director or officer may be entitled under a certificate of incorporation,
by-law, agreement, vote of shareholders, or otherwise; provided, that no
indemnification shall be made to or on behalf of a director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that his or her acts or omissions (a) were in breach of his or her
duty of loyalty to the corporation or its shareholders, (b) were not in good
faith or involved a knowing violation of law or (c) resulted in receipt by the
director or officer of an improper personal benefit.
The Registrant's Certificate of Incorporation provides that, directors and
officers of the Registrant shall not be personally liable to the Registrant or
its shareholders for damages for breach of any duty owed to the Registrant or
its shareholders, except for liability for any breach of duty based upon an act
or omission (i) in breach of such persons' duty of loyalty to the Registrant or
its shareholders, (ii) not in good faith or involving a knowing violation of law
or (iii) resulting in receipt by such persons of an improper personal benefit.
The Certificate of Incorporation of the Registrant also provides that each
person who was or is made a party or is threatened to be made a party to or is
involved in any pending, threatened or completed civil, criminal, administrative
or arbitrative action, suit or proceeding, or any appeal therein or any inquiry
or investigation which could lead to such action, suit or proceeding (a
"proceeding"), by reason of his or her being or having been a director, officer,
employee, or agent of the Registrant or of any constituent corporation absorbed
by the Registrant in a consolidation or merger, or by reason of his or her being
or having been a director, officer, trustee, employee or agent of any other
corporation (domestic or foreign) or of any partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise (whether or not
for profit), serving as such at the request of the Registrant or of any such
constituent corporation, or the legal representative of any such director,
officer, trustee, employee or agent, shall be indemnified and held harmless by
the Registrant to the fullest extent permitted by the New Jersey Business
Corporation Act, as the same exists or may be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Registrant to
provide broader indemnification rights than said Act permitted prior to such
amendment), from and against any and all reasonable costs, disbursements and
attorneys' fees, and any and all amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties, incurred or suffered in connection
with any such proceeding, and such indemnification shall continue as to a person
who has ceased to be a director, officer, trustee, employee or agent and shall
inure to the benefit of his or her heirs, executors, administrators and assigns;
provided, however, that, the Registrant shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was specifically
authorized by the Board of Directors of the Registrant. The right to
indemnification created by the Certificate of Incorporation shall be a contract
right and shall include the right to be paid by the Registrant the expenses
incurred in connection with any proceeding in advance of the final disposition
of such proceeding as authorized by the Board of Directors; provided, however,
that, if the New Jersey Business Corporation Act so requires, the payment of
such expenses in advance of the final disposition of a proceedings shall be made
only upon receipt by the Registrant of an undertaking, by or on behalf of such
director, officer, employee, or agent to repay all amounts so advanced unless it
shall ultimately
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be determined that such person is entitled to be indemnified under the
Certificate of Incorporation or otherwise. The right to indemnification and
advancement of expenses provided by or granted pursuant to the Certificate of
Incorporation shall not exclude or be exclusive of any other rights to which any
person may be entitled under a certificate of incorporation, by-law, agreement,
vote of shareholders or otherwise, provided that no indemnification shall be
made to or on behalf of such person if a judgment or other final adjudication
adverse to such person establishes that such person has not met the applicable
standard of conduct required to be met under the New Jersey Business Corporation
Act.
The Registrant may purchase and maintain insurance on behalf of any
director, officer, employee or agent of the Registrant or another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any expenses incurred in any proceeding and any liabilities asserted
against him or her by reason of such person's being or having been such a
director, officer, employee or agent, whether or not the Registrant would have
the power to indemnify such person against such expenses and liabilities under
the provisions of the Certificate of Incorporation or otherwise. The Registrant
maintains such insurance on behalf of its directors and officers.
The foregoing statements are subject to the detailed provisions of the New
Jersey Business Corporation Act and the Registrant's Certificate of
Incorporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. See Exhibit Index.
(b) Financial Statement Schedules. Not Applicable.
(c) Report, Opinion or Appraisal. Not Applicable.
ITEM 22. UNDERTAKINGS
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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 or 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 Act and will be governed by the final adjudication of
such issue.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) 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. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
D. The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (C) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is
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<PAGE> 122
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offering therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
E. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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 the documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
F. 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.
G. The undersigned Registrant hereby undertakes:
1. To file during any period in which offers and sales are being made,
a post-effective amendment to this Registration Statement:
a. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. 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; and
c. 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 of 1933, 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.
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<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Madison, State of New Jersey, on
December 29, 1995.
SCHERING-PLOUGH CORPORATION
(Registrant)
By *
------------------------------------
Name: Robert P. Luciano
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 29, 1995.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- --------------------------------
<S> <C>
* Chairman of the Board, Chief
- --------------------------------------------- Executive Officer and Director
Robert P. Luciano (Principal Executive Officer)
* Executive Vice
- --------------------------------------------- President -- Finance (Principal
Harold R. Hiser, Jr. Financial Officer)
* Vice President and Controller
- --------------------------------------------- (Principal Accounting Officer)
Thomas H. Kelly
* Director
- ---------------------------------------------
Hans W. Becherer
* Director
- ---------------------------------------------
David C. Garfield
* Director
- ---------------------------------------------
Regina E. Herzlinger
* Director
- ---------------------------------------------
Hugh A. D'Andrade
* Director
- ---------------------------------------------
Richard J. Kogan
</TABLE>
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<PAGE> 124
<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- --------------------------------
<S> <C>
* Director
- ---------------------------------------------
H. Barclay Morley
* Director
- ---------------------------------------------
Carl E. Mundy, Jr.
* Director
- ---------------------------------------------
Richard de J. Osborne
* Director
- ---------------------------------------------
Patricia F. Russo
* Director
- ---------------------------------------------
William A. Schreyer
* Director
- ---------------------------------------------
Robert F. W. van Oordt
* Director
- ---------------------------------------------
Romeo J. Ventres
* Director
- ---------------------------------------------
James Wood
*By: /s/ Jack L. Wyszomierski Attorney-in-fact
- ---------------------------------------------
</TABLE>
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<PAGE> 125
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ -------------------------------------------------------------------------- ----
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of December 8, 1995, by and among
Schering-Plough Corporation, Canji Merger Corp. and Canji, Inc., without
exhibits and disclosure schedules (included as Annex A to the Proxy
Statement/Prospectus included in this Registration Statement). The
Registrant agrees to furnish supplementally a copy of any omitted exhibit
or schedule to the Commission upon request................................
3.1 Schering-Plough Corporation's Certificate of Incorporation, as amended and
currently in effect, filed as Exhibit 3(i) to Schering-Plough
Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995 (File No. 1-6571), is incorporated herein by reference...............
3.2 Schering-Plough Corporation's By-Laws, as amended and currently in effect,
filed as Exhibit 4(b) to Schering-Plough Corporation's Registration
Statement No. 33-19013, are incorporated herein by reference..............
4.1 Rights Agreement, dated as of July 25, 1989, between Schering-Plough
Corporation and The Bank of New York, filed as Exhibit 4 to
Schering-Plough Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989 (File No. 1-6571), is incorporated herein by
reference.................................................................
4.2 Indenture, dated as of November 1, 1982, between Schering-Plough
Corporation and The Chase Manhattan Bank, N.A., as Trustee, filed as
Exhibit 4(a) to Schering-Plough Corporation's Registration Statement on
Form S-3, File No. 2-80012, is incorporated herein by reference...........
4.3 Supplemental Indenture No. 1, dated as of November 1, 1991, to Indenture,
dated as of November 1, 1982, between Schering-Plough Corporation and The
Chase Manhattan Bank, N.A., as Trustee, filed as Exhibit 4.1 to
Schering-Plough Corporation's Current Report on Form 8-K dated November
20, 1991 (File No. 1-6571), is incorporated herein by reference...........
4.4 LYNX Equity Unit Agreement, filed as Exhibit 10.1 to Schering-Plough
Corporation's Current Report on Form 8-K dated October 1, 1991 (File No.
1-6571), is incorporated herein by reference..............................
4.5 LYNX Equity Unit Guarantee Agreement, filed as Exhibit 10.1 to
Schering-Plough Corporation's Current Report on Form 8-K dated October 1,
1991 (File No. 1-6571), is incorporated herein by reference...............
4.6 Form of Participation Rights Agreement between Schering-Plough Corporation
and The Chase Manhattan Bank (National Association), as Trustee...........
5 * Opinion of Kevin A. Quinn, Esq. as to the legality of the securities being
issued....................................................................
8 Opinion of Gray Cary Ware & Freidenrich as to certain tax matters in the
Merger....................................................................
12 * Statement regarding computation of ratio of earnings to fixed charges.....
23.1 Consent of Deloitte & Touche LLP with regard to use of its report on
Schering-Plough Corporation's financial statements........................
23.2 Consent of Price Waterhouse LLP with regard to the use of its report on
Canji, Inc.'s financial statements........................................
23.3* Consent of Kevin A. Quinn (included in Exhibit 5).........................
23.4 Consent of Gray Cary Ware & Freidenrich (included in Exhibit 8)...........
24 * Power of Attorney.........................................................
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ -------------------------------------------------------------------------- ----
<S> <C> <C>
25 * Form T-1 with respect to the eligibility of The Chase Manhattan Bank
(National Association) to act as Trustee under the Participation Rights
Agreement under which Participation Rights will be issued.................
99.1 Form of Proxy to be used in soliciting holders of common stock and
preferred stock of Canji, Inc.............................................
99.2 Form of letter and notice of meeting to holders of common stock and
preferred stock of Canji, Inc.............................................
</TABLE>
- ---------------
* Previously filed as an exhibit to this Registration Statement.
<PAGE> 1
Exhibit 4.6
===============================================================================
SCHERING-PLOUGH CORPORATION
TO
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
Trustee
----------------------
PARTICIPATION RIGHTS
AGREEMENT
Dated as of December ___, 1995
----------------------
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions of
General Application
Section 101. Definitions . . . . . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . 2
Agreement . . . . . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . 3
Combination Factor . . . . . . . . . . . . . . . 3
Combination Product . . . . . . . . . . . . . . . 3
Commission . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . 3
Company Request; Company Order . . . . . . . . . 4
Contingent Payment . . . . . . . . . . . . . . . 4
Contingent Payment Date . . . . . . . . . . . . . 4
Contingent Payment Periods . . . . . . . . . . . 4
Corporate Trust Office . . . . . . . . . . . . . 4
Deductible Amount . . . . . . . . . . . . . . . . 4
Exchange Act . . . . . . . . . . . . . . . . . . 5
Field . . . . . . . . . . . . . . . . . . . . . . 5
Holder . . . . . . . . . . . . . . . . . . . . . 5
Net Sales . . . . . . . . . . . . . . . . . . . . 5
Officers' Certificate . . . . . . . . . . . . . . 6
Opinion of Counsel . . . . . . . . . . . . . . . 6
Original Agreements . . . . . . . . . . . . . . . 6
Original Owners . . . . . . . . . . . . . . . . . 6
Outstanding . . . . . . . . . . . . . . . . . . . 6
p53 Gene . . . . . . . . . . . . . . . . . . . . 7
p53 Gene Technology . . . . . . . . . . . . . . . 7
Participation Certificate . . . . . . . . . . . . 7
Paying Agent . . . . . . . . . . . . . . . . . . 7
Person . . . . . . . . . . . . . . . . . . . . . 7
Product . . . . . . . . . . . . . . . . . . . . . 7
Product Patent Rights . . . . . . . . . . . . . . 7
Record Date . . . . . . . . . . . . . . . . . . . 8
Responsible Officer . . . . . . . . . . . . . . . 8
Security Register; Security Registrar . . . . . . 8
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be a part
of this Agreement.
<PAGE> 3
Page
----
Subsidiary . . . . . . . . . . . . . . . . . . . 8
Term . . . . . . . . . . . . . . . . . . . . . . 8
Trust Indenture Act . . . . . . . . . . . . . . . 8
Trustee . . . . . . . . . . . . . . . . . . . . . 8
vice president . . . . . . . . . . . . . . . . . 9
Voting Stock . . . . . . . . . . . . . . . . . . 9
Section 102. Compliance Certificates and Opinions . . . . . . 9
Section 103. Form of Documents Delivered to Trustee . . . . . 10
Section 104. Acts of Holders . . . . . . . . . . . . . . . . . 11
Section 105. Notices, etc., to Trustee and Company . . . . . . 12
Section 106. Notice to Holders; Waiver . . . . . . . . . . . . 12
Section 107. Conflict with Trust Indenture Act . . . . . . . . 13
Section 108. Effect of Headings and Table of Contents . . . . 13
Section 109. Successors and Assigns . . . . . . . . . . . . . 13
Section 110. Benefits of Agreement . . . . . . . . . . . . . . 13
Section 111. Governing Law . . . . . . . . . . . . . . . . . . 14
Section 112. Legal Holidays . . . . . . . . . . . . . . . . . 14
Section 113. Separability Clause . . . . . . . . . . . . . . . 14
ARTICLE TWO
Security Forms
Section 201. Forms Generally . . . . . . . . . . . . . . . . . 14
Section 202. Form of Face of Participation
Certificates . . . . . . . . . . . . . . . . . 15
Section 203. Form of Reverse of Security . . . . . . . . . . . 16
Section 204. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . . . 18
ARTICLE THREE
The Securities
Section 301. Title and Terms . . . . . . . . . . . . . . . . . 19
Section 302. Registrable Form . . . . . . . . . . . . . . . . 19
Section 303. Execution, Authentication, Delivery and
Dating . . . . . . . . . . . . . . . . . . . . 20
Section 304. Temporary Securities . . . . . . . . . . . . . . 21
Section 305. Registration, Registration of Transfer
and Exchange . . . . . . . . . . . . . . . . . 21
Section 306. Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . . . . . . . . 22
Section 307. Payments Under Participation Certificate . . . . 23
Section 308. Persons Deemed Owners . . . . . . . . . . . . . . 24
Section 309. Cancellation . . . . . . . . . . . . . . . . . . 24
ARTICLE FOUR
The Trustee
Section 401. Certain Duties and Responsibilities . . . . . . . 24
-ii-
<PAGE> 4
Page
----
Section 402. Certain Rights of Trustee . . . . . . . . . . . . 26
Section 403. Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . . . . . . 27
Section 404. May Hold Securities . . . . . . . . . . . . . . . 27
Section 405. Money Held in Trust . . . . . . . . . . . . . . . 27
Section 406. Compensation and Reimbursement . . . . . . . . . 28
Section 407. Disqualification; Conflicting Interests . . . . . 28
Section 408. Corporate Trustee Required; Eligibility . . . . . 28
Section 409. Resignation and Removal; Appointment
of Successor . . . . . . . . . . . . . . . . . 29
Section 410. Acceptance of Appointment by Successor . . . . . 30
Section 411. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . . . 31
Section 412. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . 31
ARTICLE FIVE
Holders' Lists and Reports by
Trustee and Company
Section 501. Company to Furnish Trustee Name and
Addresses of Holders . . . . . . . . . . . . . 31
Section 502. Preservation of Information; Communications
to Holders . . . . . . . . . . . . . . . . . . 32
Section 503. Reports by Trustee . . . . . . . . . . . . . . . 32
Section 504. Reports by Company . . . . . . . . . . . . . . . 33
ARTICLE SIX
Amendments
Section 601. Amendments without Consent of Holders . . . . . . 34
Section 602. Amendments with Consent of Holders . . . . . . . 35
Section 603. Execution of Amendments . . . . . . . . . . . . . 36
Section 604. Effect of Amendments . . . . . . . . . . . . . . 37
Section 605. Conformity with Trust Indenture Act . . . . . . . 37
Section 606. Reference in Securities to Amendments . . . . . . 37
ARTICLE SEVEN
Covenants
Section 701. Payment of Amounts, if any, to Holders . . . . . 37
Section 702. Maintenance of Office or Agency . . . . . . . . . 37
Section 703. Money for Security Payments to Be
Held in Trust . . . . . . . . . . . . . . . . . 38
Section 704. Reasonable Diligence . . . . . . . . . . . . . . 39
-iii-
<PAGE> 5
Page
----
ARTICLE EIGHT
Remedies of the Trustee and Holders
on Event of Default
Section 801. Event of Default Defined; Waiver of
Default . . . . . . . . . . . . . . . . . . . . 39
Section 802. Collection of Indebtedness by Trustee;
Trustee May Prove Debt . . . . . . . . . . . . 40
Section 803. Application of Proceeds . . . . . . . . . . . . . 43
Section 804. Suits for Enforcement . . . . . . . . . . . . . . 43
Section 805. Restoration of Rights on Abandonment
of Proceedings . . . . . . . . . . . . . . . . 44
Section 806. Limitations on Suits by Holders . . . . . . . . . 44
Section 807. Unconditional Right of Holders to
Institute Certain Suits . . . . . . . . . . . . 44
Section 808. Powers and Remedies Cumulative; Delay
or Omission Not Waiver of Default . . . . . . . 45
Section 809. Control by Holders . . . . . . . . . . . . . . . 45
Section 810. Waiver of Past Defaults . . . . . . . . . . . . . 46
Section 811. Trustee to Give Notice of Default, But
May Withhold in Certain Circumstances . . . . . 46
Section 812. Right of Court to Require Filing of
Undertaking to Pay Costs . . . . . . . . . . . 46
ARTICLE NINE
Consolidation, Merger, Sale or Conveyance
Section 901. Company May Consolidate, etc., on
Certain Terms . . . . . . . . . . . . . . . . . 47
Section 902. Successor Corporation Substituted . . . . . . . . 47
Section 903. Opinion of Counsel to Trustee . . . . . . . . . . 48
-iv-
<PAGE> 6
Reconciliation and tie between Trust Indenture Act of 1939 and
Participation Rights Agreement, dated as of December __, 1995 (the
"Agreement")
Trust Indenture Act Section Agreement Section
- --------------------------- -----------------
Section 310(a)(1) . . . . . . . . . . . . . . . . . . 408
(a)(2) . . . . . . . . . . . . . . . . . . 408
(a)(3) . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . . . . . . . 408
(b) . . . . . . . . . . . . . . . . . . . . 407, 409
Section 311(a) . . . . . . . . . . . . . . . . . . . . 412
(b) . . . . . . . . . . . . . . . . . . . . 412
(b)(2) . . . . . . . . . . . . . . . . . . 503(a)
Section 312(a) . . . . . . . . . . . . . . . . . . . . 501, 502(a)
(b) . . . . . . . . . . . . . . . . . . . . 502(b)
(c) . . . . . . . . . . . . . . . . . . . . 502(c)
Section 313(a) . . . . . . . . . . . . . . . . . . . . 503(a)
(b) . . . . . . . . . . . . . . . . . . . . 503(b)
(c) . . . . . . . . . . . . . . . . . . . . 503(a)
(d) . . . . . . . . . . . . . . . . . . . . 503(b)
Section 314(a) . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . 401(a),(b)
(b) . . . . . . . . . . . . . . . . . . . . 811, 503(a)
(c) . . . . . . . . . . . . . . . . . . . . 401(a)
(d) . . . . . . . . . . . . . . . . . . . . 401(c)
(d)(1) . . . . . . . . . . . . . . . . . . 401(a),(b)
(d)(2) . . . . . . . . . . . . . . . . . . 401(c)(2)
(d)(3) . . . . . . . . . . . . . . . . . . 401(c)(4)
(e) . . . . . . . . . . . . . . . . . . . . 812
Section 316(a) . . . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . 809
(a)(1)(B) . . . . . . . . . . . . . . . . . 810
(a)(2) . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . 807
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . 802
(a)(2) . . . . . . . . . . . . . . . . . . 802
(b) . . . . . . . . . . . . . . . . . . . . 703
Section 318(a) . . . . . . . . . . . . . . . . . . . . 107
- ----------
Note: This reconciliation and tie shall not for any purpose be deemed to be a
part of the Agreement.
<PAGE> 7
AGREEMENT, dated as of December __, 1995, between SCHERING-PLOUGH
CORPORATION, a New Jersey corporation (hereinafter called the "Company"), and
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) as trustee (hereinafter called
the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the creation of an issue of
participation rights (hereinafter called the "Securities" or "PRs"), 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, the Company proposes to issue to each holder of common stock,
par value $0.01 per share ("Canji Common Stock"), of Canji, Inc., a Delaware
corporation ("Canji"), and each holder of preferred stock, par value $0.01 per
share ("Canji Preferred Stock," and together with Canji Common Stock, "Canji
Capital Stock"), of Canji one Security for each share of Canji Capital Stock
pursuant to the Agreement and Plan of Merger, dated as of December 8, 1995 (the
"Merger Agreement"), by and among Canji, the Company and Canji Merger Corp., a
Delaware corporation and a wholly owned subsidiary of the Company ("Subcorp"),
providing for the merger (the "Merger") of Subcorp with and into Canji;
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, 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 mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE> 8
(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, and the term "generally accepted accounting
principles" means such accounting principles as are generally accepted at
the time of any computation;
(c) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the 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.
"Act" when used with respect to any Holder has the meaning specified in
Section 104.
"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 or cause the direction of 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.
"Board of Directors" means either 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
-2-
<PAGE> 9
York, New York are not authorized or obligated by law or executive order to
close and, if the PRs are listed on a national securities exchange, such
exchange is open for trading.
"Combination Factor" means, on a country-by-country basis, a fraction,
the numerator and denominator of which shall be determined as follows:
(i) The numerator of the Combination Factor shall be the seller's price
of an equivalent unit price for the active ingredient which includes the
p53 Gene, and the denominator of the Combination Factor shall be the sum of
the numerator and the seller's price for an equivalent unit price of each
additional active ingredient contained therein.
(ii) If the numerator and denominator of the Combination Factor cannot
be determined in the manner set forth in clause (i) above, then the
numerator of the Combination Factor shall be the cost to seller of the
active ingredient which contains the p53 Gene, and the denominator shall be
the cost to seller of all active ingredients as customarily and
consistently applied by seller.
(iii) In no event shall the Combination Factor be less than fifty
percent (50%).
"Combination Product" means any product which utilizes a Product which
contains the p53 Gene as an active ingredient plus also utilizes other active
ingredients.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, 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.
"Company" means the Person 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 the Trust Indenture Act Sections
310 through 317 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
-3-
<PAGE> 10
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 for each Contingent Payment Period the
amount payable with respect to each PR equal to the product of (x) the quotient
obtained by dividing (I) one by (II) _______________ and (y) (I) the product of
(A) the contingent payment rate of 11% and (B) Net Sales for such Contingent
Payment Period reduced by (II) the Deductible Amount.
"Contingent Payment Date" means with respect to each Contingent Payment
Period the date 60 days following the end of such Contingent Payment Period.
"Contingent Payment Periods" shall be the periods of three calendar
months ended March 31, June 30, September 30 and December 31 of each calendar
year.
"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 Chase Trust Services, 4 Chase MetroTech Center, Brooklyn, New York 11245.
"Deductible Amount" shall be, with respect to each Contingent Payment
Period, the aggregate of (1), (2), (3) and (4) below:
(1) All royalties owing from the Company or any of its Affiliates to
any of the Original Owners under any of the Original Agreements accrued or paid
during the respective Contingent Payment Period.
(2) If there is a net reduction in the royalty rates payable by the
Company or any of its Affiliates to the Original Owners as a group, because
of future amendments to the Original Agreements, then half of any such
reduction shall be reflected as a reduction in the future contingent payment
rate payable by the Company hereunder; provided, however, in no event shall
this reduction cause such contingent payment rate to be lower than 8%.
(3) (A) If it is ultimately determined (by final judgment, or by good
faith negotiations which also involve the Trustee) (i) that the Products based
upon Product Patent Rights do in fact infringe on a third party's patent rights,
and (ii) that the Company cannot reasonably make, use or sell said
-4-
<PAGE> 11
Products without infringing on the third party's patent rights, and (iii)
that the Company becomes obligated to pay a royalty to such third party,
then one-half of any such royalty payable to such third party, provided,
however, in no event shall the reduction provided for in this clause (A)
cause the contingent payment rate to be lower than 1% of Net Sales with
respect to such Products, and (B) on a country-by-country basis, and a
Product-by-Product basis, one-half of any reasonable out-of-pocket expense
of defense against any third party's claim of a Product's infringement of
such third party's patent rights, which are reasonably documented, as such
expenses are incurred shall be deducted from the Contingent Payment.
(4) All royalties, other than royalties for which a reduction is made
pursuant to paragraph (1) above, owing from the Company or any of its
Affiliates to any third party with respect to any Product(s) as a result of
any arrangement, agreement or understanding between Canji, Inc. and such
third party which is in effect as of the effective time of the Merger shall
be deducted from the Contingent Payment.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Field" means for prophylactic or therapeutic medical care or treatment
of any disease or condition in humans or animals. Expressly excluded from the
Field are (i) all diagnostic uses or products, and (ii) all research reagents or
research products.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Net Sales" means for any Contingent Payment Period the gross amount
invoiced by the Company, the Company's Affiliates and their sublicensees on
sales of all Products the respective Terms of which have commenced and have not
expired as of the time of determination net of returns and rejections, less all
actual amounts which are included on said invoice or identified in other
documentation for (i) allowances for normal and customary quantity and cash
discounts which reduce the customer's invoice obligation, (ii) rebates including
government mandated rebates which reduce the customer's invoice obligation,
(iii) transportation costs and insurance while in transit which is actually paid
by the Company or its Affiliates or sublicensees, and (iv) any sales or similar
taxes, packaging charges, freight and insurance. For the purposes of
determining Net Sales, a sale shall be deemed to have occurred when an
invoice therefor shall be generated, the Product shipped for
-5-
<PAGE> 12
delivery, or payment therefor is received, whichever shall occur first. Sales
to any Affiliate of the Company shall be excluded until the subsequent sale
by any such Affiliate to a non-Affiliate, which shall then be included
hereunder in the determination of Net Sales. Notwithstanding the foregoing,
Net Sales with respect to any Combination Product shall be equal to Net
Sales with respect thereto, as calculated above, multiplied by the Combination
Factor.
"Officers' Certificate" 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, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
"Original Agreements" mean (i) the License Agreement, dated August 10,
1990, with the University of California, as licensor, and Canji, Inc., as
licensee; (ii) the Patent License and Option Agreement, dated December 11, 1992,
with the University of Texas, as licensor, and Canji, Inc., as licensee; and
(iii) the Assignment Agreement, dated April 22, 1993, with Research Development
Foundation, as assignor, and Canji, Inc. as assignee.
"Original Owners" mean the licensors and assignor under the Original
Agreements.
"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; and
(b) 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 owned by the Company or any other obligor upon the
Securities
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or any Affiliate of the Company or such other obligor 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.
"p53 Gene" means the p53 gene sequence as published in Science
250:1576-1580, 1990, entitled "Genetic Mechanisms of Tumor Suppression by the
Human p53 Gene", authored by Phang-Tanz Chen, et al., and any p53 gene fragment,
derivative or analog, or combination of p53 fragments, natural or synthetic or
by recombinant DNA technology and any p53 gene product (as is customarily
scientifically understood e.g., a p53 protein or transcript), and p53 gene
product fragment, derivative or analog, or mimetic or combination of p53 product
fragments, natural or synthetic or by recombinant DNA technology.
"p53 Gene Technology" means any and all technology owned or controlled
in whole or part by Canji, Inc. or its Affiliates as of the effective time of
the Merger by license, assignment or otherwise involving the p53 Gene, together
with any vectors owned or controlled by Canji, Inc. in whole or in part by
license, assignment or otherwise useful with the p53 Gene.
"Participation Certificate" means a certificate representing any of
the PRs.
"Paying Agent" means any Person authorized by the Company to pay the
amount determined pursuant to Section 301, if any, on any Securities on behalf
of the Company.
"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.
"Product" means any pharmaceutical product, device, biological
material, method or process derived from the p53 Gene Technology, and which
includes the p53 Gene as an active ingredient or a material element of an active
ingredient, for use in the Field.
"Product Patent Rights" means (i) the patents or patent applications
listed on Exhibit A to this Agreement, (ii) all existing and future patents
and patent applications owned or controlled in whole or part by license,
assignment or otherwise by Canji, Inc. or Canji, Inc.'s Affiliates which
claim or
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relate to the p53 Gene, the p53 Gene Technology or making, using and selling
Products in the Field, and (iii) any divisions, continuations, continuations-
in-part, reissues, reexaminations, extensions or other governmental actions
which extend any subject matter of a patent, and any substitutions,
confirmations, registrations, revalidations or additions of any of the
foregoing that were in existence as of the effective time of the Merger.
"Record Date" means for the Contingent Payment payable on any
Contingent Payment Date on the PRs, the date specified for that purpose as
contemplated by Section 301, which date shall be the fifteenth day prior to such
Contingent Payment Date whether or not such day shall be a Business Day.
"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.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Subsidiary" means each Person more than 50% of the outstanding Voting
Stock of which is owned, directly or indirectly, by the Company or one or more
Subsidiaries, or by the Company and one or more other Subsidiaries.
"Term" with respect to any Product means, on a country-by-country
basis, (i) for a Product utilizing Product Patent Rights, the period commencing
on the date of this Agreement and ending on the last to expire (and/or to be
declared invalid in a proceeding from which no appeal is or can be taken) of
Product Patent Rights utilized by or in such Product in each such country and
(ii) for a Product not utilizing Product Patent Rights, the twelve-year period
commencing on the date of first commercial sale of the initial Product in such
country.
"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.
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"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 Stock" means stock 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 102. Compliance Certificates 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 all conditions precedent, if
any, provided for in this Agreement (including any covenants compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with and an Opinion of Counsel stating 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 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 or not, in the opinion of each such
individual, such condition or covenant has been complied with.
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Section 103. 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, 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, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. 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, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
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, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous. 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.
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Section 104. 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 401) 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 10 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 501 of this Agreement prior to such solicitation. If a record date is
fixed, those Persons who were Holders of securities at such record date (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.
(d) At any time prior to (but not after) the evidencing to the Trustee,
as provided in this Section 104, 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
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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 104, 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 105. 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, Attention: [ ];
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 Giralda Farms, Madison, New
Jersey 07940, Attention: [____________], or at any other address previously
furnished in writing to the Trustee by the Company.
Section 106. 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
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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 107. 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 108. 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 109. 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 110. 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 the sole
benefit of the parties hereto and their successors and of the Holders.
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Section 111. Governing Law.
This Agreement and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.
Section 112. Legal Holidays.
In the event that any date on which any payment in respect of any
Security is due 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 on the next succeeding Business
Day with the same force and effect as if made on the date due.
Section 113. Separability Clause.
In case any provision in this Agreement or in the PRs 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.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
The Participation Certificates and the Trustee's certificate of
authentication shall be in substantially the forms set forth in this Article,
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 officers executing such Participation Certificates, as
evidenced by their execution of the Participation Certificates. Any portion of
the text of any Participation Certificate may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Participation
Certificate.
The definitive Participation Certificates shall be 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
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exchange on which the Securities may be listed, all as determined by the
officers executing the Participation Certificates representing such Securities,
as evidenced by their execution of such Participation Certificates.
Section 202. Form of Face of Participation Certificates.
SCHERING-PLOUGH CORPORATION
PARTICIPATION RIGHTS
No. Certificate for Participation Rights
This certifies that , or registered assigns (the
"Holder"), is the registered holder of the number of Participation Rights
("PRs") set forth above. Each PR entitles the Holder, subject to the provisions
contained herein and in the Agreement referred to on the reverse hereof, to
payment from Schering-Plough Corporation, a New Jersey corporation (the
"Company"), with respect to any Contingent Payment Period ending on or after the
date of this Participation Certificate, Contingent Payments at the times and in
the amounts specified in Section 301 of the Agreement.
Payment of said Contingent Payments shall be made, net of any
applicable withholding taxes, at the offices or agencies of the Company
maintained for that purpose in The City of New York, New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts, provided, that such payments
shall be made, unless the Trustee shall agree otherwise, by check mailed to the
address of the person entitled thereto as such address shall appear on the
Securities Register of the Company. The Chase Manhattan Bank (National
Association) has been appointed as paying agent in The City of New York,
New York.
Reference is hereby made to the further provisions of the PRs 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 or on behalf of the Trustee referred to on the reverse hereof by manual
signature, the PRs represented by this Participation 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 in strument to be duly
executed under its corporate seal.
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Dated: SCHERING-PLOUGH CORPORATION
By_____________________________
Attest:
__________________________ [SEAL]
Authorized Signature
Section 203. Form of Reverse of Security.
This Participation Certificate is issued under and in accordance with
the Participation Rights Agreement, dated as of December , 1995 (the
"Agreement"), between the Company and The Chase Manhattan Bank (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 Participation 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 PRs.
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 under the Agreement at any time by the
Company and the Trustee with the consent of the holders of a majority of the PRs
at the time Outstanding.
No reference herein to the Agreement and no provision of the PRs or of
the Agreement shall alter or impair the obligation of the Company, which is
absolute and unconditional, to make the Contingent Payments on the PRs at the
times and in the amounts and in the coin or currency prescribed in the
Agreement; provided, however, that all such payments will be made net of any
applicable withholding taxes.
The PRs are issuable only in registered form, and Participation
Certificates representing any integral number of PRs may be issued. As provided
in the Agreement and subject to certain limitations therein set forth, the
transfer of the PRs
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<PAGE> 23
represented by this Participation Certificate is registrable on the Security
Register of the Company, upon surrender of this Participation Certificate for
registration of transfer at the office or agency of the Company maintained for
such purpose in The City of New York, 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 Participation
Certificates, for the same number of PRs, will be issued to the designated
transferee or transferees. The Company hereby designates the office of The
Chase Manhattan Bank (National Association) as the office for registration of
transfer of this Participation Certificate.
As provided in the Agreement and subject to certain limitations therein
set forth, this Participation Certificate is exchangeable for one or more
Participation Certificates representing the same number of PRs as represented by
this Participation Certificate as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of PRs, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Participation 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 Participation
Certificate is registered as the owner hereof for all purposes, subject to the
provisions set forth in the Agreement relating to a record date for the payment
of Contingent Payments, and neither the Company, the Trustee nor any agent shall
be affected by notice to the contrary.
All capitalized terms used in this Participation Certificate without
definition shall have the meanings assigned to them in the Agreement.
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Section 204. Form of Trustee's Certificate of Authentication.
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Participation Certificates referred to in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Trustee
By_____________________________________
Authorized Officer
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<PAGE> 25
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
(a) The aggregate number of Participation Certificates which may be
authenticated and delivered under this Agreement is limited to the number equal
to the number of PRs issued by the Company in the Merger pursuant to the Merger
Agreement, except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Securities pursuant to
Section 304, 305, 306 or 606.
(b) The Securities shall be known and designated as the "Participation
Rights" of the Company.
(c) Each Person who is the Holder of a PR at the close of business on
any Record Date will be entitled to receive in respect of each PR held, on the
Contingent Payment Date, the Contingent Payment with respect to the Contingent
Payment Period last preceding such Record Date determined by the Company
pursuant to this Agreement. Such determinations by the Company absent manifest
error shall be final and binding on the Company and the Holders.
(d) Contingent Payments on each PR shall be calculated to the nearest
cent, with one-half cent rounded for such purpose to the next greater whole
number. No Contingent Payment shall be due or payable for any Contingent Payment
Period for which the Contingent Payment would be less than $0.05 per PR, but any
such unpaid amount shall be cumulated and paid in the next succeeding Contingent
Payment Period for which Contingent Payments, when added to all such previously
unpaid amounts, would be $0.05 per PR or more.
(e) Notwithstanding any provision of this Agreement or the
Participation Certificates to the contrary, other than as expressly provided
under this Agreement, no interest shall accrue on any amounts payable on the PRs
to any Holder.
Section 302. Registrable Form.
The Securities shall be issuable only in registered form.
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Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
chairman of the Board of Directors or any vice chairman of the Board of
Directors or its president or any vice president or its treasurer, under its
corporate seal which may, 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 any time 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 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.
The Person in whose name any Security is registered at the close of
business on any Record Date with respect to any Contingent Payment shall be
entitled to receive such Contingent Payment notwithstanding the cancellation of
the Participation Certificate representing such Security upon any registration
of transfer of such Security or exchange of such Participation Certificate
subsequent to such Record Date and prior to the date on which such Contingent
Payment is required to be paid; provided, however, that if and to the extent the
Company shall default in the payment of such Contingent Payment, such defaulted
Contingent Payment shall be paid to the Persons in whose names Outstanding
Securities are registered at the close
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of business on the record date fixed by the Company for the payment of such
defaulted Contingent Payment.
Section 304. 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 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 702,
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 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 702 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.
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Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 702, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Participation
Certificates representing the same aggregate number of PRs represented by the
Participation 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 Participation Certificates represented
by such Participation Certificate that are not to be transferred.
At the option of the Holder, Participation Certificates may be
exchanged for other Participation Certificates that represent in the aggregate
the same number of PRs as the Participation Certificates surrendered at such
office or agency. Whenever any Participation Certificates are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Participation 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
right, and entitled to the same benefits 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 304 or 606 not involving any transfer.
Section 306. 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
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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 its written request 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
Participation Certificate of like tenor and amount of PRs, bearing a number not
contemporaneously outstanding.
Upon the issuance of any new Securities under this Section, the Company
may require the payment of a sum sufficient to cover 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.
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 307. Payments Under Participation Certificate.
Payment of Contingent Payments on the PRs shall be made, net of any
applicable withholding taxes, at the offices or agencies of the Company
maintained for that purpose in The City of New York, New York, 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, that such payments shall be made,
unless the Trustee shall agree otherwise, by check mailed to the address of the
Holders entitled thereto by first-class mail as such address shall appear on the
Securities Register. The Chase Manhattan Bank (National Association) has been
appointed as paying agent in The City of New York, New York.
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Section 308. 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 any such payment 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 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled 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 cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Agreement. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company Order.
ARTICLE FOUR
THE TRUSTEE
Section 401. Certain Duties and Responsibilities.
(a) With respect to the Holders of Securities issued hereunder, 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. 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. Further, with respect to the Company's obligations under
Section 704 (Reasonable Diligence) and Section 505 (Reports by Company
Regarding Commercialization Efforts), the Trustee shall make such inquiries and
obtain such evidence as a prudent business person would do under the
circumstances in order to monitor and verify the Company's proper performance
of the Company's obligations pursuant to said Sections 704 and 505.
(b) In the absence of bad faith on its part, prior to the occurrence of
an Event of Default and after the curing
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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
(1) this Subsection (c) shall not be construed to limit the effect of
Subsections (a) and (b) of this Section;
(2) 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;
(3) 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
(4) 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 809 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.
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Section 402. Certain Rights of Trustee.
Subject to the provisions of Section 401:
(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;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(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;
(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) prior to the occurrence of an Event of Default hereunder and after
the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
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notice, request, consent, order, approval, appraisal, bond, debenture,
note, coupon, security, or other paper ordocument unless requested in
writing to do so by the Holders of not less than a majority of the
Securities then Outstanding; provided that, if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation is, in the opinion
of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such expenses or liabilities as a condition to
proceeding; the reasonable expenses of every such investigation shall be
paid by the Company or, if paid by the Trustee or any predecessor Trustee,
shall be repaid by the Company upon demand; and
(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.
Section 403. Not Responsible for Recitals or Issuance of 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 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. The Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
Section 404. 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 407 and 412, 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 405. 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.
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Section 406. 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 its negligence or bad
faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, 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.
Section 407. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire any conflicting interest within the
meaning of the Trust Indenture Act, it shall, within 90 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.
Section 408. 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 $50,000,000. 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
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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 409. 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 410.
(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 30 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 407 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 408 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 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.
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(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 such resignation, removal or incapability, or the
occurrence of such vacancy, 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 410, 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 so accepted appointment, 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 410. Acceptance of Appointment by 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, on 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
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.
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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 411. 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 412. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or shall become a creditor, directly
or indirectly, secured or unsecured, 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 FIVE
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 501. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee (a)
semiannually, not later than [May 1] and [November 1], a list, in such form as
the Trustee may reasonably require, of the names and addresses of the Holders as
of
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[April 15] and [October 15], respectively, and (b) at such times as the Trustee
may request in writing, within 30 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 15 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 502. Preservation of Information; Communications to Holders.
(a) The 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 501 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 501 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 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 503. Reports by Trustee.
(a) Within 60 days after [May 15] of each year commencing with the
first [May 15] after the first issuance of Securities, 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 upon which the
Securities are listed, with the Commission and also with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
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Section 504. Reports by Company.
The Company shall:
(a) file with the Trustee, within 15 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; or,
if the Company is not required to file information, documents or reports
pursuant to either of said Sections, then it shall file with the Trustee
and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and periodic
information, documents and reports which may 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;
(b) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Agreement as may be
required from time to time by such rules and regulations;
(c) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 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 Subsections (a) and (b) of
this Section as may be required by rules and regulations prescribed from
time to time by the Commission;
(d) furnish to the Trustee, not less often than annually, a brief
certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Agreement
(for purpose of this paragraph, such compliance shall be determined without
regard to any period of grace or requirement of notice provided under this
Agreement); and
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(e) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, at periodic intervals, but no less
frequently than annually, a report summarizing the present status of the
Company's p53 gene research and development and of Product production, and
describing any significant developments relating to the p53 gene project
which have occurred since the date of the last such report; provided,
however, that no such report shall contain any information that has not
been disclosed to shareholders of the Company generally.
ARTICLE SIX
AMENDMENTS
Section 601. Amendments Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more amendments hereto, in form satisfactory to the Trustee, 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
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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
rights of the Holders of a majority of the Outstanding Securities to
waive such an Event of Default;
(d) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Agreement; provided that in each case, such
provisions shall not adversely affect the interests of the Holders; or
(e) 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
accordance with this Section 601, 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 602. 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
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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 Contingent Payment Period, Contingent
Payment, Contingent Payment Date, Deductible Amount, Net Sales, Term,
Product, Product Patent Rights or otherwise reduce the amounts payable in
respect of the Securities;
(b) reduce the amount of the Outstanding Securities, the consent of
whose Holders is required for any such amendment; or
(c) modify any of the provisions of this Section or Section 810, 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 be
sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Company and the Trustee of any
amendment pursuant to the provisions of this Section, 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 603. Execution of Amendments.
In executing any amendment permitted by this Article, the Trustee shall
be entitled to receive, and (subject to Section 401) 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 may, but shall not be
obligated to, enter into any such amendment which affects the Trustee's own
rights, duties or immunities under this Agreement or otherwise.
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Section 604. Effect of Amendments.
Upon the execution of any amendment under this Article, this Agreement
and the Securities shall be modified in 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.
Section 605. Conformity with Trust Indenture Act.
Every amendment executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act.
Section 606. 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 SEVEN
COVENANTS
Section 701. 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.
Section 702. Maintenance of Office or Agency.
As long as any of the Securities remain Outstanding, the Company will
maintain in The City of New York, New York, an office or agency (i) where
Securities may be surrendered for registration of transfer or exchange and (ii)
where notices and demands to or upon the Company in respect of the Securities
and this Agreement may be served. The Company hereby designates the office of
The Chase Manhattan Bank (National Association) as such office
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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 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 maintain any such
required office or agency or 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, 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 City of New York, 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. The Company also designates the Corporate Trust Office as one of such
offices.
Section 703. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of any amount due on any of the PRs, 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 each due date of any amount due on any of the
PRs, 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 (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 such amount has become due and payable, 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 704. Reasonable Diligence.
The Company shall use commercially reasonable, diligent and good faith
efforts to bring Products to market, and to make sales of such Products at
commercially reasonable volumes taking into due account applicable
considerations, if any, arising with respect to possible claims by any third
party alleging infringement of such third party's patent rights by Products sold
by the Company. Said reasonable diligence shall be at least up to the level of
efforts that the Company devotes to the commercialization of its other products
of similar market value and therapeutic and developmental status. Without
limiting the generality of the foregoing, the Company and its Affiliates and
sublicensees will not develop, manufacture or market any pharmaceutical,
therapeutic or prophylactic product for use in humans or animals utilizing the
p53 Gene, unless the same is done as a Product pursuant to this Agreement and
treated as such for all purposes hereunder, including for purposes of
calculating Net Sales. To the extent any such pharmaceutical, therapeutic or
prophylactic product is done or treated as a Product as provided in the
preceding sentence, although such product would not otherwise be a Product as
defined herein but for this paragraph, all royalties owing from the Company or
any of its Affiliates to any third party related to any such product accrued or
paid during any Contingent Payment Period shall be included in and treated as
part of the Deductible Amount, so long as said royalties payable to said third
parties, together with any royalties (if any) payable to the Original Owners, do
not exceed 6% of Net Sales of such product.
ARTICLE EIGHT
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
Section 801. Event of Default Defined; Waiver of Default.
"Event of Default" with respect to Securities, means any of the
following events which shall have occurred and be continuing (whatever the
reason for such Event of
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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 any Contingent Payment when the same
shall become due and payable, and continuance of such default for a period
of 30 days; or
(b) default in the performance, or breach, of any covenant of the
Company in this Agreement (other than a covenant or 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 90 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
25% 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 60 consecutive days; or
(d) the Company shall commence a voluntary case under any applicable
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, liquidator, 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.
Section 802. Collection of Indebtedness by Trustee; Trustee May Prove
Debt. The Company covenants that in case default shall be made in the payment of
any Contingent Payment when and as the same shall have become due and payable
and such default continues for the period of 30 days, 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 then
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due and payable; 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.
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
any 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 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, 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
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relative to the Company or other obligor upon the Securities, or to the
creditors or property of the Company or such other obligor;
(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 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 negligence or
bad faith and all other amounts due to the Trustee or any predecessor
Trustee pursuant to Section 406.
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 relative thereto, and any such action or 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.
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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 803. Application of Proceeds. Any moneys 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 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 negligence or
bad faith, and all other amounts due to the Trustee or any predecessor
Trustee pursuant to Section 406;
SECOND: To the payment of Contingent Payments on the Securities, in the
order of such Contingent Payments, and in case such moneys 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
THIRD: To the payment of the remainder, if any, to the Company or any
other Person lawfully entitled thereto.
Section 804. 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 and 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.
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Section 805. Restoration of Rights on Abandonment of Proceedings. In
case the Trustee or 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 Holder
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 806. 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
25% 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 incurred therein
or thereby and the Trustee for 60 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 809; 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 807. 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
Contingent
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Payments payable in respect of such Security on or after the respective
Contingent Payment Dates, or to institute suit for the enforcement of any such
payment on or after such respective Contingent Payment Dates, shall not be
impaired or affected without the consent of such Holder.
Section 808. Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default. Except as provided in Section 806, 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 806, 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 809. 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 401) the Trustee
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 the Trustee
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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 810. Waiver of Past Defaults. In the case of a default or an
Event of Default specified in clause (b), (c) or (d) of Section 801, 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 811. 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, such notice to be transmitted within 90 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.
Section 812. Right of Court to Require Filing of Undertaking to Pay
Costs. All parties to this Agreement agree,
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<PAGE> 53
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 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
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith or 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 10% 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 NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 901. 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) either the Company shall be the continuing corporation, or the
successor corporation or the Person which acquires by sale or conveyance
substantially all the assets of the Company (if other than the Company) shall be
a Person organized under the laws of the United States of America or any State
thereof and shall expressly assume 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, by supplemental agreement satisfactory to
the Trustee, executed and delivered to the Trustee by such corporation, and (ii)
the Company or such successor corporation, 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 902. Successor Corporation Substituted. In case of any such
consolidation, merger, sale or conveyance, and following such an assumption by
the successor corporation, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had been named
herein. Such successor corporation 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
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<PAGE> 54
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 prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Company 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, lease 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 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 903. Opinion of Counsel to Trustee. The Trustee may receive an
opinion of Counsel, prepared in accordance with Sections 103 and 104, as
conclusive evidence that any such consolidation, merger, sale, lease or
conveyance, and any such assumption, and any such liquidation or dissolution,
complies with the applicable provisions of this Agreement.
* * * * *
This Agreement may 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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<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
SCHERING-PLOUGH CORPORATION
By_________________________
Title:
Attest:____________________
Title:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By_________________________
Title:
Attest:____________________
Title:
49
<PAGE> 56
STATE OF )
: ss.:
COUNTY OF )
On the day of , 1995, before me personally
came , to me known, who, being by me duly sworn,
did depose and say that s/he resides at
; that s/he is of ,
one of the corporations described in and which executed the above instrument;
that s/he knows the corporate seal of such corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed pursuant to
authority of the Board of Directors of such corporation; and that s/he signed
her/his name thereto pursuant to like authority.
(NOTARIAL SEAL)
-------------------------
<PAGE> 57
STATE OF )
: ss.:
COUNTY OF )
On the day of , 1995, before me personally came
, to me known, who, being by me duly sworn, did depose and
say that s/he resides at ; that s/he is
of , one of the corporations described in and which
executed the above instrument; that s/he knows the corporate seal of such
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed pursuant to authority of the Board of Directors of such
corporation; and that s/he signed her/his name thereto pursuant to like
authority.
(NOTARIAL SEAL)
-------------------------
<PAGE> 1
EXHIBIT 8
[GRAY CARY WARE & FREIDENRICH LETTERHEAD]
December 29, 1995
Canji, Inc.
3030 Science Park Road, Suite 302
San Diego, CA 92121
Ladies and Gentlemen:
We have acted as special counsel to Canji, Inc., a Delaware corporation
("Canji"), in connection with (i) the Merger, as defined and described in the
Agreement and Plan of Merger by and among Canji, Schering-Plough Corporation, a
New Jersey corporation ("Schering-Plough"), and Canji Merger Corp., a Delaware
corporation and a wholly-owned subsidiary of Schering-Plough ("Subcorp"), dated
as of December 8, 1995 (the "Merger Agreement") and (ii) the preparation and
filing with the Securities and Exchange Commission of a Proxy
Statement/Prospectus under the Securities Act of 1933, as amended (the "Proxy
Statement/Prospectus"). Unless otherwise indicated, each capitalized term has
the meaning ascribed to it in the Merger Agreement.
If the Merger is consummated on the terms and subject to the conditions
set forth in the Merger Agreement, then (i) Canji will become a wholly owned
subsidiary of Schering-Plough, and (ii) Canji Stockholders will be entitled to
receive for each share of Canji Capital Stock held by them, other than shares
held by Canji, Subcorp, or any parent of Subcorp, if any, which will be
canceled, and other than shares as to which dissenters' rights have been
perfected, (x) that number of Schering-Plough Common Shares equal to the
Exchange Ratio and (y) one Participation Right. The Exchange Ratio is equal to
the quotient (rounded to the nearest ten-thousandth of a share) obtained (i) by
dividing $54.5 million by the sum of the total number of shares of Canji
Capital Stock issued and outstanding immediately prior to the Effective Time
and the total number of shares of Canji Capital Stock required to be reserved
for issuance upon the exercise of all outstanding warrants, options (excluding
the Unvested Canji Options to purchase up to 600,000 shares of Canji Capital
Stock to be canceled immediately prior to the
<PAGE> 2
GRAY CARY WARE & FREIDENRICH
Canji, Inc.
December 29, 1995
Page 2
Effective Time) and other rights to purchase or otherwise receive such shares
and then dividing that amount by (ii) the Average Share Price.
In connection with this opinion, we have examined and are familiar with
originals and copies, certified or otherwise identified to our satisfaction,
of (i) the Proxy Statement/Prospectus and (ii) such other documents as we have
deemed necessary or appropriate in order to enable us to render the opinion
below. In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
Based upon and subject to (i) the Merger being consummated in the manner
described in the Merger Agreement, (ii) the accuracy of the Proxy
Statement/Prospectus and facts concerning the Merger that have come to our
attention during our engagement and (iii) certain representations made by Canji,
Schering-Plough, and Subcorp in connection with the issuance of our opinion, the
description in the Proxy Statement/Prospectus under the heading "Certain Federal
Income Tax Consequences," although general in nature, fairly and accurately sets
forth our opinion as to the matters addressed therein. We express no opinion as
to whether such description addresses all of the U.S. federal income tax
consequences of the Merger that may be applicable to Canji, Schering-Plough,
Subcorp, or to any particular Canji Stockholder. In addition, we express no
opinion as to the U.S. federal, state, or local, or foreign or other tax
consequences, other than as set forth in the Proxy Statement/Prospectus under
the heading "Certain Federal Income Tax Consequences."
This letter is furnished to you solely for use in connection with the
Merger, as described in the Merger Agreement, and is not to be used,
circulated, quoted, or otherwise referred to for any other purposes without our
express written permission.
We hereby consent to the use of this opinion as an exhibit to the Proxy
Statement/Prospectus and to the reference to our firm under the heading
"Certain Federal Income Tax Consequences" in the Proxy Statement/Prospectus. In
giving
<PAGE> 3
GRAY CARY WARE & FREIDENRICH
Canji, Inc.
December 29, 1995
Page 3
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Gray Cary Ware & Freidenrich
--------------------------------
GRAY CARY WARE & FREIDENRICH
A Professional Corporation
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Schering-Plough Corporation on Form S-4 of our reports dated February 15, 1995,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
Schering-Plough Corporation for the year ended December 31, 1994 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
December 29, 1995
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Schering-Plough Corporation of our report
dated February 27, 1995 relating to the financial statements of Canji, Inc.
which appears in such Prospectus. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Diego, California
December 28, 1995
<PAGE> 1
Exhibit 99.1
[FORM OF PROXY]
CANJI, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CANJI, INC. FOR USE AT
THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON
FEBRUARY 1, 1996
The undersigned hereby appoints M. Blake Ingle, Kenneth M. Cohen and T.
Knox Bell, and each or either of them with full power to act alone, and with the
power to appoint a substitute, as the true and lawful attorneys in fact and
proxies of the undersigned, with authorization to vote all shares of Common
Stock and Preferred Stock of CANJI, INC., a Delaware corporation (the
"Company"), held by the undersigned, with the same force and effect as the
undersigned would be entitled to vote if personally present at the Special
Meeting of Stockholders of the Company to be held at 3030 Science Park Road,
Suite 302, San Diego, California, on February 1, 1996, at 10:00 a.m. (local
time), and at any and all adjournments or postponements thereof, as follows:
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
Proposal 1. - Approval and adoption of the Agreement and Plan of Merger, FOR AGAINST ABSTAIN
dated as of December 8, 1995, by and among the Company,
Schering-Plough Corporation, a New Jersey corporation, [ ] [ ] [ ]
and Canji Merger Corp., a Delaware corporation, and of the
amendment of the Company's Certificate of Incorporation in
connection therewith, as more fully described in the accom-
panying Proxy Statement/Prospectus dated December 29, 1995.
Proposal 2. - OTHER MATTERS: Discretionary authority is hereby granted with [ ] [ ] [ ]
respect to such other business as may properly come before the
meeting or any adjournment or postponement thereof.
</TABLE>
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF THIS PROXY IS SUBMITTED, BUT NO
DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1 AND AT THE
DISCRETION OF THE PROXY HOLDERS UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
The Undersigned hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and the Proxy Statement/Prospectus, each dated December 29, 1995,
furnished herewith.
DATED: ______________________, 1996
SIGNATURE: ______________________________________________________________
SIGNATURE(S) (IF HELD JOINTLY): _________________________________________
TITLE OR AUTHORITY: _____________________________________________________
IMPORTANT: Please sign your name exactly as it appears hereon. When signing as
attorney, agent, executor, administrator, trustee, guardian or corporate
officer, please give your full title as such. Each joint owner should sign the
proxy. If executed by a partnership, this proxy should be signed by an
authorized partner.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
<PAGE> 1
EXHIBIT 99.2
[CANJI, INC. LETTERHEAD]
December 29, 1995
Dear Stockholder:
You are invited and urged to attend a Special Meeting of Stockholders of
Canji, Inc. ("Canji") to be held at 3030 Science Park Road, Suite 302, San
Diego, California 92121, on Thursday, February 1, 1996, at 10:00 a.m.
At the Special Meeting you will be asked to vote on a proposal (the "Canji
Merger Proposal") to approve and adopt an Agreement and Plan of Merger, dated as
of December 8, 1995 (the "Merger Agreement"), providing for the merger (the
"Merger") of a wholly-owned subsidiary ("Subcorp") of Schering-Plough
Corporation ("Schering-Plough") with and into Canji. Upon consummation of the
Merger, among other things, Canji will become a wholly-owned subsidiary of
Schering-Plough, and Canji stockholders will be entitled to receive for each
share of Canji common stock and Canji preferred stock held by them the Merger
Consideration, consisting of (i) a number of Schering-Plough common shares
determined pursuant to the share exchange formula set forth in the Merger
Agreement, which shares are expected to be listed on the New York Stock
Exchange, and (ii) one Participation Right of Schering-Plough, representing the
right to receive a pro rata share of a specified percentage of net sales, if
any, subject to certain adjustments, generated from certain Canji p53 gene
technology, as further described in the accompanying Proxy Statement/Prospectus.
Holders of outstanding, exercisable warrants to purchase Canji common stock and
Canji preferred stock will be entitled to receive the Merger Consideration for
such warrants upon consummation of the Merger in the manner described in the
accompanying Proxy Statement/Prospectus. In addition, upon consummation of the
Merger, exercisable options to purchase Canji common stock and/or Canji
preferred stock will be canceled to the extent not theretofore exercised.
The share exchange formula is described in the accompanying Proxy
Statement/Prospectus, but provides generally that each Canji stockholder will
receive Schering-Plough common shares having a value of approximately $5.06 per
share of Canji capital stock. This approximate value is based upon approximately
10,761,693 shares of Canji capital stock, on a fully-diluted basis, to be
canceled in the Merger.
The value of the Participation Rights to be issued in the Merger is
entirely dependent upon the success of Schering-Plough in developing and
commercializing Canji's p53 gene technology. If Schering-Plough does not develop
and commercialize a successful product using Canji's p53 gene technology, the
Participation Rights will have no value. If Schering-Plough develops and
commercializes a successful product, each Participation Right will produce a
cash flow. The ultimate cash flow to the Canji stockholders from this future
income stream is highly speculative, and there can be no assurance that any
income will ever be generated based upon this technology.
ADDITIONAL INFORMATION REGARDING THE MERGER AND THE MERGER AGREEMENT IS SET
FORTH IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND THE ANNEXES THERETO,
WHICH YOU ARE URGED TO READ CAREFULLY IN THEIR ENTIRETY.
The Board of Directors of Canji has carefully considered the terms and
conditions of the proposed Merger. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF, CANJI AND THE
CANJI STOCKHOLDERS. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT CANJI
STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY
VOTING FOR THE CANJI MERGER PROPOSAL.
Pursuant to Delaware law and Canji's Certificate of Incorporation, approval
of the Canji Merger Proposal, and thereby the Merger, requires the affirmative
vote of the holders of (i) a majority of the outstanding shares of Canji common
stock and Canji preferred stock entitled to vote, voting together as a single
class, and (ii) seventy percent (70%) of the outstanding shares of Canji
preferred stock entitled to vote,
<PAGE> 2
voting together as a single class. Such approval will constitute approval of
payment of the Merger Consideration to all Canji stockholders on an equal, pro
rata basis, in lieu of and without any preference being paid to the holders of
Canji preferred stock.
In view of the importance of the action to be taken at this Special Meeting
of Canji stockholders, we urge you to review carefully the accompanying Notice
of Special Meeting of Stockholders and the Proxy Statement/Prospectus, including
the annexes thereto, which also include information on Schering-Plough and
Canji. Whether or not you expect to attend the Special Meeting, please complete,
sign and date the enclosed proxy and return it as promptly as possible.
Sincerely,
CANJI, INC.
M. Blake Ingle
Chairman of the Board and
Chief Executive Officer
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<PAGE> 3
CANJI, INC.
3030 SCIENCE PARK ROAD, SUITE 302
SAN DIEGO, CALIFORNIA 92121
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 1, 1996
------------------------
To the Stockholders of Canji, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Canji,
Inc., a Delaware corporation ("Canji"), will be held on Thursday, February 1,
1996, at 10:00 a.m., local time, at 3030 Science Park Road, Suite 302, San
Diego, California, for the following purposes:
1. To consider and vote on a proposal (the "Canji Merger Proposal") to
approve and adopt the Agreement and Plan of Merger, dated as of December 8, 1995
(the "Merger Agreement"), by and among Canji, Schering-Plough Corporation, a New
Jersey corporation ("Schering-Plough"), and Canji Merger Corp., a Delaware
corporation and a wholly-owned subsidiary of Schering-Plough ("Subcorp"),
pursuant to which, among other things, (i) Subcorp will be merged with and into
Canji with the result that Canji becomes a wholly-owned subsidiary of
Schering-Plough, and (ii) each issued and outstanding share (other than shares
held, directly or indirectly, by Canji, Subcorp or any parent of Subcorp, if
any, which will be canceled, and other than shares as to which dissenters'
rights have been perfected) of Canji common stock, par value $0.01 per share
("Canji Common Stock") and of Canji preferred stock, par value $0.01 per share
("Canji Preferred Stock," and together with Canji Common Stock, "Canji Capital
Stock"), will be converted into the Merger Consideration, consisting of (x) a
number of Schering-Plough common shares, par value $1.00 per share, as
determined pursuant to the share exchange formula set forth in the Merger
Agreement and (y) one Participation Right of Schering-Plough. Approval and
adoption of the Canji Merger Proposal by seventy percent (70%) of the
outstanding shares of Canji Preferred Stock entitled to vote at the meeting,
voting together as a single class, will also constitute approval and adoption of
the amendment of Canji's Certificate of Incorporation to eliminate the
liquidation preferences of the Canji Preferred Stock. Such approval by holders
of Canji Preferred Stock is a condition to the consummation of the Merger and
the consummation of the Merger is a condition to the effectiveness of the
amendment. A copy of the Merger Agreement is attached as Annex A to the
accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on December 26,
1995, as the record date for the determination of the holders of Canji Capital
Stock entitled to notice of, and to vote at, the meeting and adjournments or
postponements thereof. The Canji Merger Proposal requires the affirmative vote
of the holders of (i) a majority of the outstanding shares of Canji Capital
Stock entitled to vote at the meeting, voting together as a single class, and
(ii) seventy percent (70%) of the outstanding shares of Canji Preferred Stock
entitled to vote at the meeting, voting together as a single class. The
executive officers and Directors of Canji and certain of their affiliates have
expressed an intention to vote in favor of the Canji Merger Proposal.
Information regarding the Merger and related matters is contained in the
accompanying Proxy Statement/Prospectus and the annexes thereto, which are
incorporated by reference herein and form a part of this Notice. Stockholders of
Canji will be entitled to dissent from the Merger and to assert appraisal rights
under Section 262 of the Delaware General Corporation Law which is attached as
Annex B to, and summarized under "Rights of Dissenting Stockholders" in, the
accompanying Proxy Statement/Prospectus.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IT IS IMPORTANT
THAT YOUR INTERESTS BE REPRESENTED AT THE MEETING.
<PAGE> 4
THE BOARD OF DIRECTORS OF CANJI HAS UNANIMOUSLY DETERMINED THAT THE TERMS
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO,
AND IN THE BEST INTERESTS OF, CANJI AND THE CANJI STOCKHOLDERS. ACCORDINGLY, THE
CANJI BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT BY VOTING FOR THE CANJI MERGER PROPOSAL.
By Order of the Board of Directors
T. Knox Bell
Secretary
San Diego, California
December 29, 1995
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
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