Buchanan Ingersoll
P R O F E S S I O N A L
C O R P O R A T I O N
Attorneys
Lewis U. Davis,Jr. One Oxford Center
301 Grant Street, 20th Floor
412-562-8953 Pittsburgh, PA 15219-1410
Telephone: 412-562-8800
Fax: 412-562-1041
December 6, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: MYLAN LABORATORIES INC.:
Registration Statement on Form S-4
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<S> <C>
Gentlemen:
Enclosed for filing pursuant to Rule 402 of Regulation C on behalf of the firm's
client, Mylan Laboratories Inc. ("Mylan"), is Registration Statement on Form S-4 covering
2,450,000 shares of Mylan's Common Stock, par value $.50 per share.
The purpose of the S-4, is the consideration of an Agreement and Plan of Merger
dated October 10, 1995 providing for the merger of MLI Acquisition Corp. ("MLI"), a Texas
corporation and wholly owned subsidiary of Mylan, with and into TC Manufacturing Co., Inc.
("TC") as a result of which the separate existence of MLI would cease and TC would continue as
the surviving corporation and a wholly owned direct subsidiary of Mylan. Shares of TC would be
converted into shares of Mylan Common Stock which shares are being registered on the
Registration Statement on Form S-4. TC is a privately held company. As an inducement to
Mylan to enter into the Merger Agreement, the controlling stockholders of TC who own far in
excess of a majority of its stock granted Mylan irrevocable proxies to vote in favor of the merger.
Thus, no uncertainty exists regarding approval of the Merger Agreement. Since TC is a private
company, Mylan has long been a New York Stock Exchange listed company and the Merger
Agreement will be approved, we respectfully suggest that the staff of the Commission not review
this filing in order to consummate the merger at the earliest possible time in accordance with the
wishes of Mylan and of TC's stockholders.
Mylan has previously wired funds representing the registration fee to your
account at Mellon Bank.
Please direct any comments regarding the enclosed materials to the undersigned
(412-562-8953) or, in my absence, Eric Kline (412-562-3934) of this office.
Very truly yours,
/S/ Lewis U. Davis, Jr.
Lewis U. Davis, Jr.
cc: The New York Stock Exchange
Registration No. 33-___
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under THE SECURITIES
ACT OF 1933 MYLAN LABORATORIES INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 2834 25-1211621
(State or jurisdiction of (Primary Standard Industrial I.R.S. Employer
Incorporation or organization) Classification Code Number) Identification No.)
130 Seventh Street, 1030 Century Building
Pittsburgh, Pennsylvania 15222
412-232-0100
(Address, including zip code and telephone number,
including area code, of registrant's principal executive offices)
Mr. Milan Puskar
Mylan Laboratories Inc.
130 Seventh Street, 1030 Century
Building Pittsburgh, Pennsylvania 15222
412-232-0100
(Name, address, including zip code and telephone number,
including area code, of agent for service)
Copies to:
John R. Previs, Esquire Keith R. Abrams, Esquire
Buchanan Ingersoll Rivkin, Radler & Kremer
Professional Corporation 30 North LaSalle Street
One Oxford Centre Chicago, Illinois 60602-2507
301 Grant Street, 20th Floor
Pittsburgh, PA 15219-1410
Approximate date of commencement of the proposed sale of
the securities to the public: As soon as practicable after
this Registration Statement becomes effective and all other
conditions to the merger (the "Merger") of MLI Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of
Mylan Laboratories Inc., with and into TC Manufacturing Co.,
Inc. pursuant to the Merger Agreement described in the enclosed
Proxy Statement/Prospectus have been satisfied or waived.
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
Title of Each Class Amount to be Proposed Maximum Proposed maximum Amount of
of Securities to be Registered (1) Offering Price Aggregate Offering Registration
Registered Per Unit (2) Price (2) Fee (3)
- ----------------------- ------------------ ------------------------ ------------------------ ---------------
Common Stock, par 2,450,000 $11.23 $27,520,000 $9,489.66
Value $.50 per share
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(1) The amount of common stock, par value $.50 per share, of
the Registrant ("Mylan Common Stock") to be registered has been
determined on the basis of the conversion ratio for such stock
in the Merger ((i) .42589063 shares of Mylan Common Stock for
each outstanding share of common stock, par value $1.00 of
TC Manufacturing Co., Inc. ("TC Common Stock") and
(ii) 5.02765 shares of Mylan Common Stock for each outstanding
share of 8% Cumulative Preferred Stock, par value $100 per
share ("TC Preferred Stock")) and the maximum number of shares
of Mylan which may be issued under this Registration Statement
upon conversion of the TC Preferred Stock and the TC Common
Stock in the Merger, assuming the exercise prior to the
effective time of the Merger of all stock options for TC
Common Stock that are, or prior to the effective time of the
Merger will be, exercised.
(2) Estimated pursuant to Rule 457(f)(2) of the Securities
Act of 1933 (the "Securities Act"), based upon the book
value ($27,520,000 as of September 30, 1995) of the shares of TC
Common Stock and TC Preferred Stock being converted in the
Merger. The per share amount assumes that the maximum number
of the shares of the Registrant's Common Stock which may be
issued in the Merger are issued.
(3) The registration fee for all securities registered
hereby, $9,489.66, has been calculated pursuant to Rule
457(f)(2) under the Securities Act, as follows: the aggregate book value
($27,520,000) as of September 30, 1995 of the outstanding TC
Common Stock and TC Preferred Stock to be converted in the
Merger in exchange for the Registrant's Common Stock was
multiplied by 1/29th of one percent (.00034483).
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 or until the Registration Statement
shall become effective on such date as the Commission acting
pursuant to said Section 8(a) may determine.
MYLAN LABORATORIES INC.
CROSS-REFERENCE SHEET
Cross Reference Sheet Pursuant to Rule 404(a) of the
Securities Act of 1933 and Item 501(b) of Regulation S-K.
Showing the Location or Heading in the Proxy
Statement/Prospectus of the Information Required by Part I or
Form S-4.
Location or Heading in Proxy
S-4 Item Number and Caption Statement/Prospectus
A. Information About Transaction
1. Forepart of Registration Facing Page of Registration
Statement and Outside Front Statement; Cross Reference
Cover Page of Prospectus Sheet; Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Available Information;
Cover Pages of Prospectus Incorporation of Certain
Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings Summary; Comparative Per
to Fixed Charges and Other Share Data; Comparative Per
Information Share Market and Dividend
Information
4. Terms of the Transaction Summary; The Merger; The
Merger Agreement; Certain
Related Transactions and
Relationships of TC and
Mylan; Comparison of
Shareholder Rights;
Description of Mylan
Capital Stock
5. Pro Forma Financial Information Summary; Index to Financial
Statements
6. Material Contacts with the The Merger; The Merger
Company Being Acquired Agreement; Certain Related
Transactions and
Relationships of TC and Mylan
7. Additional Information Required Not Applicable
for Reoffering by Persons and
Parties Deemed to be
Underwriters
8. Interests of Named Experts and Not Applicable
Counsel
9. Disclosure of Commission Not Applicable
Position on Indemnification for
Securities Act Liabilities
B. Information About the Registrant
10.Information With Respect to S-3 Incorporation of Certain
Registrants Documents by Reference;
Description of Mylan
Capital Stock; Information
About Mylan
11.Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference
12.Information With Respect to S-2 Not Applicable
or S-3 Registrants
13.Incorporation of Certain Not Applicable
Information by Reference
14.Information With Respect to Not Applicable
Registrants Other Than S-3 or S-
2 Registrants
C. Information About the Company Being
Acquired
15.Information With Respect to S-3 Not Applicable
Companies
16.Information With Respect to S-2 Not Applicable
or S-3 Companies
17.Information With Respect to Summary; Business of TC;
TC's
Companies Other Than S-2 or S-3 Management's Discussion and
Companies Analysis of Results of
Operations and Financial
Condition; Security Ownership
of Management of TC and
certain Other Persons
D. Voting and Management Information
18.Information if Proxies, Cover Page of Proxy
Consents or Authorizations are Statement/Prospectus;
to be Solicited Incorporation of Certain
Documents by Reference;
Summary; The Meeting; The
Merger; Certain Related
Transactions and
Relationships of TC and
Mylan; Security Ownership of
Management of TC and
Certain Other Persons
19.Information if Proxies, Not Applicable
Consents or Authorizations are
not to be Solicited, or in an
Exchange Offer
MYLAN LABORATORIES INC.
AND
TC MANUFACTURING CO., INC.
a Delaware Corporation
_________________
TC MANUFACTURING CO., INC. PROXY STATEMENT
MYLAN LABORATORIES INC. PROSPECTUS
______________
This Proxy Statement/Prospectus is being furnished to
holders of Common Stock, par value $1.00 per share ("TC Common
Stock") and the 8% Cumulative Preferred Stock, par value $100
per share ("TC Preferred Stock" and, collectively with the TC
Common Stock, the "TC Stock") of TC Manufacturing Co., Inc., a
Delaware corporation ("TC"), in connection with the Special
Meeting of TC Stockholders (the "Special Meeting") to be held
on __________ ____, 1996, at _____________, commencing at
___________ a.m., local time, and at any adjournment or
postponement thereof. This Proxy Statement/Prospectus is also
being used in the solicitation of proxies by the Board of
Directors of TC from certain minority holders of TC Common
Stock and TC Preferred Stock who have not previously delivered
irrevocable proxies in favor of Mylan.
This Proxy Statement/Prospectus constitutes a
prospectus of Mylan Laboratories Inc., a Pennsylvania
corporation ("Mylan" or the "Registrant") with respect to up to
2,450,000 shares of Common Stock, par value $.50 per share of
Mylan ("Mylan Common Stock") to be issued in the Merger (as
defined herein) in exchange for outstanding shares of TC Common
Stock and TC Preferred Stock. All information contained in
this Proxy Statement/Prospectus relating to Mylan has been
supplied by Mylan, and all information relating to TC has been
supplied by TC.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION NOR HAS THE 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.
_______________________
This Proxy Statement/Prospectus is first being mailed to TC
stockholders and, with respect to the solicitation of minority TC stockholders,
the accompanying forms of proxies are first being mailed on or about _________
____, 1995.
The date of this Proxy Statement/Prospectus is_______________, 1995.
(Inside Front Cover)
No persons have been authorized to give any information or to make any
representation other than those contained in this Proxy Statement/Prospectus in
connection with the solicitation of proxies or the offering of securities made
hereby and, if given or made, such information or representation must not be
relied upon as having been authorized by Mylan, TC or any other
person. This Proxy Statement/Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom it is not lawful to make any such
offer or solicitation in such jurisdiction. Neither the
delivery of this Proxy Statement/Prospectus nor any
distribution of securities made hereunder shall, under any
circumstances, create an implication that there has been no
change in the affairs of Mylan or TC since the date hereof or
that the information herein is correct as of any time
subsequent to its date.
AVAILABLE INFORMATION
Mylan is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy
statements and other information with the Securities and
Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Mylan with the
Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York
10048, and 500 West Madison Street, Room 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained
from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates. Material filed by
Mylan can also be inspected at the offices of the New York
Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York,
New York, on which the Mylan Common Stock is listed.
Mylan has filed with the Commission a Registration
Statement on Form S-4 (together with any amendments thereto,
the "Registration Statement") under the Securities Act of 1933,
as amended (the "Securities Act") with respect to the
securities to be issued pursuant to the Merger Agreement. This
Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement. Such additional
information may be obtained from the Commission's principal
office in Washington, D.C. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by
reference in this Proxy Statement/Prospectus as to the contents
of any contract or other document referred to herein or therein
are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document,
each such statement being qualified in all respects by such
reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE
AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER TO WHOM
THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN OR
ORAL REQUESTS, WITHOUT CHARGE, IN THE CASE OF DOCUMENTS
RELATING TO MYLAN, DIRECTED TO MYLAN LABORATORIES INC., 130
SEVENTH STREET, 1030 CENTURY BUILDING, PITTSBURGH, PENNSYLVANIA
15222 (TELEPHONE NUMBER (412) 232-0100), ATTENTION: PATRICIA
SUNSERI, VICE PRESIDENT-INVESTOR AND PUBLIC RELATIONS. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS
SHOULD BE MADE BY [5 BUSINESS DAYS PRIOR TO MEETING DATE]
________ 1995.
AVAILABLE INFORMATION 2
SUMMARY 3
COMPARATIVE PER SHARE DATA 13
COMPARATIVE PER SHARE MARKET AND DIVIDEND INFORMATION 14
INFORMATION WITH RESPECT TO MYLAN COMMON STOCK 14
INFORMATION WITH RESPECT TO TC STOCK 15
THE MEETING 16
GENERAL 16
MATTERS TO BE CONSIDERED AT THE MEETING 16
VOTING AT THE MEETING; RECORD DATE 16
PROXIES 17
THE MERGER 18
BACKGROUND OF THE MERGER 18
TC'S REASONS FOR THE MERGER; RECOMMENDATION OF TC'S
BOARD OF DIRECTORS 19
MYLAN'S REASONS FOR THE MERGER 20
CERTAIN FEDERAL INCOME TAX CONSEQUENCES 21
REGULATORY COMPLIANCE 23
FEDERAL SECURITIES LAW CONSEQUENCES 24
STOCK EXCHANGE LISTING 24
APPRAISAL RIGHTS 24
ACCOUNTING TREATMENT 27
THE MERGER AGREEMENT 27
THE MERGER 27
ADJUSTMENT OF COMMON STOCK EXCHANGE RATIO; CERTAIN
HOLDBACKS APPLICABLE TO HOLDERS OF TC COMMON STOCK;
AND DISTRIBUTIONS 28
REPRESENTATIONS AND WARRANTIES 32
CERTAIN COVENANTS OF TC 32
CERTAIN COVENANTS OF MYLAN 33
NO SOLICITATION OF TRANSACTIONS 34
INDEMNIFICATION 35
CONDITIONS TO EACH PARTY'S OBLIGATIONS 35
ABANDONMENT AND TERMINATION 36
EXPENSES 36
AMENDMENT AND WAIVER 37
BUSINESS OF TC 37
BACKGROUND 37
COATING BUSINESS 38
PACKAGING BUSINESS 39
PHARMACEUTICAL BUSINESS 39
LEGAL PROCEEDINGS 44
TC'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION 44
OVERVIEW 44
RESULTS OF OPERATIONS 44
CAPITAL RESOURCES AND LIQUIDIY 50
SECURITY OWNERSHIP OF MANAGEMENT OF TC AND CERTAIN
OTHER PERSONS 51
CERTAIN RELATED TRANSACTIONS AND RELATIONSHIPS OF TC
AND MYLAN 53
REORGANIZATION 53
IRREVOCABLE PROXIES 58
LETTER OF TRANSMITTAL 58
NON-COMPETITION AGREEMENTS 59
SUPPLIER RELATIONS 60
TC LEGAL COUNSEL 60
COMPARISON OF SHAREHOLDER RIGHTS 60
SHAREHOLDER RIGHTS GENERALLY 60
SHAREHOLDER VOTING RIGHTS 61
RIGHTS WITH RESPECT TO SHARES 63
RIGHTS AND POWERS OF DIRECTORS 63
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION 63
DESCRIPTION OF MYLAN CAPITAL STOCK 64
MYLAN COMMON STOCK 64
MYLAN PREFERRED STOCK 65
SPECIAL CONSIDERATIONS 65
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 66
LEGAL MATTERS 67
EXPERTS 67
INDEX TO FINANCIAL STATEMENTS F-1
ANNEX A SECTION 262 OF THE DGCL A-1
ANNEX B AGREEMENT AND PLAN OF MERGER B-1
ANNEX C TERMS FOR APPRAISAL RIGHTS TRUST AGREEMENT C-1
PART II INFORMATION NOT REQUIRED IN PROSPECTUS II-1
SUMMARY
The following is a summary of certain information
contained elsewhere in this Proxy Statement/Prospectus.
Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained, or
incorporated by reference, in this Proxy Statement/Prospectus
and the Annexes hereto. Unless otherwise defined herein,
capitalized terms used in this summary have the respective
meanings ascribed to them elsewhere in this Proxy
Statement/Prospectus. Stockholders are urged to read this Proxy
Statement/Prospectus and the Annexes hereto in their entirety.
All information contained herein gives effect to the
Reorganization of TC, effective immediately prior to closing.
The Companies
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<S> <C>
Mylan Mylan is engaged in manufacturing variety of pharmaceutical
products in finished tablet, capsules and powder dosage forms
for resale by others under either Mylan's label or their
own label. The principal executive offices of Mylan are
located at 130 Seventh Street, 1030 Century Building,
Pittsburgh, Pennsylvania 15222, and the telephone number is
(412) 232-0100.
TC TC, through its principal direct and indirect wholly owned
subsidiaries UDL Laboratories,Inc., an Illinois corporation
("UDL-Illinois") and UDLLaboratories, Inc., a Florida
corporation ("UDL-Florida", together with UDL-Illinois
sometimes referred to as "UDL" and together with TC's other
subsidiaries sometimes referred to as the "Subsidiaries") is
engaged in the marketing, packaging, manufacture and/or
development of generic pharmaceutical products,
primarily in solid and liquid oral form, but also in
injectable, topical and suppository form, each primarily
in unit dose configuration, to the institutional healthcare
market (the "Pharmaceutical Business"). TC is also engaged
through two unincorporated divisions, the Tapecoat Division
and the Pak-Sher Division, in the "Coating Business" and
"Packaging Business", respectively. Immediately prior
to the Merger, TC will divest itself of all the assets and
liabilities of the Coating Business and the Packaging
Business through a reorganization in the form of a
split-off (the "Reorganization"). See "Business
of TC - Background and Subsidiaries" and "Certain
Relationships and Related Transactions." The principal
executive offices of TC are located at 1527 Lyons Street,
Evanston, Illinois 60201, and the telephone number is
(708) 869-2320.
The Meeting
Time, Date and Place
The Special Meeting will be held on____________
_____, 1996, at the law offices of Rivkin, Radler &
Kremer, 30 LaSalle Street, Chicago, Illinois 60602,
commencing at 10:00 a.m., local time, and at
any adjournment or postponement thereof.
Record Date: Shares Entitled to Vote
Holders of record of shares of TC Common Stock and
TC Preferred Stock at the close of business
on December 11, 1995 are entitled to notice of and to
vote at the Special Meeting. At such date, there were
5,340,992 shares of TC Common Stock outstanding and
4,243 shares of TC Preferred Stock outstanding,
each of which are entitled to one vote on each matter to be
acted upon or which may properly come before the Special Meeting.
With respect to approval of the Merger Agreement, TC Preferred
Stock is entitled to a separate class vote.
Purpose of the Meeting
The purpose of the Special Meeting is to consider and vote
upon (i) a proposal to approve the Merger Agreement and
(ii) such other matters as may properly be brought before the
Special Meeting.
Vote Required
The approval by TC stockholders of the Merger Agreement will
require (i) the affirmative vote of the holders of a majority of
the outstanding shares of TC Common Stock and (ii) the
affirmative vote of the holders of a majority of the outstanding
shares of TC Preferred Stock, voting separately as a class,
entitled to vote thereon. As an inducement to Mylan to enter
into the Merger Agreement, the holders of a majority of the
outstanding shares of TC Common Stock and TC Preferred Stock
executed irrevocable proxies in favor of Mylan representatives.
See "Certain Related Transactions and Relationships
of TC and Mylan Irrevocable Proxies."
The Merger
Effect of the Merger
Upon consummation of the Merger, pursuant to the Merger
Agreement, (i) MLI will be merged with and into TC, and TC
will be the surviving corporation and will become a
wholly owned subsidiary of Mylan; and (ii) each issued and
outstanding share of TC Common Stock (other than shares as to
which appraisal rights have been perfected, all of which will be
canceled) will be converted into shares of Mylan Common Stock and
(iii) each issued and outstanding share of TC
Preferred Stock (other than shares as to which appraisal
rights have been perfected, all of which will be canceled) will
be converted into shares of Mylan Common Stock. The exchange
ratio for the Preferred Stock is equal to 5.02765 shares of Mylan
Common Stock for each share of TC Preferred Stock. The
ultimate number of shares of Mylan Common Stock received by
TC Common Stockholders as a result of the Merger is
dependent upon a post-closing adjustment based upon certain
balance sheet items of TC (parent company only) on the
Effective Time. Therefor, holders of TC Common Stock will
receive an initial distribution and, may, depending upon the
postclosing adjustment, receive an additional final distribution.
The initial distribution ratio is .40464109 shares of Mylan Common
Stock for each share of TC Common Stock. This initial
distribution ratio may increase slightly if the holders of
options to purchase TC Common Stock fail to exercise their
options and may decrease slightly to the extent that
holders of TC Common Stock exercise appraisal rights. See
"The Merger Agreement Adjustment of Common Stock
Exchange Ratio; Certain Holdbacks Applicable to Holders
of TC Common Stock; and Distributions." Fractional
shares of Mylan Common Stock will not be issuable in
connection with the Merger. Holders of TC Preferred Stock
and TC Common Stock otherwise entitled to a fractional share
will be paid the value of such fraction in cash determined as
described herein under "The Merger Agreement - The Merger."
TC's Reasons for the Merger The Board of Directors of TC
believes that the terms of the Merger are fair to, and in the
best interests of, TC and its stockholders. TC's Board of
Directors believes that combining the pharmaceutical
operations of TC and Mylan will improve the position of UDL-
Illinois and UDLFlorida in the dynamic healthcare marketplace
by affording a secure source for a broad line of generic
pharmaceutical products and access to Mylan's substantial
capital and manufacturing resources and research and
development capabilities. For a discussion of the factors
considered by TC's Board of Directors in reaching its
decision, see "The Merger -
TC's Reasons for the Merger;
Recommendation of TC's Board of
Directors."
Recommendation of TC's Board
of Directors
All directors of Tcparticipated in the meeting at which the
Merger Agreement was considered, and they
unanimously approved the Merger Agreement and recommended a
vote in favor of its approval by the stockholders of TC. For
a discussion of the factors considered by TC's Board of
Directors in reaching its decision, see "The Merger -
TC's Reasons for the Merger; Recommendation of TC's Board of
Directors."
Security Ownership of Certain Persons;
Irrevocable Proxies
Each of the directors of TC has advised that he intends to vote
or direct the vote of all the outstanding shares of TC Common
Stock and TC Preferred Stock over which he has voting control in
favor of approval of the Merger Agreement. Certain owners of
approximately 73% of the outstanding shares of TC
Preferred Stock and 77% of the outstanding shares of TC Common
Stock (including directors and executive officers who hold
approximately 52% of the outstanding shares of TC Common
Stock) have appointed Roderick P. Jackson and David M. Satter,
representatives of Mylan, as irrevocable proxies to vote
their shares regarding the Merger. Such proxies intend to
vote in favor of approval of the Merger Agreement. See
"Certain Related Transactions and Relationships of TC and
Mylan - The Irrevocable Proxies."
Effective Time of Merger
It is expected that the Merger will become effective as
promptly as practicable after the requisite stockholder
approval has been obtained and all other conditions to the
Merger have been satisfied or waived. See "The Merger
Agreement - The Merger."
Conditions to the Merger; Termination of
the Merger Agreement
The obligations of Mylan and TC to consummate the Merger are
subject to the satisfaction of certain conditions, including
(i) no event has occurred which has had a material adverse
effect on, and there has been no material adverse change in,
the business, assets, financial condition or results of
operation (see "The Merger Agreement - The Merger"); (ii)
receipt of approval for listing on the NYSE, subject to
official notice of issuance, of the Mylan Common Stock to be
issued in connection with the Merger; (iii) the absence of
any injunction prohibiting consummation of the Merger;
(iv) the consummation of the Reorganization, including the
transfer of all of the assets of the Coating Business and the
Packaging Business to TC Manufacturing Co., Inc. an
Illinois corporation ("Newco"), the assumption by Newco of all
the liabilities related to such assets, and the distribution of
the stock of Newco to certain holders of TC Common Stock and
certain related transactions; (v) termination of the
Agreement among TC and certain holders of TC Common Stock,
dated March 1, 1962, as amended;
(vi) termination of the Agreement Among Stockholders
among UDLIllinois and its stockholders, dated February
19, 1982; (vii) the acquisition of the
minority interest in UDL- Illinois held by Michael K.
Reicher; (viii) the exercise or cancellation of all outstanding
options for TC Common Stock; (ix) the execution and delivery
of that certain Indemnification Agreement by and between TC and
Newco; and (x) delivery of opinions of counsel for TC and
Mylan. See "The Merger Agreement - Conditions to Each
Party's Obligations" and "Certain Related Transactions
and Relationships of TC and Mylan."
The consummation of the Merger is subject to certain
regulatory matters, including expiration of the relevant
waiting period under the Hart- Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). The
statutory waiting period is expected to expire on December
20, 1995. Consummation of the Merger is conditioned upon the
receipt of all other required governmental authorizations,
consents, orders and approvals. Mylan and TC intend to pursue
vigorously all required regulatory approvals. However,
there can be no assurance regarding the timing of such
approvals or that such approvals will, in fact, be
obtained. See "The Merger - Regulatory Compliance."
The Merger Agreement is subject to termination upon the failure
of the satisfaction of the conditions precedent to the
Merger, by mutual agreement of TC, MLI and Mylan, if the
consummation of the Merger would violate any injunction,
restraining order or decree of any court of competent
jurisdiction or at the option of either Mylan or TC if the
Merger is not consummated on or before February 28, 1996. See
"The Merger Agreement - Termination."
Appraisal Rights
Holders of TC Common Stock and TC Preferred Stock who comply with
the requirements of Section 262 of the DGCL will be entitled to
appraisal rights in connection with the Merger. See "The
Merger - Appraisal Rights." Any holder
of TC Stock who desires to exercise his/her appraisal
rights should carefully review the requirements of Section 262
of the Delaware General Corporation Law ("DGCL")
attached hereto as Annex A and is urged to consult with
his/her legal advisor before exercising or attempting to
exercise such rights.
Certain Federal Income Tax
Consequences
The Merger is intended to be a tax-free reorganization so that
no gain or loss would be recognized by holders of TC
Stock, except in respect of cash received in lieu of
fractional shares or upon perfection of appraisal rights.
It is intended that the Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended (the "Code").
A request for a favorable private letter ruling as to the
tax free nature of the Merger and the Reorganization has been
submitted to the Internal Revenue Service. However, as of
this date, no ruling of the Internal Revenue Service has
been obtained to this effect, and no opinion of counsel has
been sought on this matter. In order to obtain their shares of
Mylan Common Stock, stockholders of TC will be
required to release Mylan and TC from any claims which may
arise with respect to the tax consequences of the Merger
and/or the Reorganization under federal, state or local income
tax laws. TC is informing its stockholders about certain
matters concerning its Reorganization, including
federal income tax consequences, in a separate
document which it is delivering to its stockholders. See "The
Merger Certain Federal Tax Consequences."
Existing Agreements Between
TC and Mylan
Reorganization
Effective immediately prior to the Closing of the Merger, TC,
through a reorganization in the form of a split-off, will
divest itself of its two unincorporated divisions, the
Tapecoat Company, engaging in the Coating Business, and the
Pak-Sher Company, engaging in the Packaging Business. TC
will establish a new subsidiary, Newco, and will
transfer all of the assets related to the Coating Business
and the Packaging Business to Newco, Newco will assume all of
the liabilities related to such assets and Newco will issue its
capital stock to TC. TC will then distribute Newco's stock
to certain holders of TC Common Stock immediately prior to the
Merger. See "Certain Related Transactions and Relationships
of TC and Mylan - Agreement for Business Combination."
Certain Other Transactions
Indemnification
As part of the Reorganization,Newco has agreed to indemnify
TC for certain liabilities with respect to the conduct of the
Coating Business and the Packaging Business, which will
be divested by TC in the Reorganization, including
liabilities which may arise with respect to taxes and
violations of environmental laws. Likewise, TC has agreed
to indemnify Newco with respect to the same types of
liabilities with respect to the conduct of the Pharmaceutical
Business principally conducted through UDL-Illinois and UDL
Florida and two wholly-owned special purpose subsidiaries
(collectively, the "Pharmaceutical Group"). See
"Certain Related Transactions and Relationships of TC and
Mylan Indemnification Agreement."
Certain Other Agreements
As a part of the Reorganization and Merger, TC and certain TC
stockholders are parties to agreements, which provide for
(i) a prohibition on the sale of Mylan Common Stock received
in the Merger by stockholders of TC for a period of three (3)
years from the effective time of the Merger; and (ii) the
purchase by TC of the minority interest in UDL-Illinois from
Michael K. Reicher, President of UDL, for $2,850,000. See
"Certain Related Transactions and Relationships of TC and
Mylan."
Comparison of Shareholder Rights
See "Comparison of Shareholder Rights" for a summary of the
material differences between the rights of holders of Mylan
Common Stock and TC Common Stock and TC Preferred Stock.
Summary Historical and Pro Forma Financial Information
Mylan Summary Historical Financial Information
The summary financial information of Mylan set forth
below has been derived from, and should be read in conjunction
with, the audited financial statements and other financial
information contained in Form 10-K for the fiscal year ended
March 31, 1995 which is incorporated by reference in this Proxy
Statement/Prospectus, and the unaudited financial statements
contained in Mylan's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 ("Mylan's Second Quarter 10-
Q"), which is incorporated by reference in this Proxy
Statement/Prospectus.
</TABLE>
Mylan Laboratories Inc. and Subsidiaries
(Amounts in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Six Months
Ended Year Ended March 31,
Sept. 30,
1995 1994 1995 1994 1993 1992 1991
Statement of Earnings Data:
Net Sales $206,907 $181,159 $396,120 $251,773 $211,964 $131,936 $104,524
Earnings from Continuing
Operations 62,643 55,788 120,869 73,067 70,621 40,114 32,952
Per Common Share:
Earnings from Continuing
Operations .53 .47 1.02 .62 .61 .35 .29
Dividends .07 .06 .19 .10 .08 .07 .07
Declared
Shares Used in
Computation 119,294 118,867 118,964 118,424 115,652 114,726 114,552
Sept. 30, March 31,
1995 1994 1995 1994 1993 1992 1991
Balance Sheet Data:
Working Capital $298,754 $232,021 $275,032 $191,647 $154,000 $102,105 $81,571
Total Assets 586,417 475,999 546,201 403,325 351,105 226,720 186,955
Long-Term Obligations 8,581 5,223 7,122 4,609 5,125 3,600 3,398
(includes long-term
debt and post-retirement
compensation)
Shareholders' Equity 538,154 429,419 482,728 379,969 295,972 203,452 167,531
Book Value Per Share 4.51 3.61 4.06 3.21 2.56 1.77 1.46
</TABLE>
The above financial data gives retroactive effect to the three
for-two stock split effective August 15, 1995.
The Company's current quarterly dividend program totals $.16
per share per year.
For the year ended March 31, 1995 the Company declared a
special one-time dividend of $.067 per share.
TC Summary Historical Financial Information
The summary financial information of TC set forth
below has been derived from, and should be read in conjunction
with, the audited financial statements and other financial
information and with the unaudited financial statements for the
nine months ended July 31, 1994 and 1995 appearing elsewhere in
this Proxy Statement/Prospectus.
TC Manufacturing Co., Inc. and Subsidiaries
(Amounts in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Nine Months Year Ended October 31,
Ended July 31,
1995 1994 1994 1993 1992 1991 1990
Statement of
Earnings Data:
Net Sales $65,370 $61,837 $78,780 $79,617 $69,920 $61,412 $63,137
Net Income (Loss) 1,872 631 (120) 4,358 3,946 1,199 2,972
Per Common
Share:
Net Income (Loss) 0.351 0.119 (0.030) 0.820 0.745 0.220 0.525
Dividends Declared on
Common Stock 0.0300 0.0150 0.0225 0.0575 0.0300 0.0350 0.0250
Shares Used in
Computation 5,338 5,304 5,325 5,299 5,258 5,324 5,592
July 31 October 31,
1995 1994 1994 1993 1992 1991 1990
Balance Sheet Data:
Working Capital $18,710 $20,899 $18,785 $22,385 $21,157 $19,194 $10,856
Total Assets 47,072 46,890 49,109 51,042 45,005 39,679 36,169
Long-TermObligations
(includes long-term
debt and post-retirement
compensation and
preferred stock) 6,924 9,924 8,324 10,974 11,682 12,821 3,842
Common Shareholders' 26,867 25,772 25,010 25,163 21,076 17,339 18,132
Equity
Book Value Per
Common Share 5.02 4.85 4.71 4.78 4.04 3.35 3.45
The above financial data has been restated to reflect a stock dividend in February
1991 and a stock split effected in the form of a stock dividend in October 1994.
</TABLE>
Summary Pro Forma Financial Information
The summary pro forma financial information set forth
below (i) presents the combination of Mylan and TC, and
(ii) should be read in conjunction with the pro forma
financial information beginning on page F-1 hereof and the
audited financial statements contained in Mylan's Form 10K for
the year ended March 31, 1995 and in TC's financial statements
provided elsewhere in this Proxy Statement/Prospectus and the
unaudited financial statements contained in Mylan's Second
Quarter 10-Q. Such summary pro forma financial information
does not purport to represent what the financial position or
results of operations actually would have been had the Merger
in fact occurred on such dates or at the dates indicated or to
project the consolidated financial position or results of
operations for any future date or period.
Pro Forma Financial Information
(Amounts in thousands, except per share data)
Six Months Ended Year Ended
Sept. 30,1995 March 31, 1995 (1)
Statement of Earnings Data:
Net Sales $235,523 $437,383
Earnings from Continuing Operations 62,696 115,685
Per Common Share:
Earnings from Continuing .52 .95
Operations
Dividends Declared .07 .19
Shares Used in 121,682 121,352
Computation
Sept. 30,
1995
----------
Balance Sheet Data:
Working Capital $299,742
Total Assets 652,125
Long-Term Obligations
(includes long-term
debt, post-retirement
compensation ) 8,581
Shareholders' Equity 585,654
Book Value Per Share 4.81
(1) The pro-forma information gives retroactive effect to the
three-for-two stock split effective August 15, 1995.
COMPARATIVE PER SHARE DATA
Set forth below are earnings from continuing
operations, cash dividends declared and book value per common
share data of Mylan and TC on an historical basis, for Mylan
and TC on a pro forma combined basis under the purchase method
of accounting and on a per share equivalent pro forma basis per
share of TC Common Stock. The information set forth below
should be read in conjunction with the respective audited and
unaudited financial statements of Mylan incorporated by
reference in this Proxy Statement/Prospectus and of TC included
in this Proxy Statement/Prospectus.
Six Months Ended Year Ended
September 30, 1995 March 31, 1995(1)
Mylan Historical:
Earnings from
Continuing Operations $ .53 $ 1.02
Dividends Declared $ .07 $ .19
Book Value (5) $ 4.51 $ 4.06
Shares Used in Computation 119,294,000 118,964,000
Mylan Pro Forma (2):
Earnings from
Continuing Operations $ .52 $ .95
Dividends Declared $ .07 $ .19
Book Value(5) $ 4.81 N/C
Shares Used in
Computation 121,682,000 121,352,000
Nine Months Ended Year Ended
July 31, 1995 October 31, 1994
TC Historical:
Net Income (Loss) $ .35 $ (.03)
Dividends Declared
on Common Stock $ .03 $ .02
Book Value Per
Common Share (5) $ 5.02 $ 4.71
Shares Used in
Computation 5,338,000 5,325,000
Six Months Ended Year Ended
September 30, 1995 March 31, 1995
TC Equivalent Pro
Forma (3)(4):
Net Income (Loss) $ .22 $ .40
Dividends Declared $ .03 $ .08
Book Value(5) $ 2.05 N/C
Shares Used in
Computation 285,712,000 284,937,000
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------
(1) The Mylan historical and pro forma information gives retroactive effect to the three-for-two
stock split effective August 15,1995.
(2) The pro forma information was calculated by combining the historical amounts from Mylan
and TC divided by hte sum of Mylan's historical share information and 2,388,135 additional
shares of Mylan Common Stock (the number of shares that is estimated to be issued pursuant to
the Merger Agreement). Pro forma book value per share is presentd for interim periods only.
(3) Represents the pro forma information (as calculated in note 2) adjusted to reflect the value of
one share of TC Common Stock.
(4) TC equivalent pro forma data excludes the impact of Newco.
(5) Calculated using common shares outstanding at period end.
- ---------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE PER SHARE MARKET AND DIVIDEND INFORMATION
Information with Respect to Mylan Common Stock
Mylan Common Stock is listed on the NYSE.
The table below sets forth, for the calendar quarters
indicated, the reported high and low sales prices of Mylan
Common Stock as reported on the NYSE Composite Index based on
published financial sources, and the dividends declared on such
stock, retroactively adjusted for a three-for-two stock split
effective August 15, 1995.
Mylan Common Stock
High Low Dividends
Quarter Ended:
June 30, 1993 20 1/2 15 3/4 .02
September 30, 1993 20 1/4 13 1/8 .027
December 31, 1993 22 1/8 15 5/8 .027
March 31, 1994 16 3/4 10 5/8 .027
June 30, 1994 15 3/8 10 3/8 .027
September 30, 1994 18 1/4 13 5/8 .033
December 31, 1994 19 7/8 16 3/8 .10
March 31, 1995 22 1/2 16 1/2 .033
June 30, 1995 21 5/8 18 3/8 .033
September 30, 1995 24 19 5/8 .04
September 30, 1995
To December __, 1995
On October 9, 1995, the last full trading day prior
to the execution and delivery of the Merger Agreement and the
public announcement thereof, the closing price of Mylan Common
Stock was $18 5/8 per share on the NYSE Composite Index.
On __________, 1995, [the most recent practicable
date prior to the printing of this Proxy Statement/Prospectus],
the closing price of Mylan Common Stock was __________ per
share on the NYSE Composite Index.
Because the market price of Mylan Common Stock may
fluctuate, the market value of the shares of Mylan Common Stock
that holders of TC Common Stock will receive in the Merger may
increase or decrease prior to the Merger. See "The Merger
Agreement -- The Merger." TC stockholders are urged to obtain
a current market quotation for Mylan Common Stock.
Information With Respect to TC Stock
Neither TC Common Stock nor TC Preferred Stock is
listed for trading on an exchange or included for trading over
the-counter on a market. Therefore, no information is
available on market prices for such stock. The following table
sets forth, for the fiscal year indicated, the dividends
declared on TC Common Stock and TC Preferred Stock.
TC Common Stock
Dividends*
Quarter Ended:
January 31, 1993 $.0175
April 30, 1993 .0075
July 31, 1993 .0075
October 31, 1993 .025
January 31, 1994 0
April 30, 1994 .0075
July 31, 1994 .0075
October 31, 1994 .0075
January 31, 1995 .0075
April 30, 1995 .0075
July 31, 1995 .015
October 31, 1995 0
_________________________
*Restated to reflect the October, 1994 stock split effected in
the form of a stock dividend.
Cumulative dividends in the amount of $8.00 per share
are payable on July 15 and are paid on the TC Preferred Stock
on June 15 of each year.
Covenants in certain credit agreements may impose
restrictions on TC's payment of dividends. See "TC's
Management's Discussion and Analysis of Results of Operations
and Financial Condition - Capital Resources and Liquidity."
THE MEETING
General
This Proxy Statement/Prospectus is being furnished to
holders of TC Stock in connection with the Special Meeting to
be held on ______ ___, 1996 at the law offices of Rivkin Radler
& Kremer, 30 North LaSalle Street, Chicago, Illinois 60602,
commencing at 10:00 a.m., local time, and at any adjournment or
postponement thereof. This Proxy Statement/Prospectus is also
being used in the solicitation of proxies by the TC Board of
Directors for use at the Special Meeting from the stockholders
of TC who did not execute irrevocable proxies in connection
with the execution of the Merger Agreement.
This Proxy Statement/Prospectus is first being mailed
to stockholders of TC and, with respect to the solicitation of
proxies from those stockholders of TC who did not execute
irrevocable proxies in connection with the execution of the
Merger Agreement, the accompanying forms of proxies are first
being mailed on or about ________ ___, 1995.
Matters to be Considered at the Meeting
At the Special Meeting, holders of TC Stock will
consider and vote upon (i) a proposal to approve the Merger
Agreement; and (ii) such other matters as may properly be
brought before the Special Meeting.
Board of Directors Recommendation. All the directors
of TC participated in the meeting at which the Merger Agreement
was considered and have unanimously approved the Merger
Agreement and recommended a vote FOR approval of the Merger
Agreement by the stockholders of TC.
Voting at the Meeting; Record Date
The TC Board of Directors has fixed December 11, 1995
as the record date for the determination of the TC stockholders
entitled to notice of and to vote at the Special Meeting.
Accordingly, only holders of record of shares of TC Common
Stock and TC Preferred Stock on the record date will be
entitled to notice of and to vote at the Special Meeting. As
of December 11, 1995, there were 5,340,992 shares of TC Common
Stock outstanding, entitled to vote and held by fifty-eight
holders of record and 4,243 shares of TC Preferred Stock
outstanding, voting separately as a class, entitled to vote and
held by eight holders of record. Each holder of record of
shares of TC Common Stock and TC Preferred Stock on the record
date is entitled to cast one vote per share on each proposal
properly submitted for the vote of the TC stockholders, either
in person or by properly executed proxy, at the Special
Meeting. The presence, in person or by properly
executed proxy, of the holders of a majority of the outstanding
shares of TC Common Stock and a majority of the outstanding
shares of TC Preferred Stock, voting separately as a class,
entitled to vote is necessary to constitute a quorum at the
Special Meeting.
The approval by TC stockholders of the Merger
Agreement will require (i) the affirmative vote of the holders
of a majority of the outstanding shares of TC Common Stock
entitled to vote thereon; and (ii) the affirmative vote of the
holders of a majority of the outstanding shares of TC Preferred
Stock, voting separately, entitled to vote thereon. A failure
to vote or an abstention or a broker non-vote will have the
same legal effect as a vote by a TC stockholder against the
approval of the Merger Agreement.
Each of the directors has advised TC that he intends
to vote or direct the vote of all shares of TC Common Stock and
TC Preferred Stock over which he has voting control FOR
approval of the Merger Agreement. Certain beneficial owners of
approximately 77% of the outstanding shares of Common Stock and
73% of the outstanding shares of Preferred Stock (including
directors and executive officers who beneficially own
approximately 52% of the TC Common Stock) have appointed
Roderick P. Jackson and David M. Satter, representatives of
Mylan, as irrevocable proxies to vote their shares in favor of
the Merger. See "Certain Related Transactions and
Relationships of TC and Mylan - The Irrevocable Proxies."
As of ________, 1995, Mylan and its subsidiaries
owned no outstanding shares of TC Common Stock or TC Preferred
Stock.
Proxies
This Proxy Statement/Prospectus is being furnished to
TC stockholders in connection with the Special Meeting. In
addition, it is being used in the solicitation of proxies
(individually, a "Solicited Proxy" and collectively, the
"Solicited Proxies") from the stockholders of TC who did not
execute irrevocable proxies in connection with the execution of
the Merger Agreement (see "Certain Related Transactions and
Relationships of TC and Mylan - The Irrevocable Proxies") for
use at the Special Meeting.
TC stockholders who executed irrevocable proxies in
connection with the execution of the Merger Agreement are not
being solicited for a new proxy and should not execute a
Solicited Proxy.
All shares of TC Common Stock and TC Preferred Stock
that are entitled to vote and are represented at the Special
Meeting by properly executed Solicited Proxies received prior
to or at the Special Meeting, and not revoked, will be voted at
the Special Meeting in accordance with the instructions
indicated on such Solicited Proxies. If no instructions are
indicated, such Solicited Proxies will be voted FOR approval of
the Merger Agreement.
If any other matters are properly presented at the
Special Meeting for consideration, including consideration of a
motion to adjourn the Special Meeting to another time and/or
place (including for the purpose of soliciting additional
Solicited Proxies), unless otherwise indicated on such
Solicited Proxies, the person named in the enclosed forms of
Solicited Proxies and acting thereunder will have discretion to
vote on such matters in accordance with his best judgment.
Any Solicited Proxy given pursuant to this
solicitation may be revoked by the person giving it at any time
before it is voted. Solicited Proxies may be revoked by (i)
filing with the Secretary of TC, at or before the taking of the
vote at the Special Meeting, a written notice of revocation
bearing a later date than the Solicited Proxy; (ii) duly
executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of TC, before the taking of the
vote at the Special Meeting; or (iii) attending the Special
Meeting and voting in person (although attendance at the
Special Meeting will not in and of itself constitute a
revocation of the Solicited Proxy). Any written notice of
revocation or subsequent proxy should be sent so as to be
delivered to Herbert L. Stern, Jr., Secretary, TC Manufacturing
Co., Inc., in care of Rivkin, Radler & Kremer, 30 North LaSalle
Street, Chicago, Illinois, 60602-2507 or hand delivered to the
Secretary of TC, at or before the taking of the vote at the
Special Meeting.
All expenses of this solicitation, including the cost
of preparing and mailing this Proxy Statement/Prospectus, will
be borne equally by Mylan and TC, except as provided in the
Merger Agreement. See "The Merger Agreement - Expenses." In
addition to solicitation by use of the mails, Solicited Proxies
may be solicited by directors, officers and employees of TC in
person or by telephone, telegram or other means of
communication. Such directors, officers and employees will not
be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such
solicitation. Following the original mailing of the Solicited
Proxies and other soliciting materials, TC will request
brokers, custodians, nominees and other record holders to
forward copies of the Solicited Proxy and other soliciting
materials to persons for whom they hold shares of TC Common
Stock or TC Preferred Stock and to request authority for the
exercise of proxies. Mylan and TC will reimburse such
custodians, nominees and fiduciaries for reasonable expenses
incurred in connection herewith.
TC STOCKHOLDERS SHOULD NOT SEND ANY STOCK
CERTIFICATES WITH THEIR PROXY CARDS.
THE MERGER
Background of the Merger
For its fiscal years ending March 31, 1995, March 31,
1994 and March 31, 1993, Mylan had sales to UDL-Illinois of
$6,038,000, $2,750,000 and $2,061,000, respectively.
During the period of May through December 1993, TC
and Mylan conducted preliminary discussions relating to a
possible business combination between them. These discussions
were based upon an ongoing business relationship between TC and
Mylan in which Mylan acts as a supplier of a significant
portion of the generic pharmaceutical products which UDL-
Illinois provides to its customers. Although such preliminary
discussions did not result in any transaction, the customer-
supplier relationship between TC and Mylan was continued.
In December 1994, the Board of Directors of TC
discussed the possibility of initiating a new round of
discussions with Mylan and authorized certain officers of TC to
communicate with Mylan in that regard. Initial discussions
between TC and Mylan commenced in January 1995 and led to the
execution of a confidentiality agreement in April 1995
following
a meeting among representatives of both corporations at Mylan's
executive offices.
Since that date, TC and Mylan and their respective
advisors have participated in structuring the proposed
Reorganization and Merger, conducting due diligence
investigations and preparing the transaction documents to
evidence the Reorganization and the Merger.
Negotiation on the proposed structure of the
transaction and the definitive Merger Agreement and due
diligence continued through the week of October 9, 1995.
On October 9, 1995, the Board of Directors of TC
approved TC's execution and delivery of the Merger Agreement.
Members of management of TC and of Mylan, along with their
respective legal counsel, continued to negotiate the terms of
the proposed merger through October 10, 1995. On October 10,
1995, management of Mylan approved the Merger Agreement.
Because the Board of Directors of Mylan previously had
authorized its management to negotiate a merger agreement and,
if negotiated, to enter into a merger agreement, the Merger
Agreement was executed by the parties and various stockholders
of TC executed and delivered irrevocable proxies in favor of
Mylan. See "Certain Related Transactions and Relationships of
TC and Mylan - The Irrevocable Proxies."
TC's Reasons for the Merger; Recommendation of TC's Board of
Directors
The Board of Directors of TC believes that the terms
of the Merger are fair to and in the best interests of TC and
its stockholders. Accordingly, the Board of Directors of TC
has unanimously approved the Merger Agreement and recommended
its approval by TC stockholders.
The Board of Directors of TC, after careful study and
evaluation of financial and market factors, believes that the
consummation of the Merger will improve UDL's position in the
dynamic healthcare marketplace.
Since 1993, the Board of Directors of TC increasingly
has been concerned over UDL's ability to secure quality and
reliable sources for the generic pharmaceutical products
required in UDL's business. As primarily a marketer of
products manufactured by others, UDL is dependent on outside
manufacturers for the procurement of most of the products
marketed by it.
In 1993 and early 1994, TC's Board of Directors saw
the solution to UDL's source dependency problems as primarily
one of capital. The Board believed that if UDL could complete
a public offering of its securities and thus obtain the
requisite capital, it could, over time, by expanding its
manufacturing facilities and in-house research and development
capabilities, position itself to manufacture a number of
generic products which it otherwise would have had to purchase
from others. UDL also hoped to invest its enhanced capital
resources in product development opportunities through joint
ventures with other pharmaceutical companies. It was thought
that as the number of products manufactured in-house by UDL or
secured through joint venture investments increased, UDL's
source dependency on unaffiliated outside manufacturers would
diminish.
UDL, however, never successfully completed the
contemplated public offering due to several circumstances.
First, TC's Board of Directors questioned whether the
amount of capital to be raised through the public offering
would be sufficient for UDL to develop new products as rapidly
as previously believed. Second, TC's Board of Directors
questioned whether, in light of increasing competition, UDL
would be afforded the same opportunities as it had previously
enjoyed to be among the first to introduce, in unit dose
configuration to the institutional marketplace, newly developed
generic equivalents of recently off-patent pharmaceuticals.
Without these opportunities, UDL would have difficulty
attaining its forecasted earnings.
Third, while reflecting on these concerns but
proceeding with its preparations for the public offering, TC's
Board of Directors in August 1993 received from Mylan an
indication of interest in a business combination with TC. The
Board of Directors saw that such a combination could enable UDL
to accomplish its objective of gaining access to a secure
source for a broad line of generic pharmaceutical products and
to substantial capital and manufacturing resources and research
and development capabilities. The Board, therefore, decided to
defer completion of the public offering pending further
discussions with Mylan.
By mid-December 1993, these discussions ended when
the parties failed to reach agreement. By this time, the Board
had concluded that the public markets might not be the best
source for capital required by TC's pharmaceutical operations.
TC therefore retained an investment banking firm as its
financial advisor with a mandate to determine whether
alternative sources of capital could be found.
In the midst of this process, a downturn occurred in
stock prices within the generic pharmaceuticals sector of the
public securities market and the public offering alternative
became no longer a viable option.
At about the same time, the wave of mergers and
consolidations within the generic pharmaceutical industry
struck. Apprehension over the dwindling number of potential
suppliers led TC's Board of Directors to conclude that capital
alone could not cure UDL's source dependency because UDL no
longer had time to develop a broad line of products to
manufacture in-house. UDL would have to immediately secure one
or more long-term supply relationships offering ongoing access
to (i) a broad line of existing and potential products; (ii)
extensive manufacturing capabilities; and (iii) expanded
research and development. The Board concluded that UDL could
only achieve this objective through affiliation with a major
existing pharmaceutical company.
In now focusing strictly on the immediate need to
alleviate UDL's source dependency, TC's Board of Directors
reviewed UDL's existing and potential supply relationships for
prospective merger partners. Over the course of the next
eighteen months, a number potential merger candidates,
including Mylan, were identified and indications of interest
solicited. Extensive negotiations with several of the potential
merger candidates ensued, culminating in the agreement to
combine the Pharmaceutical Business with the pharmaceutical
operations of Mylan.
Mylan is currently the largest supplier to the
Pharmaceutical Business in terms of number of products (28 of
177 total products carried by UDL) and dollar volume of
purchases. Furthermore, there are 22 additional products which
UDL currently purchases from sources other than Mylan but which
can be procured
from Mylan and with respect to which a merger with Mylan would
provide source security.
Furthermore, TC's Board of Directors believes that
the merger with Mylan will alleviate the constraints on UDL
caused by TC's limited capital, manufacturing resources and
know-how, and research and development capabilities.
BASED ON THE FOREGOING, THE BOARD OF DIRECTORS OF TC
BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE IN THE BEST
INTERESTS OF TC AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT TC STOCKHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO APPROVE
THE MERGER AGREEMENT.
Mylan's Reasons for the Merger
Mylan believes that the Merger is a logical step in
its long-range plan to became a fully integrated pharmaceutical
company by adding a more complete line of both solid and liquid
unit dose generic pharmaceutical products in custom packaging
for the retail, institutional and managed care markets in
addition to Mylan's other generic products. Among the factors
considered by Mylan in deciding to approve and execute the
Merger Agreement were the compatibility of the business
philosophies of the two companies, TC's distribution system and
integration into the unit dose market and the ability to
consummate the Merger through, primarily, the issuance of Mylan
Common Stock.
Certain Federal Income Tax Consequences
The following is a summary under currently applicable
law of certain federal income tax considerations generally
applicable to the holders of TC Preferred Stock and TC Common
Stock resulting from the Reorganization and the Merger. The
following summary is for general information only, and the tax
treatment described herein may not be applicable to certain TC
Stockholders depending upon their particular situations.
Certain TC stockholders (including tax-exempt organizations,
financial institutions or broker-dealers, foreign corporations
and persons) or TC stockholders who are not citizens or
residents of the United States may be subject to special rules
not discussed below. A favorable ruling from the Internal
Revenue Service may be issued with respect to the federal
income tax consequences discussed herein; however, there can be
no assurance that the IRS will issue such a ruling prior to the
consummation of the transactions proposed or that the IRS will
agree with any of the conclusions proposed and stated herein.
In January 1995, the IRS issued a pronouncement indicating that
the IRS will not issue a ruling regarding the tax consequences
of a transaction structured in a fashion similar to the Merger;
however, this "no ruling" position does not represent a
determination by the IRS as to whether the Merger will qualify
as a nontaxable transaction and subsequent pronouncements with
respect to the reorganization provisions of the Code indicate
that the IRS may withdraw its no ruling policy as it relates to
mergers similar to the Merger. Each shareholder should consult
his/her own tax advisor as to the particular tax consequences
to him/her of the Reorganization and the Merger, including the
applicability and effect of any state, local, foreign or other
tax laws, any recent changes in applicable tax laws and any
proposed legislation.
The Reorganization
With respect to the distribution of the stock of
Newco by TC to the holders of TC Common Stock who are not
employed in the Pharmaceutical Business, TC believes, for
federal income tax
purposes, as follows (i) the transfer by TC of the assets of
the Packaging and Coating Businesses to Newco solely in
exchange for the stock of Newco and the assumption of
liabilities related to such Businesses will qualify as a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
that TC and Newco will each be "a party to the reorganization"
within the meaning of Section 368(b) of the Code; (ii) no gain
or loss will be recognized by (and no amount will be included
in the income of) TC upon the transfer of assets to Newco
solely in exchange for stock of Newco and the assumption of
liabilities by Newco; (iii) no gain or loss will be recognized
by (and no amount will be included in the income of) Newco upon
the receipt of assets in exchange for stock of Newco and the
assumption of liabilities by Newco; (iv) no gain or loss will
be recognized by (and no amount will be included in the income
of) TC upon the distribution to the holders of TC Common Stock
who are not employed in the Pharmaceutical Business of all its
Newco stock; (v) no gain or loss will be recognized by (and no
amount will be included in the income of) the holders of TC
Common Stock who are not employed in the Pharmaceutical
Business upon receipt of the Newco stock; (vi) the aggregate
basis of the stock of Newco and TC in the hands of each of the
holders of TC Common Stock who are not employed in the
Pharmaceutical Business after the Reorganization will be the
same as the basis of the TC Common Stock held by such
shareholder immediately before the Reorganization, allocated in
proportion to the fair market value of each; and (vii) the
holding period of the Newco stock which the holders of the TC
Common Stock who are not employed in the Pharmaceutical
Business receive will include the holding period of the TC
Common Stock with respect to which the distribution will be
made, provided the TC Common Stock is held as a capital asset
by such shareholders on the date of the distribution.
As currently planned, TC expects to distribute to the
holders of TC Common Stock who are employed in the
Pharmaceutical Business additional shares of TC Common Stock
concurrently with the distribution of the stock of Newco to the
holders of TC Common Stock who are not employed in the
Pharmaceutical Business. TC believes, for federal income tax
purposes, that the transfer of shares of TC Common Stock to the
holders of TC Common Stock who are employed in the
Pharmaceutical Business will result in the following tax
consequences: (i) no gain or loss will be recognized by (and
no amount will be included in the income of) TC; (ii) no gain
or loss will be recognized by (and no amount will be included
in the income of) the holders of TC Common Stock who are
employed in the Pharmaceutical Business upon the receipt of the
additional shares of TC Common Stock; (iii) the aggregate basis
of the TC Common Stock in the hands of each of the holders of
TC Common Stock who are employed in the Pharmaceutical Business
after the distribution will be the same as the basis of TC
Common Stock held by such shareholders immediately before the
distribution allocated between the TC Common Stock held before
the distribution, and the additional TC Common Stock received
in the distribution in proportion to the fair market value of
each; and (iv) the holding period of the additional TC Common
Stock which the holders of TC Common Stock who are employed in
the Pharmaceutical Business receive will include the holding
period of the TC Common Stock with respect to which the
foregoing distribution will be made, provided the TC Common
Stock is held as a capital asset by such shareholders on the
date of the Reorganization.
The Merger
With respect to the merger of MLI into TC, TC and
Mylan believe, for federal income tax purposes, as follows:
(i) the merger of MLI with and into TC will be treated as an
acquisition by Mylan of 100 percent of the outstanding shares
of TC Common Stock solely in exchange for voting stock of Mylan
and will constitute a reorganization within the meaning of
Section 368(a)(1)(B) of the Code; (ii) no gain or loss will be
recognized by the holders of TC Common Stock upon receipt of
solely Mylan Common Stock in exchange for their shares of TC
Common Stock; (iii) each TC shareholder's basis in the Mylan
Common Stock permitted to be received without the recognition
of gain or loss, including the shares to be held in escrow,
shall be the same as that of TC Common Stock exchanged; (iv)
the holding period of the Mylan Common Stock in the hands of
the TC shareholders will include the holding period of TC
Common Stock immediately before the exchange, provided that TC
Common Stock surrendered was held as a capital asset on the
date of the exchange; and (v) the payment of cash to the
holders of TC Common Stock in lieu of fractional shares of
Mylan Common Stock will be treated as if the fractional shares
were distributed as part of the Merger and then redeemed by
Mylan, and the cash payment will be treated as having been
received as a distribution in full payment in exchange for the
fractional shares redeemed and will be taxed as provided in
Section 302(a) of the Code (generally treated as the sale of a
capital asset).
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY. THE TAX CONSEQUENCES OF THE
REORGANIZATION AND THE MERGER MAY VARY DEPENDING UPON, AMONG
OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TC
STOCKHOLDER. EACH TC STOCKHOLDER IS URGED TO CONSULT SUCH
STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO SUCH STOCKHOLDER (INCLUDING THE APPLICABILITY
AND EFFECT OF THE CONSTRUCTIVE OWNERSHIP RULES AND FOREIGN,
STATE AND LOCAL TAX LAWS) ON THE DISPOSITION OF SHARES PURSUANT
TO THE REORGANIZATION AND THE MERGER.
Release of Tax Claims
Each holder of TC Preferred Stock and TC Common
Stock, as a condition of receiving shares of Mylan Common
Stock, must release Mylan and TC and their respective officers,
directors and affiliates, from any claims that such holder may
have as a result of the Reorganization and the Merger being
subject to any federal, state or local taxes, except for
corporate taxes assessed against TC and imposed upon any such
holder on account of transferee liability, if any, resulting
from the distribution by TC to such holder of the shares of
capital stock of Newco in the Reorganization. See also
"Certain Related Transactions and Relationships of TC and
Mylan."
See also "Certain Related Transactions and
Relationships of TC and Mylan - Reorganization and Letter of
Transmittal."
Regulatory Compliance
Under the HSR Act and the rules promulgated
thereunder by the Federal Trade Commission (the "FTC"), the
Merger may not be consummated until notifications have been
given and certain information has been furnished to the FTC and
the Antitrust Division of the Department of Justice (the
"Antitrust Division") and specified waiting period requirements
have been satisfied. Mylan and TC each filed notification and
report forms under the HSR Act with the FTC and the Antitrust
Division on November 20, 1995. The statutory waiting period
under the HSR Act is expected to expire on December 20, 1995.
At any time before or after consummation of the Merger, the
Antitrust Division or the FTC
could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including
seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of Mylan or TC. At any time
before or after the Effective Time, and notwithstanding that
the HSR Act waiting period has expired, any state could take
such action under the antitrust laws as it deems necessary or
desirable in the public interest. Such action could include
seeking to enjoin the consummation of the Merger or seeking
divestiture of TC or businesses of Mylan or TC. Private
parties may also seek to take legal action under the antitrust
laws under certain circumstances.
Based on information available to them, Mylan and TC
believe that the Merger can be effected in compliance with
federal and state antitrust laws. However, there can be no
assurance that a challenge to the consummation of the Merger on
antitrust grounds will not be made or that, if such a challenge
were made, Mylan and TC would prevail or would not be required
to accept certain conditions, possibly including certain
divestitures in order to consummate the Merger.
Consummation of the Merger is conditioned upon the
receipt of all material governmental authorizations, consents,
orders and approvals, subject to waiver of such conditions, in
accordance with the terms of the Merger Agreement. Mylan and
TC intend to pursue vigorously all required regulatory
approvals. However, there can be no assurance regarding the
timing of such approvals or that such approvals will, in fact,
be obtained.
Federal Securities Law Consequences
Except as provided in the Continuity of Interest
Agreement (See "Certain Relationships and Related Transactions
of TC - Reorganization"), all shares of Mylan Common Stock
received by holders of TC Common Stock or TC Preferred Stock in
the Merger will be freely transferable, except that shares of
Mylan Common Stock received by persons who are deemed to be
affiliates of TC prior to the Merger may be resold by them only
in transactions permitted by the resale provisions of Rule 145
promulgated under the Securities Act (or Rule 144 in the case
of such persons who become affiliates of Mylan) or as otherwise
permitted under the Securities Act. Persons who may be deemed
to be affiliates of TC or Mylan generally include individuals
or entities that control, are controlled by, or are under
common control with, such party and may include certain
officers and directors of such party as well as principal
shareholders of such party. The rights of "affiliates" of TC
to receive their shares of Mylan Common Stock in the Merger are
conditioned upon the execution by each of such affiliates of a
written agreement to the effect that such person will not offer
or sell or otherwise dispose of any of the shares of Mylan
Common Stock issued to such person in or pursuant to the Merger
in violation of the Securities Act or the rules and regulations
promulgated by the Commission thereunder and their shares will
bear a restrictive legend to such effect.
Stock Exchange Listing
Mylan has covenanted to use its commercially
reasonable efforts to effect listing of the Mylan Common Stock
to be delivered in accordance with the Merger Agreement on the
NYSE upon notice of issuance.
Appraisal Rights
Holders of TC Common Stock and TC Preferred Stock are
entitled to appraisal rights under Section 262 of the DGCL,
which are reprinted in their entirety as Annex A 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 A. This discussion and Annex A
should be reviewed carefully by any holder of TC Stock who
wishes to exercise statutory appraisal rights or who wishes to
preserve the right to do so, because failure to comply with the
procedures set forth herein or therein will result in the loss
of appraisal rights.
Record holders of TC Stock are entitled to appraisal
rights under Section 262 of the DGCL ("Section 262"). A person
having a beneficial interest in shares of TC Common Stock or
TC Preferred Stock held of record in the name of another
person, such as a broker or nominee, must act promptly to cause
the record holder to follow the steps summarized below properly
and in a timely manner to perfect the appraisal rights provided
under Section 262.
Under Section 262, where a merger is to be submitted
for approval at a meeting of stockholders, as in the case of
the Special Meeting, not less than 20 days prior to the
meeting, a constituent corporation must notify each of the
holders of its stock for which appraisal rights are available
that such appraisal rights are available and include in each
such notice a copy of Section 262. THIS PROXY STATEMENT-
PROSPECTUS SHALL CONSTITUTE SUCH NOTICE TO THE RECORD HOLDERS
OF TC COMMON STOCK OR TC PREFERRED STOCK. ANY SUCH STOCKHOLDER
WHO WISHES TO EXERCISE SUCH APPRAISAL RIGHTS SHOULD REVIEW THE
FOLLOWING DISCUSSION AND ANNEX A CAREFULLY, BECAUSE FAILURE TO
TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SPECIFIED WILL
RESULT IN THE LOSS OF APPRAISAL RIGHTS UNDER THE DGCL.
Under the DGCL, record holders of TC Common Stock or
TC Preferred Stock who follow the procedures set forth in
Section 262 will be entitled to have their shares of TC Common
Stock or TC Preferred Stock appraised by the Delaware Court of
Chancery and to receive payment of the "fair value" of such
shares as described below. Such holders are, in such
circumstances, entitled to appraisal rights because they hold
stock of a constituent corporation to the Merger and such
TC Stock is not listed on a national securities exchange or
designated as a national market system security or NASDAQ, nor
held of record by more than 2,000 holders.
A holder of shares of TC Common Stock or TC Preferred
Stock wishing to exercise his or her appraisal rights must
deliver to the Secretary of TC, before the vote on the Merger
Agreement at the Special Meeting, a written demand for appraisal
of his or her shares of TC Common Stock or TC Preferred Stock,
respectively. Neither a proxy indicating a vote against nor a
vote against the Merger shall constitute such a demand. Such
written demand must reasonably inform TC of the identity of the
holder and that such holder intends thereby to demand appraisal
of the holder's shares. All written demands for appraisal of
TC Common Stock or TC Preferred Stock should be sent or
delivered to Herbert L. Stern, Jr., Secretary, TC Manufacturing
Co., Inc. in care of Rivkin, Radler & Kremer, 30 North LaSalle
Street, Chicago, Illinois 60602-2507. A holder of shares of TC
Common Stock or TC Preferred Stock who desires to exercise his
or her appraisal rights must not vote his shares in favor of the
Merger Agreement either in person or by proxy. Neither an
abstention from voting with respect to, nor failure to vote in
person or by proxy against, approval of the Merger Agreement constitutes a
waiver of the rights of stockholders exercising appraisal
rights. However, a signed Solicited Proxy that is returned
without any instruction as to how the Solicited Proxy should be
voted will be voted in favor of the approval of the Merger
Agreement and will be deemed a waiver of the rights of a
stockholder exercising appraisal rights. In addition, a holder
of shares of TC Common Stock or TC Preferred Stock wishing to
exercise his or her appraisal rights must hold such shares of
record on the date the written demand for appraisal is made and
must hold such shares continuously through the Effective Time.
Stockholders who hold their shares of TC Common Stock or TC
Preferred Stock in brokerage accounts or other nominee forms and
who wish to exercise appraisal rights must take all necessary
steps in order that a demand for appraisal is made by the record
holder of such shares and are urged to consult with their
brokers or such other appropriate person to determine the
appropriate procedures for the making of a demand for appraisal
by the record holder.
Within ten days after the Effective Time, the
Surviving Corporation must send a notice as to the effectiveness
of the Merger to each person who has satisfied the appropriate
provisions of Section 262 and who is entitled to appraisal
rights under Section 262. Within 120 days after the Effective
Time, any holder of record of shares of TC Common Stock or TC
Preferred Stock who has complied with the requirements for
exercise of appraisal rights will be entitled, upon written
request, to receive from the Surviving Corporation a statement
setting forth (i) the aggregate number of shares of TC Common
Stock or TC Preferred Stock not voted in favor of the Merger Agreement
and with respect to which demands for appraisal have been
received and (ii) the aggregate number of holders of such
shares. Any such statement must be mailed within ten days after
a written request therefor has been received by the Surviving
Corporation.
Within 120 days after the Effective Time, but not
thereafter, the Surviving Corporation or any holder of shares of
TC Common Stock or TC Preferred Stock who has complied with the
foregoing procedures and who is entitled to appraisal rights
under Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the "fair value" of such
shares. The Surviving Corporation is not under any obligation
to file a petition with respect to the appraisal of the "fair
value" of the shares of TC Common Stock or TC Preferred Stock
and neither Mylan nor TC presently intends that the Surviving
Corporation file such a petition. Accordingly, it is the
obligation of the stockholders to initiate all necessary action
to perfect their appraisal rights within the time prescribed in
Section 262. A holder of shares of TC Common Stock or
TC Preferred Stock will fail to perfect, or effectively lose,
his or her right to appraisal if no petition for appraisal of
shares of TC Common Stock or TC Preferred Stock is filed within
120 days after the Effective Time.
If a petition for an appraisal is timely filed, after
a hearing on such petition, the Delaware Court of Chancery will
determine the holders of shares of TC Common Stock or
TC Preferred Stock entitled to appraisal rights and will
appraise the "fair value" of the shares of TC Common Stock or TC
Preferred Stock, exclusive of any element of value arising from
the accomplishment or expectation of the Merger. Holders
considering seeking appraisal should be aware that the "fair
value" of their shares of TC Common Stock or TC Preferred Stock
as determined under Section 262 could be more than, the same as,
or less than the value of the Mylan Common Stock they would
receive if they did not seek appraisal. The Delaware Supreme
Court has stated that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the
appraisal proceedings. In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on
factual circumstances, may or may not be the exclusive remedy
for a stockholder exercising appraisal rights.
The Delaware Court of Chancery will determine the
amount of interest, if any, to be paid upon the amounts to be
received by persons whose shares of TC Common Stock have been
appraised. The costs of the action may be determined by such
court and taxed upon the parties as the court deems equitable.
The Delaware Court of Chancery may also order that all or a
portion of the expenses incurred by any holder of shares of
TC Common Stock or TC Preferred Stock in connection with an
appraisal, including, without limitation, reasonable attorneys'
fees and the fees and expenses of experts utilized in the
appraisal proceeding, be charged pro rata against the value of
all of the shares of TC Common Stock or TC Preferred Stock
entitled to appraisal.
If any holder of shares of TC Common Stock or
TC Preferred Stock who demands appraisal of his or her shares
under Section 262 fails to perfect, or effectively withdraws or
loses, his or her right to appraisal, as provided in the DGCL,
the shares of TC Common Stock or TC Preferred Stock of such
stockholder will not be deemed to qualify for payment of
appraisal rights in accordance with Section 8.9 of the Merger
Agreement. A holder may withdraw his or her demand for
appraisal by delivering to the Surviving Corporation a written
withdrawal of his or her demand for appraisal and acceptance of
the Merger, except that any such attempt to withdraw made more
than 60 days after the Effective Time will require the written
approval of the Surviving Corporation. Failure to follow the
steps required by Section 262 of the DGCL for perfecting
appraisal rights may result in the loss of such rights.
Any holder of shares of TC Common Stock or TC
Preferred Stock who has duly demanded an appraisal in compliance
with Section 262 will not, after the Effective Time, be entitled
to vote the shares of TC Common Stock or TC Preferred Stock
subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares
(except dividends or other distributions payable to holders of
record of shares of TC Common Stock or TC Preferred Stock as of
a date prior to the Effective Time).
Accounting Treatment
The Merger will be accounted for by Mylan under the
purchase method of accounting. Under this method the assets
(both tangible and intangible) and liabilities of TC at the
Effective Time will be recorded by Mylan for financial reporting
purposes at their market values as of the Effective Time, and
any excess of the consideration paid over the net market values
of the assets acquired will be recorded and amortized as
goodwill.
THE MERGER AGREEMENT
The following is a brief summary of certain provisions
of the Merger Agreement, a copy of which is attached as Annex B
to this Proxy Statement/Prospectus and is incorporated herein by
reference. Such summary is qualified in its entirety by
reference to the Merger Agreement.
The Merger
The Merger Agreement provides that, following the
approval of the Merger Agreement by the stockholders of TC and
the satisfaction or waiver of the other conditions to the
Merger, MLI will be merged with and into TC, with TC continuing
as the surviving corporation (the "Surviving Corporation").
If the Merger Agreement is approved by the
stockholders of TC and the other conditions to the Merger are
satisfied or waived, the Merger will become effective
immediately upon the filing of a duly executed Certificate of
Merger by TC and MLI (the "Constituent Corporations") with, and
the issuance of a Certificate of Merger by, the Secretary of
State of the State of Delaware.
Upon consummation of the Merger, pursuant to the
Merger Agreement (i) the issued and outstanding shares of TC
Common Stock (other than shares as to which appraisal rights
have been perfected, all of which will be canceled), will be
converted into shares of Mylan Common Stock at a ratio equal to
.42589063 ("Common Stock Exchange Ratio") shares of Mylan Common
Stock for each share of TC Common Stock, assuming the exercise
prior to the Effective Time of all outstanding stock options for
TC Common Stock exercised and subject to adjustment depending
upon certain balance sheet items of TC (parent company only) at
the close of business on the Effective Time (see "Adjustment to
Common Stock Exchange Ratio ; Certain Holdbacks Applicable to
Holders of TC Common Stock and Distributions"); and (ii) the
issued and outstanding shares of TC Preferred Stock (other than
shares as to which appraisal rights have been perfected, all of
which will be canceled) will be converted into shares of Mylan
Common Stock at a ratio equal to 5.02765 ("Preferred Exchange
Ratio") shares of Mylan Common Stock for each share of TC
Preferred Stock. Based upon the capitalization of TC and Mylan
as of September 30, 1995, the Common Stock Exchange Ratio and
the Preferred Stock Exchange Ratio, the stockholders of TC
immediately prior to the consummation of the Merger will own
less than 2.0 percent of the outstanding shares of Mylan Common
Stock immediately following consummation of the Merger.
Adjustment of Common Stock Exchange Ratio; Certain Holdbacks
Applicable to Holders of TC Common Stock; and Distributions
The number of shares of Mylan Common Stock to which
the holders of TC Common Stock are entitled will be finally
determined based upon the Adjusted Exchange Ratio. The "Adjusted
Exchange Ratio" is the Common Stock Exchange Ratio adjusted for
certain balance sheet items of TC (parent company only) as of
the close of business on the date the Merger is consummated. The
Adjusted Exchange Ratio may be greater or less than the Common
Stock Exchange Ratio. Because the Adjusted Exchange Ratio will
not be known at the closing, the initial distribution of shares
of Mylan Common Stock to holders of TC Common Stock will be
subject to a holdback which would be used to satisfy any
reduction in the number of shares of Mylan Common Stock to which
holders of TC Common Stock are entitled in the event that the
Adjusted Exchange Ratio is less than the Common Stock Exchange
Ratio.
The initial distributions to holders of TC Common
Stock will also be subject to a holdback with respect to any
shares of TC Common Stock or TC Preferred Stock for which
stockholders of TC exercise appraisal rights.
Upon the final determination of the Adjusted Exchange
Ratio and any appraisal rights proceedings: (i) if holders of
TC Common Stock are entitled to receive more shares of Mylan
Common Stock than initially distributed, the Exchange Agent
and/or the trustee of the trust for stockholders exercising
appraisal rights will distribute such additional shares to
holders of TC Common Stock as described below; and (ii) if
holders of TC Common Stock are not entitled to receive more
shares of Mylan Common Stock than initially distributed, the
shares of Mylan Common Stock held back and in the possession of
the Exchange Agent will be returned to Mylan.
Adjustment to Common Stock Exchange Ratio and Holdback
After the Effective Time and upon surrender of the
certificates representing shares of TC Common Stock, each holder
of TC Common Stock will receive in exchange, 95% of the total
whole number of shares of Mylan Common Stock to which he/she is
entitled. The remaining shares of Mylan Common Stock will be
held pending the definitive determination of the Adjusted
Exchange Ratio. Upon the issuance of such determination, each
holder of TC Common Stock will receive the balance of any shares
of Mylan Common Stock or cash in lieu of fractional shares to
which he/she is entitled, if any, under the Merger Agreement.
Following the Effective Time, the Stockholders
Representative (See "Certain Related Transactions and
Relationships of TC and Mylan - Reorganization") and a
representative of Mylan (the "Mylan Representative") will
jointly review the books and records of TC in order to determine
definitively, as of the Effective Time but after giving effect
to the Reorganization, the amount of assets and liabilities
reflected on the books and records of TC on a stand-alone basis
(that is, without consolidating any of the assets or liabilities
of any subsidiary of TC). The number of shares of Mylan Common
Stock to be delivered to former holders of TC Common Stock in
exchange for their shares of TC Common Stock will then be
adjusted upward to reflect the amount of any excess of assets
over liabilities or downward to reflect the amount of any excess
of liabilities over assets as determined in accordance with the
calculations described below.
On or before the 15th day after the Effective Time,
the Stockholders Representative and a representative of Mylan
shall jointly prepare and certify to the former holders of TC
Common Stock and Mylan the following items, in each case, as of
the close of business on the date the Merger is consummated,
after giving effect to all of the transactions contemplated by
the Reorganization and the Merger Agreement (the "Joint
Certification"):
(A) the amount of cash on hand or in bank
accounts of TC (the "TC Cash");
(B) all other assets which would appear on a balance
sheet of TC (parent company only) prepared in
accordance with generally accepted accounting
principles applied on a consistent basis (the
"Other Assets");
(C) the amount of the indebtedness owed to TC by UDL
Illinois and its two special purpose
subsidiaries, whether on account or evidenced by
one or more promissory notes (the "Intercompany
Indebtedness");
(D) the amount necessary to pay in full the 10 1/2%
Senior Promissory Notes of TC due July 31, 2001
held by Metropolitan Life Insurance Company,
including, without limitation, principal, accrued
but unpaid interest and any yield maintenance or
prepayment penalty (the "Senior Note
Indebtedness");
(E) the amount necessary to pay in full the line of
credit granted to TC by LaSalle National Bank,
including, without limitation, principal, accrued
but unpaid interest and any yield maintenance or
prepayment penalty (the "Line of Credit Indebtedness");
(F) the amount necessary to pay in full any
outstanding obligations of the Company in favor
Michael K. Reicher in connection with its
acquisition of the shares of common stock of UDL
Illinois held by Mr. Reicher (the "Reicher
Indebtedness");
(G) all other liabilities which appear on a balance
sheet of TC (parent company only ) prepared in
accordance with generally accepted accounting
principles applied on a consistent basis
including, without limitation, any liabilities
under the group health insurance plans of TC
which are not covered by insurance and any costs
or expenses associated with the transactions
contemplated by the Reorganization or the Merger
Agreement which have not been paid by TC (the
"Other Liabilities");
(H) the amount equal to (1) the sum of the TC Cash,
the Other Assets and the Intercompany
Indebtedness minus (2) the sum of the Senior Note
Indebtedness, the Line of Credit Indebtedness,
the Reicher Indebtedness and the Other
Liabilities, which may be a positive or negative
amount (the "Net Adjustment Amount");
(I) the sum of the shares of Mylan Common Stock to be
delivered to holders of TC Common Stock pursuant
to the Merger Agreement valued at $19.89 per
share plus the Net Adjustment Amount (if a
positive amount) or minus the Net Adjustment
Amount (if a negative amount) (the "Adjusted
Company Common Stock Consideration");
(J) the Adjusted Company Common Stock Consideration
divided by $19.89, which quotient is then divided
by the number of outstanding shares of TC Common
Stock at the Effective Time (the "Adjusted
Exchange Ratio"); and
(K) the number of shares of Mylan Common Stock
calculated at the Adjusted Exchange Ratio for
each of the outstanding shares of TC Common Stock
(the "Adjusted Shares of Mylan Company Shares").
Following delivery of the Joint Certification (i)
Mylan shall deliver to the Exchange Agent within 2 business days
after receipt of the Joint Certification shares of Mylan Common
Stock equal to the excess, if any, of (A) the number of Adjusted
Shares of Mylan Common Stock over (B) the number of whole shares
of Mylan Common Stock previously delivered to the Exchange Agent
by Mylan together with dividends, if any, related to the shares of
Common Stock so delivered; or (ii) the Exchange Agent shall
deliver to Mylan within 2 business days after receipt of the
Joint Certification shares of Mylan Common Stock equal to the
excess, if any, of (A) the number of whole shares of Mylan
Common Stock previously delivered to the Exchange Agent by Mylan
over (B) the number of Adjusted Shares of Parent Common Stock
and, in such event, Mylan shall have no further obligation to
deliver shares of Mylan Common Stock to holders of TC Common
Stock.
In the event of any controversy or dispute between the
Stockholders Representative and the Mylan Representative arising
out of or relating to the preparation of the Joint
Certification, either the Stockholders Representative or the
Mylan Representative may give notice to the other of its desire
to engage Arthur Andersen LLP or, if unavailable, another "big
six" accounting firm mutually acceptable to the Stockholders
Representative and the Mylan Representative (the "Independent
Accountant") to resolve the controversy or dispute within 15
days after such engagement. The Independent Accountant's
determination shall be final and binding, and the Stockholders
Representative and the Mylan Representative shall deliver the
Joint Certification based upon the decision of the Independent
Accountant. The fees and disbursements of the Independent
Accountant shall be borne by Mylan as reorganization expenses
incident to the Merger.
Appraisal Rights Holdback
TC and Mylan have agreed to certain procedures to be
followed in the case of stockholders of TC who exercise their
rights to have the fair market value of their shares appraised
under Section 262 of the DCGL.
Because the amounts due holders of TC Common Stock who
exercise appraisal rights under the DGCL (the "Dissenting
Stockholders") will not be ascertainable at the Effective Time,
the precise number of required shares of Mylan Common Stock to
be delivered in the Merger cannot be determined and delivered to
existing holders of TC Common Stock who do not exercise their
appraisal rights (the "Participating Stockholders"). In view of
the foregoing, if any TC stockholders elect to exercise their
appraisal rights from the adoption of the Merger Agreement and
such stockholders shall have perfected their appraisal rights in
accordance with Section 262 of the DGCL and shall not have their
shares of TC redeemed as of the Effective Time, TC and Mylan
will create an agreement of trust (the "Trust Agreement") which
will govern the procedures by which shares of Mylan Common Stock
issued to the Participating Stockholders shall be deposited with
a trustee and held pending (i) settlement of the Dissenting
Stockholders rights with respect to their TC stockholdings; or
(ii) a formal determination of the value due to each of the
Dissenting Stockholders pursuant to Section 262 of the DGCL (the
"Dissenter's Allocation"). The basic terms to be included in
the Trust Agreement are set forth in a letter agreement between
TC and Mylan which is attached as Annex C to this Proxy
Statement/Prospectus.
Distributions
Promptly after the Effective Time, transmittal forms
will be mailed to each holder of record of TC Common Stock and
TC Preferred Stock to be used in forwarding his/her certificates
evidencing such shares for surrender. After receipt of such
transmittal form, each holder of certificates formerly
representing TC Common Stock or TC Preferred Stock should
surrender such certificate to the Exchange Agent. Such
transmittal forms will be accompanied by instructions specifying
other details of the exchange.
In the case of holders of TC Common Stock, each such
holder will receive an initial whole number of shares of Mylan
Common Stock equal to (i) the number of shares such holder holds
multiplied by the Common Stock Exchange Ratio less (ii) the
number of shares of Mylan Common Stock subject to the holdback
provisions described above. Assuming all outstanding options to
purchase TC Common Stock are exercised and that no holder of TC
Common Stock exercises appraisal rights, the initial
distribution ratio will be .40464109 shares of Mylan Common
Stock for each share of TC Common Stock. This initial
distribution ratio may increase slightly if the holders of
options to purchase TC Common Stock fail to exercise their
options and may decrease slightly to the extent that holders of
TC Common Stock exercise appraisal rights. See "Appraisal Rights
Holdback." Following final determination of the Adjusted
Exchange Ratio and any appraisal rights proceedings, the holders
of TC Common Stock may be entitled to receive an additional
amount of shares of Mylan Common Stock.
In the case of holders of TC Preferred Stock, each
such holder will receive in exchange therefor a certificate
evidencing the whole number of shares of Mylan Common Stock to
which he or she is entitled and a check representing any cash
that may be payable in lieu of a fractional share of Mylan
Common Stock, as hereafter described.
If any holder of shares of TC Preferred Stock would be
entitled to receive a number of shares of Mylan Common Stock
that includes a fraction, or if any holder of shares of TC
Common Stock upon final determination of the Adjusted Exchange
Ratio and any appraisal rights proceedings is entitled to
receive additional shares of Mylan Common Stock that includes a
fraction, then, in lieu of a fractional share, such holder will
be entitled to receive cash. Such cash will be derived from the
sale by the Exchange Agent (as defined below) (i) on behalf of
stockholders of TC Common Stock otherwise entitled to fractional
shares of shares of Mylan Common Stock equal to the total of
such fractional interests multiplied by a fraction, the
numerator of which is the amount of the fractional share
interest to which such holder of TC Common Stock is entitled and
the denominator of which is the aggregate amount of fractional
share interests to which all holders of TC Common Stock are
entitled; and (ii) on behalf of stockholders of TC Preferred
Stock otherwise entitled to fractional shares of shares of Mylan
Common Stock equal to the total of such fractional interests
multiplied by a fraction, the numerator of which is the amount
of the fractional share interest to which such holder of TC
Preferred Stock is entitled and the denominator of which is the
aggregate amount of fractional share interests to which all
holders of TC Preferred Stock are entitled. American Stock
Transfer Co. or a bank or trust company selected by Mylan will
act as exchange agent (the "Exchange Agent") and, at the
appropriate times, will sell shares of Mylan Common Stock
representing the aggregate of the fractional shares at the
prevailing prices on the NYSE and make the proceeds available to
stockholders entitled thereto. TC STOCKHOLDERS SHOULD NOT SEND
IN THEIR CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
See "Certain Related Transactions and Relationships of TC and
Mylan."
After the Effective Time, each certificate evidencing
TC Common Stock or TC Preferred Stock, until so surrendered and
exchanged, will be deemed, for all purposes, to evidence only
the right to receive the number of shares of Mylan Common Stock
which the holder of such unexchanged certificate is entitled to
receive in the Merger and the right to receive any cash payment
in lieu of a fractional share of Mylan Common Stock. The holder
of any such unexchanged certificate evidencing TC Common Stock
or TC Preferred Stock will not receive any dividends or other
distributions payable by Mylan until the certificate is
surrendered. Subject to applicable laws, such dividends and
distributions, together with any cash payment in lieu of a
fractional share of Mylan Common Stock, will be paid, without
interest.
Representations and Warranties
The Merger Agreement contains various customary
representations and warranties relating to, among other things
(i) each of Mylan's, TC's, MLI's and TC's subsidiaries'
organization and similar corporate matters; (ii) each of
Mylan's, TC's, MLI's and TC's subsidiaries' capital structure
and the ownership of MLI by Mylan and TC's subsidiaries by TC;
(iii) each of Mylan's, TC's and TC's subsidiaries' financial
statements; (iv) each of Mylan's, MLI's and TC's authorization
of the Merger Agreement and related matters; (v) each of
Mylan's, MLI's or TC's absence of conflicts under charters or
bylaws, receipt of required consents or approvals, and absence
of violations of any instruments or law; (vi) documents filed by
Mylan with the Commission and the accuracy of information
contained therein; (vii) absence of certain material adverse
events, changes or effects; (viii) in the case of TC, retirement
and other employee plans and matters relating to the Employee
Retirement Income Security Act of 1974, as amended; (ix) certain
Food and Drug Administration matters; (x) litigation; (xi)
compliance with law; (xii) in the case of TC, the stockholder
vote required; (xiii) in the case of TC, the status of certain
intercompany transactions between TC and TC's subsidiaries;
(xiv) the absence of any broker; (xv) in the case of Mylan, the
due authorization and non-accessibility of the Mylan Common
Stock to be issued in the Merger; and (xvi) in the case of MLI,
its interim operations.
Certain Covenants of TC
TC has agreed that, during the period from the date of
the Merger Agreement until the Effective Time, it, and in
certain instances its subsidiaries, will (i) use their
commercially reasonable efforts to defend any lawsuits, obtain
all necessary consents, and make all filings to effect the
transactions contemplated by the Merger Agreement; (ii) maintain
their respective properties; (iii) provide information to Mylan;
(iv) except for the Reorganization, not engage in transactions
out of the ordinary course of business and use their best
efforts to preserve their respective businesses and employees;
(v) not (A) make any changes in their authorized capital stock,
(B) issue any stock options, warrants or other rights, (C)
declare any stock dividend or effect a recapitalization, (D)
issue any capital stock except pursuant to existing stock
options, (E) purchase or redeem any capital stock or (F) declare or pay
any dividends other than cash dividends on the TC Stock
consistent with past practice; (vi) not solicit or negotiate
other proposals; (vii) not create or incur any indebtedness
other than current liabilities in the ordinary course of
business and increases in lines of credit to fund operations or
the Reorganization or intercompany indebtedness in the ordinary
course of business; (viii) not (A) pay any bonus or severance
not required under an existing agreement or benefit plan, (B)
create any new employee benefit plan or modify any existing plan
or (C) enter into any new employee agreement or modify any existing
employee agreement; (ix) not enter into, terminate or modify any
material agreement without Mylan's consent; (x) continue to file
all tax returns and make payments pursuant thereto; (xi) amend
disclosure schedules as necessary; (xii) notify Mylan of (A) a
notice or event of default when a material agreement, (B) notice
by a third party alleging consent to the Merger is required, (C)
notice by a regulatory authority or exchange, (D) material
change in the business, or (E) commenced or threatened claim or
action which would have required disclosure; (xiii) take all
steps to hold a Stockholder meeting to vote upon the Merger and
to recommend such Merger to the stockholders; (xiv) provide
updated financial statements; (xv) not amend the Reorganization
documents without Mylan's consent; (xvi) deliver to Mylan the
final form of an information statement relating to the
Reorganization two business days prior to its distribution;
(xvii) not enter into transactions, other than the
Reorganization, with Newco; and (xviii) permit Mylan to
participate in the establishment of TC's cash management system,
bank accounts, lock boxes and other investments as part of the
Reorganization. Both TC and Mylan also agree to cooperate in
filing the Registration Statement of which this Proxy
Statement/Prospectus is a part, to use commercially reasonable
efforts to procure its effectiveness and to seek each other's
consent to issuance of a press release regarding the Merger.
Certain Covenants of Mylan
Mylan has agreed that, during the period from the date
of the Merger Agreement until the Effective Time, it will:
(i) use commercially reasonable efforts to defend any lawsuits,
obtain all necessary consents, make all filings and file the
Registration Statement of which the Proxy Statement/Prospectus
is a part to effect the transactions contemplated by the Merger
Agreement; (ii) maintain its properties; (iii) provide
information to TC; and (iv) use commercially reasonable efforts
to list the Mylan Common Stock on the NYSE; (v) file periodic
reports with the SEC; (vi) vote the Irrevocable Proxies in favor
of the Merger; (vii) deliver the final form of the Registration
Statement of which this Proxy Statement/Prospectus is a part two
business days prior to its effectiveness; and (viii) conduct its
business in the ordinary course. Both TC and Mylan also agree
to cooperate in filing the Registration Statement of which this
Proxy Statement/Prospectus is a part, to use commercially
reasonable efforts to procure its effectiveness and to seek each
other's consent to issuance of a press release regarding the
Merger.
MLI has agreed that, during the period from the date
of the Merger Agreement until the Effective Time, it will (i)
not engage in any business except as related to the Merger
Agreement; (ii) provide information to TC; and (iii) use
commercially reasonable efforts to obtain all necessary
consents, make all filings and give all notices to effect the
transactions contemplated by the Merger Agreement.
Mylan has agreed that until the third anniversary of
the Effective Time: (i) Mylan will not dispose of any capital
stock of the Surviving Corporation by sale, exchange or
transfer, distribution to shareholders or otherwise (including,
without limitation, transfers to any subsidiary of Mylan); (ii)
Mylan will not cause or permit the Surviving Corporation or any
member of the Pharmaceutical Group to:
(A) cease operations;
(B) make a material disposition of any of its
existing assets by means of a sale, exchange or transfer,
distribution to shareholders or otherwise (including, without
limitation, transfers from the Surviving Corporation to UDL
Illinois, UDL-Florida or the special purpose subsidiaries or
transfers from UDL-Illinois, UDL-Florida or the special purpose
subsidiaries to the Surviving Corporation, Mylan or any
subsidiary of Mylan);
(C) dispose of any capital stock of any member
of the Pharmaceutical Group by sale, exchange or transfer,
distribution to shareholders or otherwise (including, without
limitation, transfers from the Surviving Corporation to Mylan or
any subsidiary of Mylan);
(D) liquidate or merge with any other
corporation (including Mylan or a subsidiary of Mylan); or
(E) in the case of the Surviving Corporation
only, cease to engage in the active conduct of a trade or
business within the meaning of Section 355(b)(2) of the Code.
In the event Mylan desires to take any of the actions
described above or in the event the Parent desires to cause or
permit the Surviving Corporation or any member of the
Pharmaceutical Group to take any of the actions described above,
Mylan is required to first deliver to Newco either an opinion of
counsel to Mylan, addressed to Mylan and those persons or
entities who were holders of TC Preferred Stock and TC Common
Stock at the Effective Time, which opinion shall be reasonably
satisfactory to the Stockholders Representative, or a favorable
ruling letter from the appropriate taxing authority, reasonably
satisfactory to the Stockholders Representative, that such
actions would not adversely affect the tax consequences of the
transactions described in the Plan or Reorganization to the
Surviving Corporation or the holders of TC Preferred Stock or TC
Common Stock, or adversely affect the tax consequences of the
Merger to the Surviving Corporation or the holders of TC
Preferred Stock or TC Common Stock.
Except as expressly restricted pursuant to the
foregoing, Mylan, the Surviving Corporation and the members of
the Pharmaceutical Group will be free to conduct business and to
enter into any transactions which they deem appropriate.
No Solicitation of Transactions
The Merger Agreement provides, subject to certain
exceptions relating to the duties of the Board of Directors of
TC, that neither TC nor any of the Subsidiaries will directly or
indirectly, or authorize or permit any of their respective
officers, directors, employees, representatives and agents to,
solicit, initiate or encourage, or take any other action to
facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any
Takeover Proposal (as defined below), or agree to or endorse any
Takeover Proposal. The Merger Agreement provides that TC shall
promptly notify Mylan (orally or in writing) of any such
proposals or inquiries. As used in the Merger Agreement,
"Takeover Proposal" means any tender or exchange offer, proposal
for a merger, consolidation or other business combination
involving TC or any of the Subsidiaries or any proposal or offer
to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of, TC or any of the
Subsidiaries other than the transactions contemplated by the
Merger Agreement.
In addition, the Merger Agreement provides that
neither Mylan nor the Surviving Corporation will have any
liability to the holders of TC Preferred Stock or TC Common
Stock with respect to the tax consequences resulting from the
transactions which are a part of the Reorganization and the
Merger, except for corporate taxes assessed against TC and
imposed upon such holders on account of transferee liability, if
any, resulting from the distribution by TC to such holders of
the shares of capital stock of Newco in the Reorganization.
Indemnification
The Merger Agreement provides that, whether or not the
Merger is consummated, Mylan and TC each agree to indemnify and
hold harmless the other party, and, each person, if any, who
controls such party within the meaning of Section 15 of the
Securities Act, each officer and director of such party, and
each and all of them, against any and all losses, claims,
damages or liabilities, joint or several (and to reimburse each
such indemnified person for any legal or other expenses
reasonably incurred by such indemnified person in connection
with investigating or defending any such loss, claim, damage or
liability, or action in respect thereof) to which they, or any
of them, may become subject under the Securities Act or other
statutory law or common law, caused by, or arising out of,
information provided in writing by the indemnifying party, its
subsidiaries, affiliates, officers or directors for inclusion in
the Registration Statement or in any amendment or supplement
thereto (other than that information requested to be filed by
the other party) being false or misleading in any material
respect, failing to state any facts necessary to make the
statements therein not false or misleading in any material
respect, or omitting to state any material fact required to be
stated therein with respect to the indemnifying party, its
subsidiaries, affiliates, officers or directors in light of the
circumstances under which they were made. See also "Certain
Related Transactions and Relationships of TC and Mylan -
Reorganization."
Conditions to Each Party's Obligations
The respective obligations of Mylan and TC to effect
the Merger are subject to the following conditions, among others
(i) no "material adverse effect" (see below) on the business,
assets or financial condition of Mylan or TC (as reorganized),
including the inaccuracy of representations and warranties or
breach of covenants under the Merger Agreement or default under
any agreement as a result of the Merger; (ii) no "material
adverse change" (see below) in the business assets, financial
condition or results of operation of Mylan or TC (as
reorganized) and their respective subsidiaries taken as a whole;
(iii) the receipt of certain officer's certificates; (iv) the
receipt of certain legal opinions; (v) the receipt of all
required governmental authorizations, consents, orders or
approvals;
(vi) a legal opinion of counsel for TC with respect to status of
affiliates; (vii) the shares of Mylan Common Stock issuable and
reserved for issuance in connection with the Merger shall have
been authorized for listing on the NYSE, upon notice of
issuance; (viii) the Registration Statement of which this Proxy
Statement/Prospectus is a part shall have become effective and
shall not be the subject of a stop order or proceeding seeking a
stop order and the Reorganization and all related matters must
be consummated; (ix) TC must deliver a reconciliation of its
intercompany accounts; (x) the TC Stockholders' Agreement and
UDLIllinois Stockholders' Agreement must be terminated; (xi)
Newco and TC shall have executed the Indemnification Agreement;
(xii) Mylan shall have received audited financial statements of
TC for fiscal year ended October 31, 1995; (xiii) the
employment agreement of Michael K. Reicher shall have been
terminated; (xiv) no shares of TC Special Preferred Stock shall
be outstanding; and (xv) no injunction or other legal restraint
to the Merger shall be in effect.
TC and Mylan have agreed that the phrases "material
adverse effect" and "material adverse change," as used in
Section 5 of the Merger Agreement, are intended by the parties
to reflect an event or circumstance which is so adverse as to
result in a severe and critical impairment of the business,
assets, financial condition or results of operations of : (i)
the Pharmaceutical Group, taken as a whole, or (ii) the Parent
and its subsidiaries, taken as a whole. Example of events
which would cause a "material adverse effect" or constitute a
"material adverse change" as intended by TC and Mylan are as
follows:
(A) the Pharmaceutical Group or Mylan has been
shut down by reason of United States Food and Drug
Administration or United States Drug Enforcement Agency
regulatory violations or such shut-down is reasonably foreseen
as imminent; or
(B) the Pharmaceutical Group or any of their
respective officers have been disbarred under 21 United States
Code Section 335(a) or such disbarment (whether mandatory or
permissive) is reasonably foreseen as imminent; or
(C) fire or other casualty causes a total or
major curtailment of operations at the Pharmaceutical Group or
Mylan and such casualty, including the business interruption
thereby caused, is not reasonably covered by insurance; or
(D) any governmental agency or third party has
initiated, or threatened in writing, litigation or proceedings,
grounded on alleged violation of environmental laws or on an
environmental condition with respect to which the
Pharmaceutical Group or Mylan is a defendant or respondent and
the correction action work or demand for damages or penalties
chargeable against such party is reasonably foreseen as
involving an expenditure of more than $3,500,000.
Abandonment and Termination
The Merger may be abandoned and the Merger Agreement
terminated on or before February 28, 1996 (i) by mutual
agreement of Mylan, MLI and TC; (ii) by either Mylan or MLI, on
the one part, or TC, on the other, if consummation of the
Merger would violate any injunction, restraining order or
decree of any court of competent jurisdiction; or (iii) by
failure of a condition to closing not occurring.
In the event of any abandonment of the Merger and
termination of the Merger Agreement by either Mylan or TC as
provided above, the Merger Agreement will become void and of no
effect and there will be no liability or obligation on the part
of Mylan, MLI or TC or their respective officers or directors
(other than under certain specified provisions of the Merger
Agreement with respect to confidentiality and indemnification)
except as set forth below.
Mylan and TC have agreed that neither of them, nor
MLI, shall have any right to terminate the Merger Agreement or
abandon the Merger on account of an unfavorable ruling,
preliminary indication of unfavorable ruling or lack of any
preliminary indication, upon any formal or informal ruling
request to the Internal Revenue Service submitted with respect
to thetransactions contemplated by the Plan of Reorganization.
Expenses
Except as set forth below, whether or not the Merger
is consummated, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated
thereby shall be paid by the party incurring such expense, and,
in connection therewith, each of Mylan and TC shall pay, with
its own funds, any and all property or transfer taxes imposed
on such party, except that expenses incurred in connection with
printing and mailing this Proxy Statement/Prospectus shall be
shared equally by Mylan and TC, except that TC's share shall
not exceed $10,000.
In the event that Mylan shall terminate the Merger
Agreement pursuant to a failure of a condition of closing to
occur, other than (i) filings or consents of Mylan;
(ii) effectiveness of the Registration Statement of which this
Proxy Statement/Prospectus is a part; (iii) listing of the
Mylan Common Stock on the NYSE issuable and reserved for
issuance in connection with the Merger; or (iv) the existence
of an injunction or other legal restraint to the Merger
effective regarding Mylan; then TC will be required to
reimburse Mylan for certain expenses incurred by it in
connection with the Merger including filing fees, printing and
mailing expenses of this Proxy Statement/Prospectus and actual
out-of-pocket legal and accounting fees and expenses.
In the event that TC shall terminate the Merger
Agreement pursuant to a failure of a condition of closing to
occur, other than (i) filings or consents of TC;
(ii) effectiveness of the Registration Statement of which this
Proxy Statement/Prospectus is a part; (iii) listing of the
Mylan Common Stock on the NYSE issuable and reserved for
issuance in connection with the Merger; or (iv) the existence
of an injunction or other legal restraint to the Merger
effective regarding TC; then Mylan will be required to
reimburse TC for certain expenses incurred by it in connection
with the Merger including filing fees, printing and mailing
expenses of this Proxy Statement/Prospectus and actual out-of-
pocket legal and accounting fees and expenses.
Amendment and Waiver
The parties, by action taken or authorized by their
respective Boards of Directors, may amend the Merger Agreement
at any time and may waive compliance with any agreements or
conditions for their respective benefit contained in the Merger
Agreement.
BUSINESS OF TC
Background
TC is a privately-owned company engaged in several
diverse lines of business. TC was incorporated in 1962 as The
Tapecoat Company, Inc. and was the successor-in-interest to The
Tapecoat Company, an Illinois general partnership organized in
1941. TC's name was changed to its present name in 1974. TC's
executive offices are located at 1527 Lyons Street, Evanston,
Illinois 60201, telephone number (708) 869-2320.
TC is engaged through one or more operating divisions
and subsidiaries in the following business operations:
i) the manufacture, marketing and sale of specialty
corrosion protection products (the "Coating
Business");
ii) the manufacture, marketing and sale of flexible
packaging products and systems (the "Packaging
Business"); and
iii) the marketing, packaging, manufacture,
development and sale of generic pharmaceutical
products (the "Pharmaceutical Business").
The Coating Business is conducted through (i) an
unincorporated division which does business under the name "The
Tapecoat Company" from principal offices and manufacturing
facilities in Evanston, Illinois; and (ii) Tapecoat Canada,
Inc., an Ontario, Canada corporation having principal offices
in Mississauga, Ontario, Canada, a wholly-owned subsidiary of
The Tapecoat Company of Canada, Limited, itself an Ontario,
Canada corporation and wholly-owned subsidiary of TC. The
Coating Business is sometimes collectively referred to
hereinafter as "Tapecoat."
The Packaging Business is conducted through an
unincorporated division which does business under the name "Pak-
Sher Co." from principal offices and manufacturing facilities
in Kilgore, Texas. The Packaging Business is sometimes
referred to hereinafter as "Pak-Sher."
The Pharmaceutical Business is conducted through:
(i) UDL-Illinois having principal offices and manufacturing and
distribution facilities in Rockford, Illinois; and (ii) UDL
Florida having principal offices and research and development,
manufacturing and distribution facilities in Pinellas County,
Florida just outside of Tampa. UDL-Florida is a wholly-owned
subsidiary of UDL-Illinois.
UDL-Illinois is 94% owned by TC and was acquired in
February 1982. The remaining 6% of UDL-Illinois is owned by
its President, Michael K. Reicher, who was a founder of UDL-
Illinois in November 1980. Originally known as Unit Dose
Laboratories, Inc., UDL-Illinois changed its name in November
1984 to UDL Laboratories, Inc. UDL-Florida, was formed in July
1985 under the laws of the State of Florida to hold and operate
certain newly acquired Florida-based assets.
The nature of the operations conducted by each of
TC's businesses is as discussed below.
Coating Business
Tapecoat manufactures protective coatings, primarily
tapes and liquids designed to provide corrosion protection for
underground metal pipe joints, fittings, couplings, tanks,
cables, conduits and tie rods, as well as for other metal
surfaces, including entire lengths of underground metal pipe.
Tapecoat's protective coatings have historically been used
principally by the oil and gas, water, telephone and electrical
industries in the construction of new pipelines and conduits.
Products are sold nationally and internationally by salaried
sales personnel on a direct basis and to a lesser extent by
independent distributors. The tapes, which are produced to a
variety of specifications in a wide range of widths, are of two
general types: hot-applied modified coal tar tapes and cold
applied non-coal tar tapes. The liquids ("liquid coatings")
consist principally of mastics, primers and epoxies.
Tapecoat Canada markets protective coatings, primarily
tapes and liquid coatings, designed to protect underground metal
pipe joints, fittings and the like. Most sales by Tapecoat
Canada are made to the Canadian national market. The principal
portion of the products sold by Tapecoat Canada are manufactured
at Tapecoat's plant in the United States or purchased through
Tapecoat.
Packaging Business
Pak-Sher manufactures flexible packaging products.
Sales are primarily made by Pak-Sher to customers having special
and distinct requirements such as fast food chains, convenience
stores and other purveyors of non-packaged foods (for example,
deli and bakery departments of supermarket chains). It buys
highdensity polyethylene in pellet form, extrudes the pellets
into film, in most cases prints the film, and then converts the
film into bags and other specialty packaging products such as
cut sheets.
Pharmaceutical Business
UDL is engaged in the business of marketing,
packaging, manufacturing, and developing prescription and non-
prescription generic pharmaceuticals, principally in unit-dose
configuration.
UDL is a leading supplier of unit dose configured
generic pharmaceuticals to the institutional healthcare market.
Generic pharmaceuticals are the therapeutic equivalents of brand
name, single source pharmaceuticals for which patent or
regulatory exclusivity in respect of their manufacture and sale
has expired. Like their brand-name equivalents, generic
pharmaceuticals are subject to strict regulatory standards under
the supervision and direction of the U.S. Food and Drug
Administration (the "FDA") and the U.S. Drug Enforcement
Administration (the "DEA").
Unit dose products are sold in pre-packaged dosage
amounts ready for dispensing to patients for use and thereby
offer institutional end-users (e.g. hospitals and nursing homes)
benefits over similar products packaged in bulk quantities.
Specifically, unit dose packaging facilitates inventory control,
limits waste and theft, and reduces the risk that a patient
receives improper medication.
Following the advent of unit dose packaging in the
early 1970's, UDL was among the first pharmaceutical concerns to
focus on marketing unit dose products specifically to the
institutional healthcare market. As the advantages of unit dose
packaging gained recognition in the institutional healthcare
market, use of unit dose pharmaceuticals grew rapidly.
Product Line
UDL currently offers 177 different pharmaceutical
products. Many are offered in several dosage strengths and
packaging configurations, aggregating more than 450 product-line
items.
UDL's product line is comprised of generic
pharmaceuticals, principally solid orals but also to some extent
liquid orals. Solid orals may be tablets, capsules or caplets.
Liquid orals may be suspensions, solutions, syrups or
concentrates. UDL also carries a limited number of injectables,
topicals (ointments and creams) and suppositories.
UDL also seeks to augment its product line with
specialty products having unique or niche applications. Among
the more significant specialty products carried by UDL are:
(i) its "Emergi-Script" product line, consisting of a formulary
of frequently prescribed generic pharmaceuticals specially
packaged in 24-hour starter doses for convenient dispensing in
hospital emergency rooms; (ii) methadone hydrochloride, a
controlled substance marketed strictly to licensed treatment
and detoxification clinics; and (iii) pre-filled oral syringes
used in the administration of oral liquids. Specialty products
tend to be less sensitive to price competition than more widely
available generic pharmaceutical products, and therefore
typically carry higher prices and better than average gross
margins.
Marketing
UDL markets its products primarily to the
institutional healthcare market, principally to hospitals and
nursing home providers. No single institutional end-user
accounted for as much as ten percent (10%) of UDL's
consolidated net sales in either fiscal 1995, 1994 or 1993.
Nearly all hospitals and a significant number of
nursing home providers and other institutional end-users are
members of one or more group purchasing organizations ("GPOs")
and typically purchase pharmaceuticals from the vendors
approved by the GPO of which they are a member.
Group Purchasing Organizations
GPOs serve as purchasing representatives of their
institutional members by, among other things, reviewing,
evaluating and recommending vendor sources for the purchase of
the various products used by their members. The GPOs award
contracts to vendors that establish the prices at which the
vendors' products may be purchased.
UDL works closely with the GPOs to ensure that they
are aware of recent product developments and that their members
purchase UDL products in compliance with awards between GPO and
UDL.
Drug Wholesale Distributors
Approximately 90% of UDL's sales are made to drug
wholesale distributors, who in turn resell such product to
institutional end-users. The drug wholesale distributors
typically are located near the facilities of major
institutional end-users and carry a broad line of the
pharmaceutical products.
UDL's products are currently stocked by substantially
all United States drug wholesale distributors doing
institutional business. In recent years, the number of
regional drug wholesale distributors have lessened as a result
of industry consolidation.
Institutional End-Users
Institutional end-users purchase UDL product from the
drug wholesale distributors for dispensing to patients. UDL
recognizes that institutional pharmacists make the final
purchasing decisions for the institutions they service.
Accordingly, UDL's sales force regularly meets with
such pharmacists for the purpose of (I) advising them as to UDL
products covered under GPO contract awards; (ii) encouraging
their compliance with such GPO awards where the institution is
a member of such GPO; (iii) sharing information concerning new
and existing products and product, market and purchasing
developments, trends and patterns; and (iv) cultivating loyalty
to the UDL product line.
Pricing Practices
UDL maintains a published wholesale price for each
product in its product line and invoices its drug wholesaler
distributors for product sold to such wholesalers at the
published wholesale price. Normally, the wholesaler will
charge an end-user purchasing UDL product the published
wholesale price plus a service fee.
Institutional end-users that are members of a GPO are
entitled to purchase UDL products at the price established in
the contract award between the GPO and UDL. Typically, the
contract price is less than the published wholesale price paid
by nonmember institutions. Separate arrangements between UDL
and the drug wholesale distributors obligate the latter to
honor the lower contract price and provide for UDL to reimburse
the wholesaler for the differential between the published
wholesale price and the lower contract price. Such
reimbursement is commonly referred to as a "chargeback."
Government Rebate Programs
Under the Omnibus Budget Reconciliation Act of 1990
(OBRA `90), each pharmaceutical manufacturer, including UDL, is
required to rebate to state Medicaid agencies a portion of
sales revenues earned by such manufacturer from the
administration of its products to Medicaid patients. The
rebate applicable to generic manufacturers equals 11% of the
average wholesale price of pharmaceuticals sold for use by
persons covered by Medicaid.
Several states have imposed and others are
considering imposing a further rebate requirement on
pharmaceutical manufacturers whose products are sold for use by
persons covered under Medicaid or certain state sponsored
medical assistance programs.
Product Sourcing
UDL purchases most of its pharmaceutical products in
bulk from outside manufacturers. UDL manufactures a limited
number of unit dose liquid oral products with respect to which
it purchases the active ingredients from specialty chemical
concerns or other third-party sources. Certain products, such
as antibiotics, injectables, topicals and suppositories, have
packaging or manufacturing requirements which exceed UDL's
capabilities. UDL, therefore, purchases such products already
packaged.
There are many generic pharmaceuticals for which
there may be only a single manufacturer or a limited number of
manufacturers. This is especially true in respect of generic
versions of products which only recently have lost their patent
or regulatory exclusivity. UDL, therefore, may compete
directly with a product manufacturer or other marketer or
distributor in offering a given product in unit dose
configuration to the institutional healthcare market. Such
competition may affect a manufacturer's willingness to supply
such product to UDL. UDL generally has been able to secure
sources for the broad range of products required by its
institutional end-users.
UDL maintains multi-year supply agreements with a
number of its major pharmaceutical product sources. Such
agreements generally cover all products purchased by UDL from
such source and are designed to ensure that UDL can maintain
availability of its products throughout the term of its multi
year sale contracts with the various group purchasing
organizations.
UDL's supply relationships also provide an
opportunity for UDL to obtain generic versions of brand-name
pharmaceutical products which for the first time become
available in generic form. Emphasis is placed on gaining early
access to newly available products so that UDL may secure GPO
contract awards with respect to such products and timely
introduce such products to UDL's drug wholesale distributors
and institutional end-users. Gaining early access also enables
UDL to benefit from the higher selling prices and profit
margins typically enjoyed on newly available generic
pharmaceuticals.
Competition
The generic pharmaceutical industry is highly
competitive, with numerous manufacturers having capital and
other resources substantially greater than UDL. UDL believes
that the strength of its relationships with all three links in
the institutional purchasing process (i.e., the group
purchasing organizations, the drug wholesale distributors and
the institutional end-users) affords it a competitive advantage
in the institutional marketplace by allowing it to maintain a
dominant market share for the products which it carries and to
rapidly introduce and build market share for new products.
UDL competes with brand and generic pharmaceutical
companies active in the institutional market by offering a
broad line of quality products, consistent product availability
and exceptional customer service rather than on the basis of
price alone. In general, unit doses products sell at prices in
excess of similar products packaged in bulk. This premium
reflects, among other things, the value of additional materials
and labor costs involved in packaging products in unit dose
configuration. UDL believes that institutional end-users and
third-party payers have been willing to absorb this premium
because they appreciate (i) the administrative benefits
afforded by unit dose packaging systems and (ii) the costs
avoided in not having to sort and dispense bulk
pharmaceuticals. Although UDL's pricing structure generally
reflects the need to offer prices competitive with those
offered by other generic drug manufacturers in respect of their
bulk or unit-dose products, UDL has not made a practice of
initiating market reductions in product pricing or of
necessarily meeting the lowest product price established in the
marketplace.
Research and Development
In recent years, UDL has expanded its research and
development activities. Because UDL purchases the majority of
its products from outside manufacturers, its research and
development activities are limited.
UDL's research and development activities are focused
primarily on the development of unit-dose versions of existing
generic liquid oral pharmaceuticals. UDL currently has obtained
FDA approval to manufacture and market three oral concentrates.
The development, testing and regulatory approval process with
respect to liquid oral products is substantially less than with
respect to solid oral products.
Drug Approval Process
FDA approval is required before the generic version
of any previously approved drug can be manufactured and
marketed. Certain of UDL's products are subject to the ANDA
application procedures. However, in the case of the products
which UDL purchases from other manufacturers in final dosage
form, principally its solid orals and injectables, the ANDA
authorizing the marketing of such products is the property of
the manufacturer of such products.
Facilities, Equipment and Staffing
In establishing an independent research and
development laboratory, UDL initially dedicated discrete
physical space and equipment within its Florida manufacturing
facility. During fiscal 1993, that space was enlarged to
accommodate the growing number of personnel and amount of
equipment devoted to research and development activities.
During fiscal 1995, UDL leased a separate research
and development facility having approximately 10,300 square
feet and fully equipped such facility.
UDL believes that its research and development
facilities and staff are sufficient for its present activities.
Government Regulation
UDL is subject to extensive regulation by the federal
government, principally the FDA and the DEA, and to a lesser
extent by state and local governments. Specifically, the
federal Food Drug and Cosmetic Act, the Controlled Substance
Act, and other federal and state statutes and regulations
govern or influence the development, testing, manufacture,
safety, labeling, storage, approval, advertising, promotion,
marketing, sale and distribution of pharmaceutical products.
They also govern recordkeeping and research procedures. As
regard the FDA, the totality of statutory and regulatory
requirements, along with the FDA's explanatory guidelines, is
generally referred to as current Good Manufacturing Practice
("cGMP").
All pharmaceutical manufacturers must conform to the
cGMP regulations established by the FDA. UDL devotes
significant time and resources to FDA compliance, and its
continued compliance is of critical importance.
With respect to the manufacturing, warehousing and
marketing of drug products containing controlled substances,
UDL must also comply with DEA regulations. Those regulations
place substantial controls and impose complex recordkeeping
requirements on the acquisition, storage, use, transfer
marketing and sale, both of the controlled substance ingredient
and the finished product containing such ingredient.
Pharmaceutical manufacturing establishments subject to the
Controlled Substances Act and DEA regulations are also subject
to routine but unannounced inspections by the DEA for
compliance with such Act and the DEA regulations promulgated
thereunder. Noncompliance can subject the manufacturer to
serious civil or criminal sanctions. As with FDA requirements,
UDL believes that it is in material compliance with DEA
regulations. In 1990, however, the DEA alleged that UDL failed
to adhere to certain recordkeeping requirements or otherwise
violated applicable DEA regulations. UDL paid $110,000 in fines
and entered into a consent decree with the DEA whereby UDL,
neither admitting or denying any wrongdoing,
was ordered to comply with DEA regulations.
UDL is also subject to federal, state and local laws
and regulations regarding work place safety, environmental
protection and hazardous substance controls among others. UDL
believes that it is in substantial compliance with all such
laws and regulations.
Facilities
UDL operates six facilities, three at UDL-Rockford
and three at UDL-Florida.
UDL's principal executive offices and production
facility is located in Rockford, Illinois and is owned by UDL.
This 39,725 square foot facility contains UDL's packaging
operations for its solid oral products and serves as a
warehouse for receiving and storing bulk pharmaceuticals used
in UDL's Rockford operations.
UDL also leases a separate 30,480 square foot
finished goods distribution warehouse located in Rockford less
than one mile from its main production facility and an adjacent
7,920 square foot component warehouse for the storage of
production and packaging materials.
UDL's Rockford facilities also contain segregated
warehouse space devoted to the special storage requirements of
controlled substances and antibiotic products. UDL's
production facility also contains segregated space for secured
storage of product labels and information inserts.
UDL's manufacturing facility is located in Largo,
Florida and owned by UDL. This 32,000 square foot facility
contains UDL's manufacturing and packaging operations for
liquid oral pharmaceuticals, methadone powder and liquid
concentrate and UDL's chemistry and microbiology laboratories.
UDL leases a separate 31,200 square foot finished
goods distribution and components warehouse located in
unincorporated Pinellas County, Florida,. near to its main
manufacturing facility. UDL also leases a separate 10,300
square foot research and development laboratory located in
unincorporated Pinellas County, Florida, adjacent to its
distribution and components warehouse
UDL believes that its facilities are sufficient for
its present activities.
Product Liability and Insurance
Product liability claims constitute a risk to all
pharmaceutical manufacturers. No product liability claims have
been made against UDL to date. UDL believes that it carries
adequate product liability insurance to cover its current
needs.
Legal Proceedings
TC presently is not party to any material legal
proceedings, and knows of no claims overtly threatened against
it, which would be expected to have a material adverse affect
against TC or its properties.
TC'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Overview
TC Manufacturing Co. Inc. conducts operations through
its subsidiaries and/or divisions involved in the
pharmaceutical, packaging and coatings industries.
Results Of Operations
Three months ended July 31, 1995 and 1994:
TC's operations for the three months ended July 31,
1995 resulted in net income of $925,000 or $0.17 per share as
compared to net income of $372,000 or $0.07 per share for the
same period of 1994.
Net Sales and Gross Profit
Net sales and gross profit by division for the three
months ended July 31, 1995 and 1994 are as follows (dollars in
thousands):
TC Manufacturing Co. and Subsidiaries
Divisional Net Sales and Gross Profit
Three Months Ended July 31,
(Dollars in thousands)
1995 1994
Net Gross Net Gross
Sales Profit Sales Profit
Pharmaceutical $15,265 $3,582 $15,205 $3,019
Packaging 5,397 1,958 4,340 1,534
Coating 2,457 603 3,428 1,291
Total $23,119 $6,143 $22,973 $5,844
Gross profit as a percent of sales for the
Pharmaceutical Business increased from 20% for the three months
ended July 31, 1994 to 24% in this year. This improvement is
principally due to changes in product mix. Due to the
competitive nature of the generic pharmaceutical industry the
sales and gross profit recognized in the three months ended July
31, 1995 are not necessarily indicative of the results to be expected
in future quarters.
The Packaging Business generated net sales for the
three months ended July 31, 1995 that were 24% higher than the
comparable period for fiscal 1994. Gross profit increased
over the same three month period by 28% from the comparable
period in 1994. This improved performance is due to price
increases and a shift in product mix to higher margin products.
The Coating Business generated net sales for the
quarter ended July 31, 1995 that were 28% lower than the
same quarter of fiscal 1994. The decline was as a result on
increase competition from lower priced competitors affecting
both the price and volume of the divisions sales. Gross profit as a
percent of sales decreased from 38% for the quarter ended
July 31, 1994 to 25% this year principally due to the lower
level of production which resulted in the underutilization of
production equipment purchased in the prior year.
Operating Expenses:
<TABLE>
<S> <C> <C> <C> <C>
Operating Expenses by Business Segment:
General Research
and and
Selling Admin. Development Total
-------- --------- ---------------- ------
(dollars in thousands)
Three Months Ended July 31, 1995
Pharmaceutical $1,254 $ 644 $300 $2,198
Packaging 672 218 0 890
Coating 516 225 39 780
Corporate 0 631 0 631
Total $2,442 $1,718 $339 $4,499
Three Months Ended July 31, 1994
Pharmaceutical $1,659 $ 652 $332 $2,643
Packaging 589 198 0 787
Coating 592 182 30 804
Corporate 0 779 0 779
Total $2,840 $1,811 $362 $5,013
</TABLE>
The Pharmaceutical Business' selling, general and
administrative and research and development expenses for the
three months ended July 31, 1995 were less than for the
comparable period of fiscal 1994 especially as a percentage of
net revenues. These savings occurred primarily as a result of
reduced personnel costs.
Nine months ended July 31, 1995 and 1994
TC's operations for the nine months ended July 31, 1995
resulted in net income of $1,872,000 or $0.35 per share as
compared to net income of $631,000 or $0.12 per share for
the same period of 1994.
Net Sales and Gross Profit
Net sales and gross profits for the nine months ended
July 31, 1995 increased by 6% and 11% respectively from the
same period a year ago. Gross profit as a percent of sales was
27% for the nine months ended July 31, 1995 versus 25% last year.
Net Sales and gross profit by division for the nine
months ended July 31, 1995 and 1994 are as follows
(dollars in thousands)
TC Manufacturing Co. and Subsidiaries
Divisional Net Sales and Gross
Profit Nine Months Ended July 31,
(Dollars in thousands)
1995 1994
Net Gross Net Gross
Sales Profit Sales Profit
-------- --------- -------- ---------
Pharmaceutical $43,939 $10,657 $41,264 $9,001
Packaging 14,918 4,891 12,486 3,718
Coating 6,513 1,461 8,087 2,558
Total $65,370 $17,009 $61,837 $15,277
The Pharmaceutical Business generated net sales for
the nine months ended July 31, 1995 that were 6% higher than
the same period a year ago. Gross profit as a percent of sales
for the Pharmaceutical Business increased from 22% for the nine
months ended July 31, 1994 to 24% this year principally due to
changes in product mix. The combination of improved product
mix and higher overall volume resulted in the 18% increase in
gross profit dollars for the comparative nine month periods.
Due to the competitive nature of the generic pharmaceutical
industry the sales and gross profit recognized in the nine
months ended July 31, 1995 are not necessarily indicative of
the results to be expected in future periods.
The Packaging Business generated net sales for the
three months ended July 31, 1995 that were 19% higher than the
comparable period for fiscal 1994. Gross profit increased over
the same three month period by 32% from the comparable period
in 1994. This improved performance is due to price increases
and a shift in product mix to higher margin products. Gross
profit as a percent of sales was 33% this year versus 30% a
year ago.
The Coating Business generated net sales for the nine
months ended July 31, 1995 that were 19% lower than the same
period of fiscal 1994. The decline was as a result of
increasing competition from lower priced competitors. Gross
profit as a percent of sales decreased from 32% for the nine
months ended July 31, 1994 to 22% this year principally due to
the lower level of production which resulted in the underutilization
of production equipment purchased in the prior year.
Operating Expenses:
Operating Expenses by Business Segment:
General Research
and and
Selling Admin. Development Total
-------- --------- -------------- -----
(dollars in thousands)
Nine Months Ended July 31, 1995
Pharmaceutical $4,123 $2,136 $895 $7,154
Packaging 1,892 660 0 2,552
Coating 1,486 649 114 2,249
Corporate 0 1,552 0 1,552
Total $7,501 $4,997 $1,009 $13,507
Nine Months Ended July 31, 1994
Pharmaceutical $4,229 $2,325 $858 $7,412
Packaging 1,761 583 0 2,344
Coating 1,615 626 110 2,351
Corporate 0 1,447 0 1,447
Total $7,605 $4,981 $968 $13,554
The Pharmaceutical Business' selling, general and
administration and research and development expenses for the
first nine months of fiscal 1995 were less than for the
comparable period of fiscal 1994 especially as a percentage of
net revenues. These savings occurred primarily as a result of reduced personnel
costs.
Years Ended October 31, 1994, 1993 and 1992:
TC recognized a loss of $120,000 or $0.03 per
share, for the year ended October 31, 1994 compared to net
income of $4,358,000 or $0.82 in fiscal 1993 and $3,946,000
or $0.75 per share in fiscal 1992. The fiscal 1993 and 1992
earnings per share amounts have been adjusted to reflect the
2 for 1 stock split approved by the Board of Directors in
October 1994.
Net Sales and Gross Profit
Net sales and gross profit for the three years
ending October 31, 1994, 1993 and 1992 by division are as
follows (dollars in thousands):
TC Manufacturing Co. and Subsidiaries
Divisional Net Sales and Gross Profit
Years Ended October 31,
(Dollars in thousands)
1994 1993 1992
Net Gross Net Gross Net Gross
Sales Profit Sales Profit Sales Profit
Pharmaceutical $50,223 $8,948 $52,810 $15,073 $44,566 $12,835
Packaging 17,226 5,533 17,351 5,729 15,306 5,040
Coating 11,331 3,779 9,456 3,026 10,048 3,645
Total $78,780 $18,260 $79,617 $23,828 $69,920 $21,520
Net sales of the Pharmaceutical Business increase by
18% from fiscal 1992 to fiscal 1993 principally due to volume
increases. Gross profit as a percent of sales for both years
was 29%. In fiscal 1994 the Pharmaceutical Business
experienced pricing competition that was more significant than that
experienced historically. This resulted not only in lower
prices for product sold during fiscal 1994 but also in
higher than anticipated price protection credits to customers for product
that was sold by the division in fiscal 1993 but remained in the
customers warehouses into fiscal 1994.
To minimize the negative affect of price protection
credits, the division, working closely with its customers,
reduced the level of its products in the customers warehouses.
This resulted in lower sales volume in fiscal 1994 than would
otherwise have been recognized. The combination of 1) lower
prices, 2) higher than anticipated credits and 3) lower
customer inventory levels resulted in the significant drop in
gross profit dollars and gross profit as a percent of sales for
the year ended October 31, 1994. Management believes that the
actions taken in fiscal 1994 will have a favorable impact on
future operations of this division in the highly competitive
generic pharmaceutical industry.
Net sales and gross profit in the Packaging Business
increased by approximately 13.5% from fiscal 1992 to 1993 and
decreased modestly from fiscal 1993 to 1994. Gross profit as
a percent of sales was 32% in fiscal 1994 versus 33% in fiscal
1993 and 1992. At the beginning of fiscal 1994, the Packaging
Business was notified by a significant customer that it was
discontinuing the use of a customized and patented carryout
bag. The 1994 results indicate that the division was able to
replace substantially all of the lost business with new
business.
The Coating Business' $11,331,000 net sales and
$3,779,000 gross profit for the year ended October 31, 1994
represent increases of 20% and 25% respectively from 1993
reversing the decline from 1992 to 1993. Gross profit as a
percent of sales was 33% in 1994, 32% in 1993 and 36% in 1992.
The improvement in the Coating Business can be
attributed to four factors, 1) an increase in international
business, 2) the beginning of market acceptance of its new
products, 3) a modest recovery in the domestic pipeline
construction and or repair and 4) the coming on-line of the
division's new state-of-the-art could tape production
equipment.
In 1993, international business represented 7% of net
sales of the division. In 1994 international business
represented 10% of divisional net sales. Foreign sales were
stimulated by additional and more fully trained foreign
distributors and agents and the burgeoning oil boom in many
Southeast Asian developing nations, particularly in
Thailand, Indonesia and Malaysia.
Operating Expenses
Operating Expenses by Business Segment:
General Research
and and
(dollar in thousands) Selling Admin. Development Total
- -------------------- --------- -------- ---------------- -------
1994
Pharmaceutical $4,368 $4,414 $1,075 $9,857
Packaging 2,371 759 0 3,130
Coating 2,133 760 103 2,996
Corporate 0 1,643 1,643 0
Total $8,872 $7,576 $1,178 $17,626
===== ===== ===== ======
1993
Pharmaceutical $4,451 $2,508 $717 $7,676
Packaging 2,074 817 0 2,891
Coating 2,132 743 158 3,033
Corporate 1,798 1,798 0 0
Total $8,657 $5,866 $875 $15,398
1992
Pharmaceutical $4,147 $2,278 $386 $6,811
Packaging 1,874 852 0 2,726
Coating 1,986 739 169 2,894
Corporate 1,557 1,557 0 0
Total $8,007 $5,426 $555 $13,988
The Pharmaceutical Business' 1994 operating income was
adversely impacted by collection losses. In 1994, two long
time wholesaler-customers, one of whom was significant,
declared bankruptcy resulting in write-offs of approximately
$1,400,000. This bad debt expense is included in general and
administrative expenses.
The Pharmaceutical Business has proceeded with the
planned expansion of its research and development program.
Expenditures for research and development which had aggregated
$717,000 during 1993 grew to $1,075,000 in 1994 - a 50%
increase.
They had been $386,000 in 1992.
Income Taxes
The effective tax rates for fiscal 1994 was 27%
compared to 37% for fiscal 1993 and 1992. The lower rates for
fiscal 1994 resulted from the greater impact of fiscal 1994
permanent tax differences as a percent of fiscal 1994 pretax
loss.
Capital Resources And Liquidity
TC's balance sheet remains strong. At July 31, 1995,
its long-term debt was only 24% of equity and its current ratio
was 2.60 to 1. With cash and equivalents of $3,249,000 and
current assets of $30,284,000, TC has adequate liquidity to
meet its forseeable short-term needs. For the nine month
period ended July 31, 1995, TC generated $1,253,000 from
operating activities.
TC used this cash as well as accumulated cash to invest
$2,068,000 in new equipment and to repay existing debt of
$1,600,000.
TC has in recent years been able to meet its short-term
capital needs out of accumulated resources and/or the proceeds
of its 1991 10.5% long-term borrowing from the Metropolitan Life
Insurance Company. TC also has a revolving credit line
aggregating $10,000,000, of which $9,200,000 remained
available at July 31, 1995.
TC's revolving credit line incorporates the provisions
of the loan agreement which supports TC's remaining
indebtedness to the Metropolitan Life Insurance Company. The
Metropolitan agreement limits TC's ability to incur short-term bank debt
and to make certain kinds of payments, principally dividend
payments and repurchases, of its common stock. the formulae upon which
such restrictions are grounded are such that at the present
time, TC is free to use its entire short-term credit line and as of
July 31, 1995 had accumulated earnings of $4,927,000 not
subject to such restriction.
Other Items
In December 1994, the President signed into law the
Uruguay Round Agreements Act ("URAA") which took effect on
June 8, 1995 and implemented the General Agreement of Tariffs
and Trade ("GATT"). One change in US law required by GATT is
the amendment of patent law to reflect a patent term of 20 years
from the date of filing the application instead of the current
term of
17 years from the date of issuance. The FDA has taken the
position that it cannot approve an Abbreviated New Drug
Application ("ANDA") until the expiration of the extended
patent period. This could delay the launch of future
products by generic drug manufacturers and in turn TC's
Pharmaceutical Business. While this has no effect on products presently
marketed by the division, it is impossible for TC to predict
the extent to which the operations of the Pharmaceutical
Business will be affected by this regulation.
SECURITY OWNERSHIP OF MANAGEMENT OF TC
AND CERTAIN OTHER PERSONS
The following table sets forth the amount and
percentage of TC Common Stock and TC Preferred Stock owned
beneficially, on October 31, 1995 by (i) any person or group
that is known to TC to be the beneficial owner of more than 5%
of the outstanding TC Common Stock or Preferred Stock, (ii) each
of the directors of TC and (iii) all directors and officers of
TC as a group. No stockholder of TC will acquire in the
Merger beneficial ownership of more than 1.0% of the issued and
outstanding shares of Mylan Common Stock.
<TABLE>
<S> <C> <C> <C> <C>
Name and Address of Shares of TC Percent of TC Shares of TC Percent of TC
Beneficial Owner Common Stock Common Stock Preferred Stock Preferred Stock
Owned(1) Beneficially owned Owned(1) Beneficially owned
Prior to Merger Prior to merger
- -------------------------- ------------------- ----------------------- ------------------- ----------------------
Herbert L. Stern, Jr. 2,490,136 46.6%
(2)(3)
30 N. LaSalle St.
Suite 4300
Chicago, IL 60602
Priscilla S. Sloss(2) 600,000 11.2% 1,250 29.5%
1601 Oakwood Ave., #103
Highland Park, IL
60035
Shiro F. Shiraga (4) 486,230 9.1%
860 Appletree Court
Northbrook, IL 60062
Susan S. Ettelson (5) 360,000 6.7%
2440 N. Lakeview
Chicago, IL 60614
Joan E. Feitler (6) 342,852 6.4%
777 N. Prospect Ave.
Milwaukee, WI 53202
Harold E. Foreman, Jr. 284,580 5.3% 285.5 6.7%
890 Skokie Blvd.
Northbrook, IL 60062
Robert Feitler (3)(6) 5,052 *
Frank L. Klapperich, Jr.(3) 25,000 *
Dr. John F. Moore(3) 2,600 *
Herbert L. Stern, III (3)(8) 1,480 *
S. Peter Ullman(3) 1,000 *
Mayo Foundation 137,160 2.6% 285.5 6.7%
200 First St. SW
Rochester, MN 55905
Nancy Smart 572 13.5%
309 East 49th St.,
No. 7B
New York, NY 10017
Grace Mary Stern (9) 1,250 29.5%
291 Marshman
Highland Park, IL 60035
All directors and 3,271,326 59.5%
officers as a group (26 in number)
- ----------------------------------------------------------------
1 All record except in the case of Herbert L. Stern, Jr., Priscilla S. Sloss, Shiro F. Shiraga, Susan
S. Ettelson, Harold E. Foreman, Jr. and certain officers of the Company, whose shares are owned
beneficially.
2 Priscilla Sloss's shares are held in two trusts, one known as the Priscilla S. Sloss Declaration of
Trust(a revocable trust of which Mrs. Sloss is hte grantor) and the other as hte James Sloss 1984
Revocable Trust (now irrevocable due to the death of Mr. Sloss.) Mrs. Sloss is a beneficiary of
both trusts, and in each case, one of three trustees. Priscilla Sloss is hte sister of Herbert L. Stern,
Jr. The holdings of the Stern family, including among others Herbert L. Stern, Jr. and the Sloss
Trusts, total 3,090,616 shares of the Common Stock. Herbert L. Stern, Jr. and Priscilla Sloss each
disclaims that he or she is the beneficial owner of any securities other than those indicated
opposite his or her name.
3 Includes 1,000 shares with the beneficial owner has the option to purchase.
4 Includes 48,812 shares held of record by each of Mr. Shiraga's five children (244,060 shares in
the aggregate) for which Mr. Shiraga has been granted proxies to vote and to otherwise act with
respect to such shares. Said proxies have a duration of ten years but are revocable, in part or in
whole, at any time at the election of the holder of record. Also includes 24,000 shares which Mr.
Shiraga has the option to purchase.
5 Does not include 2,400 shares owned by Susan S. Ettelson's husband, to which Mrs. Ettelson
disclaims beneficial ownership.
6 Does not include 4,052 shares owned by Robert Feitler, Joan E. Feitler's husband, to which
Mrs. Feitler disclaims beneficial ownership.
7 Does not include 342,852 shares owned by Joan E. Feitler, wife of Robert Feitler, to which Mr
Feitler disclaims beneficial ownership.
8 Herbert L. Stern, III is hte son of Herbert L. Stern, Jr. Herbert L. Stern, Jr. and Herbert L.
Stern, III each disclaims beneficial ownership of any securities other than those indicated
opposite his name.
9 Grace Mary Stern is the wife of Herbert L. Stern, Jr. Herbert L. Stern, Jr. and Gracy Mary Stern
each disclaims that he or she is the beneficial owner of any securities other than those indicated
opposite his or her name.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
CERTAIN RELATED TRANSACTIONS AND RELATIONSHIPS OF TC AND MYLAN
Reorganization
Effective immediately prior to the closing of the
Merger, TC, through a reorganization in the form of a split-
off, will transfer all its assets (including the stock of certain
subsidiaries) relating to the Coating Business and to the
Packaging Business to Newco. All of the liabilities related to
the Coating Business and the Packaging Business will be assumed
by Newco.
As part of the Reorganization, there will be a non-
pro rata distribution to the holders of TC Common Stock.
Holders of TC Common Stock who are not employed in the
Pharmaceutical Business will receive a distribution of all of
the shares of Newco. Holders of TC Common Stock who are in the
Pharmaceutical Business will receive additional shares of TC
Common Stock in a sufficient number to account for the values
of the Coating Business and the Packaging Business in which
such employee holders will no longer have an ownership
interest.
In order to effect the Reorganization and Merger, TC
and Mylan are parties to an Agreement for Business Combination
which identifies and describes the transactions which are to be
consummated as part of the Reorganization and as conditions
precedent to the Merger. A summary of each of such
transactions follows.
1. Plan of Reorganization. The Plan of
Reorganization adopted by the Board of Directors of TC provides
for a series of transactions described as follows:
(a) HSW Investment Co., an Illinois
corporation and wholly-owned subsidiary of TC ("HSW"), will
liquidate pursuant to a Plan of Complete Liquidation. The Plan
of Complete Liquidation will provide for HSW to distribute to
TC the stock of two wholly-owned special purpose subsidiaries.
TC will then contribute the stock of these special purpose
subsidiaries to UDL-Illinois and UDL-Illinois will also assume
and agree to pay the entire balance of any intercompany
indebtedness due to TC from these subsidiaries.
(b) TC will transfer all of the
assets of the Coating Business and the Packaging Business to
Newco and, in exchange, Newco will assume all of the
liabilities of TC relating to the Coating Business and the
Packaging Business and will issue shares of its capital stock
to TC.
(c) The shares of Newco will then be
distributed by TC to the holders of TC Common Stock who are not
employed by a member of the Pharmaceutical Group. At the same
time, holders of TC Common Stock who are employed by a member
of the Pharmaceutical Group will receive additional shares of
TC Common Stock in a sufficient number to account for the
values of each of the Coating Business and the Packaging
Business in which such holders will no longer have an ownership
interest.
2. Other Ownership Interests in TC and
UDL-Illinois.
(a) Options to purchase TC Common
Stock are held by employees and directors of TC. The holders
of such options will be given the opportunity to exercise the
options prior to the effective date of the Reorganization,
whether or not such options are then vested and exercisable.
Holders of options who exercise their rights to purchase TC
Common Stock will then be in a position to receive shares of
Newco Common Stock or additional shares of TC Common Stock as
part of the Reorganization.
(b) Michael K. Reicher is the holder of
three shares of UDL-Illinois Common Stock which constitute a
sixpercent interest in UDL-Illinois. TC has entered into a
Stock Purchase Agreement with Mr. Reicher pursuant to which TC
has agreed to purchase Mr. Reicher's shares in UDL-Illinois for
a price of $2,850,000 payable in cash pursuant to the terms of
a promissory note to be delivered by TC to Mr. Reicher. The
obligations of TC to purchase Mr. Reicher's stock is
conditioned upon the occurrence of the Reorganization and the
Merger. The obligation of TC in favor of Mr. Reicher is due
and payable on the later of January 3, 1996 or the day
immediately following the consummation of the Merger.
3. Agreement and Plan of Merger.
See "The Merger Agreement."
4. Treatment of Indebtedness and Liabilities ofTC.
As a precondition to the Merger, TC is to
remain obligated with respect to: (a) its indebtedness (both
principal and interest) to the Metropolitan Life Insurance
Company ("Metropolitan"), including any penalty which might be
payable upon a subsequent mandatory or other prepayment of such
indebtedness, the amount of which will be calculated as if TC
had made such prepayment at the Effective Time; (b) its
indebtedness (both principal and interest) under TC's
outstanding line of credit with the LaSalle National Bank
("LaSalle"); and (c) such other indebtedness and liabilities as
may exist on the books and records of TC as of the Effective
Time after giving effect to TC's acquisition of Mr. Reicher's
interest in UDL-Illinois, the assumption of liabilities by
Newco in conjunction with the Reorganization and the payment by
TC of all expenses payable by it in conjunction with the
transactions contemplated by the Reorganization and the Merger.
The amount of the indebtedness to remain outstanding may or may
not exceed the amount due and owing to TC on account of UDL-
Illinois' intercompany indebtedness to TC. The amount of such
excess or deficiency will affect the aggregate number of shares
of Mylan Common Stock finally delivered to holders of TC Common
Stock.
See "The Merger Agreement - Certain Holdbacks
Applicable to Holders of TC Common Stock; Adjustment of Common
Stock Exchange Ratio; and Distributions."
5. Indemnification. As part of the
Reorganization, Newco will agree to assume and be responsible
for the liabilities relating to TC's ownership and operation of
the Coating Business and the Packaging Business prior to the
Reorganization and TC agrees to remain responsible for the
liabilities relating to TC's ownership and operation of the
Pharmaceutical Business prior to the Reorganization. In order
to further protect TC and Newco from the claims or causes of
action which relate to or are derived from such actual or
potential liabilities, Newco will execute for the benefit of TC
and Mylan, and TC will execute for the benefit of Newco and
Newco's stockholders, the Indemnification Agreement to be
executed pursuant to the Plan of Reorganization.
The Indemnification Agreement provides for the
procedures to be followed by Newco and TC with respect to the
filing of all tax returns with respect to the Coating Business,
the Packaging Business and the Pharmaceutical Business and the
payment of the taxes shown to be due by such tax returns. The
Indemnification Agreement also provides for the procedures to
be followed by Newco and TC in the event either party desires
to make a claim for indemnification.
Newco and TC have mutually agreed in the
Indemnification Agreement that, until the third anniversary of
the Effective Time, neither of them will nor will they permit
their respective subsidiaries to:
(i) cease operations;
(ii) make a material disposition of existing assets by
means of a sale, exchange, or transfer, distribution
to shareholders or otherwise;
(iii) dispose of any capital stock of any of
existing subsidiaries by sale, exchange or transfer,
distribution to shareholders or otherwise; or
(iv) liquidate or merge with any other corporation.
In the event Newco or TC desires to take any of
the actions described above or to permit any of its respective
subsidiaries to do so within such three year time period, Newco
or TC, as the case may be, is required to deliver to the other
either an opinion of counsel or a favorable ruling letter from
the appropriate taxing authority to the effect that such
actions will not adversely affect the tax consequences of the
transactions described in the Plan of Reorganization or the
Merger.
Newco has agreed that, except as described in
the following sentence, during the five year term of the
Indemnification Agreement, it will not sell, transfer or
otherwise dispose of the stock of any of its subsidiaries or
all or substantially all of the assets of the Coating Business
or the Packaging Business. After the third anniversary of the
Effective Time, Newco has agreed that it will not (i) sell or
otherwise dispose of the stock of any of its subsidiaries
without the consent of TC unless such subsidiary enters into a
joinder and undertaking agreement by which it agrees to join in
the Indemnification Agreement and to perform the obligations of
Newco under the Indemnification Agreement (a "Newco Joinder and
Undertaking Agreement"); (ii) sell all or substantially all of
the assets of the Coating Business or Packaging Business except
in transactions which are bona fide and arm's-length in nature;
or (iii) transfer the assets of the Coating Business or the
Packaging Business or both to one or more corporations which
are wholly-owned subsidiaries of Newco (each a "Newco
Subsidiary") unless (A) each such Newco Subsidiary enters into
a Newco Joinder and Undertaking Agreement; and (B) Newco
retains the stock of each such Newco Subsidiary until Newco
sells or distributes the stock of such Newco Subsidiary in
accordance with the provisions of the Indemnification
Agreement.
Newco has further agreed that, except as
described in the following sentence, during the term of the
Indemnification Agreement, it will not permit the transfer on
its stock register of any shares of its capital stock held by
any stockholder owning at least 1% of the issued and
outstanding capital stock of Newco except for transfers by will
or intestate succession. After the third anniversary of the
Effective Time, if the stockholders of Newco enter into an
agreement to sell at least 51% of the issued and outstanding
capital stock of Newco in transactions which are bona fide and
arm's-length in nature, upon notice to TC and upon the
consummation of the transactions set forth in such agreement,
certain covenants of Newco in favor of TC as set forth in the
Indemnification Agreement will terminate.
Newco has agreed generally not to make any
distributions to its stockholders if, after giving effect to
such distribution, the stockholders' equity shown on the
balance sheet of Newco at the date of the distribution would be
less than the stockholders' equity shown on the balance sheet
of Newco on the date the Reorganization is consummated. Newco
has also agreed not to make any loans or advances to its
stockholders.
However, under the terms of the Indemnification
Agreement, Newco is permitted to make certain specifically
described distributions to its stockholders which enable Newco
to, by way of example, purchase a limited number of shares of
its capital stock from: (i) employee stockholders who are
terminated or retire; (ii) successors in interest to deceased
stockholders or; (iii) stockholders tendering a bona fide right
of first refusal to Newco under a shareholders agreement.
Newco is also permitted to distribute to its
stockholders the stock of a Newco Subsidiary on the condition
that such Newco Subsidiary enters into a Newco Joinder and
Undertaking Agreement which will cause such Newco Subsidiary to
be subject to the restrictions on distributions to its
stockholders described above. After executing such Newco
Joinder and Undertaking Agreement, such Newco Subsidiary will
be permitted to sell all or substantially all of its assets in
transactions which are bona fide and arm's-length in nature.
Finally, in the event Newco or, if the stock of a Newco
Subsidiary has been distributed to the stockholders of Newco,
the stockholders of Newco enter into an agreement to sell at
least 51% of the issued and outstanding capital stock of such
Newco Subsidiary in transactions which are bona fide and arm's-
length in nature, upon notice to TC and upon the consummation
of the transactions set forth in such agreement, certain
covenants of such Newco Subsidiary in favor of TC as set forth
in the Indemnification Agreement will terminate.
TC has agreed that, at any time after the third
anniversary of the Effective Time, it will not transfer the
stock of any subsidiary in existence at the Effective Time
unless such subsidiary or, at the election of TC, Mylan enters
into a joinder and undertaking agreement by which it agrees to
join in the Indemnification Agreement and to perform the
obligations of TC under the Indemnification Agreement.
6. Tax Impact of the Transactions.
See "The Merger-Certain Federal Income Tax Consequences."
7. Trading Restrictions.
(a) Rule 145 promulgated under the
Securities Act of 1933 imposes certain restrictions on the
right of "affiliates" of TC to transfer their interests in any
shares so received. In order to ensure compliance with Rule
145, each
director, officer and holder of five (5%) percent or more of
the issued and outstanding shares of TC Common Stock as of the
Effective Time will execute and deliver to Mylan and to the
Stockholders Representative (for the benefit of all of the
former stockholders of TC) a letter agreeing to abide by the
restrictions on transfer imposed by Rule 145.
(b) Additionally, in order to ensure
the ongoing continuity of stockholder ownership of TC requisite
to support the tax-free nature of the Reorganization and
Merger,
each holder of one (1%) percent or more of the issued and
outstanding shares of TC Common Stock as of the Effective Time
will be required to enter into a Letter Concerning Continuity
of Shareholder Interest pursuant to which such holder will
agree to further limit his or her right to transfer the shares
of Newco Common Stock received in the Reorganization and his or
her right to transfer the Mylan Common Stock received in the
Merger for a period of three (3) years following the effective
date of the Reorganization and Merger, respectively.
8. Stockholders Representative. In connection
with certain actions relating to the Reorganization and Merger
but which are to occur after the effective dates thereof, each
stockholder of TC will be asked to designate Herbert L. Stern,
Jr. and Robert Feitler to act singly or together as a
representative of and attorney-in-fact for such stockholder
(each, the "Stockholders Representative"). In designating the
Stockholders Representative, each stockholder will be required
to execute and deliver a Limited Power of Attorney.
Pursuant to the Limited Power of Attorney each
stockholder of TC Common Stock will authorize the Stockholders
Representative to take any and all actions on behalf of each
such stockholder in connection with the Agreement for Business
Combination, the Plan of Reorganization and the Merger
Agreement and the transactions contemplated thereby as are
required on the part of such Stockholder. The actions which
the Stockholders Representative is authorized to take on behalf
of each such stockholder are:
A. To prepare and certify the joint
certification of the assets and liabilities of TC on the
Effective Time as provided in the Merger Agreement;
B. To select a person or persons to represent
such stockholder before the Internal Revenue Service or any
other taxing authorities which may examine or audit the
transactions contemplated by the Agreement for Business
Combination, the Plan of Reorganization and the Merger
Agreement;
C. To select a person or persons to represent
such stockholder before the Internal Revenue Service in
connection with a request for a private letter ruling as to the
tax-free nature of the Reorganization and the Merger; and
D. To exercise from time to time all other
powers with respect to the shares of TC Common Stock owned by
such stockholder as described in, or required pursuant to the
terms of the Agreement for Business Combination, the Plan of
Reorganization or the Merger Agreement which may be necessary,
advisable or appropriate so as to effect the Reorganization and
the Merger.
Each stockholder of TC executing a Limited Power of
Attorney will be legally bound by all authorized actions taken
by the Stockholders Representative. The Limited Power of
Attorney is irrevocable and will expire in the event the Merger
is not consummated within six months after the execution of the
Limited Power of Attorney.
Irrevocable Proxies
Certain holders of TC Preferred Stock and TC Common
Stock have executed and delivered to Mylan irrevocable proxies
which authorize designated representatives of Mylan to vote
such holders' shares of TC stock on the following matters:
(A) in favor of calling a special meeting of the
holders of TC Preferred Stock and the holders of
the TC Common Stock for the purpose of
considering and approving the Merger Agreement
and the transactions contemplated thereby;
(B) in favor of approving the Merger Agreement and
the transactions contemplated thereby, all on
the terms and conditions provided for therein;
and
(C) against approval of any merger, consolidation or
sale of assets of TC which requires a vote of
the stockholders of TC pursuant to Section 251
or Section 271 of the Delaware General
Corporation Law at any annual, regular or
special meeting of such stockholders.
The irrevocable proxies will terminate on the first to occur of
the consummation of the Merger, the date upon which the Merger
is terminated and abandoned or February 28, 1996.
Holders of shares of TC Preferred Stock representing
approximately 73% of the outstanding TC Preferred Stock have
executed irrevocable proxies with respect to their shares.
Holders of shares of TC Common Stock representing
approximately 77% of the outstanding TC Common Stock including
directors and executive officers who hold approximately 52% of
the outstanding shares of TC Common Stock have executed
irrevocable proxies with respect to their shares.
Letter of Transmittal
In order to effect the exchange of shares of TC
Preferred Stock and TC Common Stock for shares of Mylan Common
Stock following the Merger, each stockholder of TC will be
required to execute a Letter of Transmittal and to deliver the
Letter of Transmittal and the certificates formerly
representing TC Preferred Stock and TC Common Stock to the
Exchange Agent under the Merger Agreement.
The Letter of Transmittal sets forth instructions for
the endorsement of the certificates formerly representing
shares of TC Preferred Stock and TC Common Stock and the
delivery of such shares to the Exchange Agent for the purpose
of conversion into shares of Mylan Common Stock and, in the
case of holders of TC Common Stock who are not employed by a
member of the Pharmaceutical Group, delivery of shares of
Common Stock of Newco. See also "Certain Relationships and
Related Transactions of TC."
In addition, the Letter of Transmittal requires that
each stockholder of TC represent and agree for the benefit of
Mylan that (i) although the Reorganization and the Merger have
been structured by TC to be tax free, there is no assurance
that the transactions will be tax free and there is a
possibility that each stockholder may have personal income tax
liability as a result of the Reorganization or Merger and each
stockholder is required to release Mylan and TC from any claims
that may result from the Reorganization and Merger being
subject to federal, state or local taxes; except for claims for
corporate taxes assessed against TC and imposed upon any
stockholder on account of transferee liability, if any,
resulting from the distribution by TC to such stockholder of
the shares of Newco in the Reorganization; (ii) the stockholder
is acquiring the shares of
Mylan Common Stock and, in certain cases, the Newco Common
Stock for investment and not with a view to further
distribution that would require registration under the
Securities Act of 1933; and (iii) as to each stockholder
holding 1% or more of the outstanding TC Common Stock, he/she
must execute a Letter Concerning Continuity of Shareholder
Interest which will require the stockholder to hold the Mylan
Common Stock and, if applicable, the Newco Common Stock for a
period of three years from the Effective Time and that the
share certificates will bear a legend, and the stock transfer
books of each corporation will be noted, to such effect.
See "The Merger - Certain Federal Income Tax Consequences."
Non-Competition Agreements
At the Effective Time, Mylan and TC will enter into a
Non-Competition Agreement with Newco pursuant to which Mylan
and TC will agree that, for a period of five years following
such date, neither Mylan nor TC nor any of their subsidiaries
will participate directly or indirectly in the Coating Business
or the Packaging Business in the continental United States. In
addition, TC and Mylan will agree that, during the same period,
neither of them nor any of their subsidiaries will seek to
employ any of the executive, managerial or technical employees
of the Coating Business or the Packaging Business. Finally, TC
and Mylan will agree to protect the confidentiality of any
proprietary information in their possession which relates to
the Coating Business or the Packaging Business.
At the same time, Newco, Herbert L. Stern, Jr.,
Chairman of the Executive Committee of TC ("Stern"), and Shiro
F. Shiraga ("Shiraga"), Chairman of the Board, Chief Executive
Officer and President of TC, will enter into a Non-Competition
Agreement with TC pursuant to which each of Newco, Stern and
Shiraga severally will agree that, for a period of five years
following the Effective Time, such person (including, in the
case of Newco, its subsidiaries) will not participate directly
or indirectly in the business conducted by the members of the
Pharmaceutical Group in the continental United States. In
addition, each of Newco, Stern and Shiraga severally will agree
that, during the same period, such person (including, in the
case of Newco, its subsidiaries) will not seek to employ any of
the executive, managerial or technical employees of any member
of the Pharmaceutical Group. Finally, each of Newco, Stern and
Shiraga severally will agree to protect the confidentiality of
any proprietary information in such person's possession which
relates to the members of the Pharmaceutical Group.
In each case, the parties to the Non-Competition
Agreements have the right to purchase and hold securities in
publicly held corporations which are engaged in competitive
businesses as long as such holdings do not exceed five percent
of the outstanding class of securities of such publicly held
corporation.
Supplier Relations
Mylan supplies pharmaceutical products to TC. See
"The Merger -- Background of the Merger."
TC Legal Counsel
The law firm of Rivkin, Radler & Kremer, acts as
legal counsel to TC. Herbert L. Stern, Jr., a significant
stockholder and Chairman of the Executive Committee of TC is of counsel to
such firm and Keith R. Abrams, Assistant Secretary of TC, is a
partner of such firm. Legal fees to be paid to Rivkin, Radler &
Kremer with respect to services provided in connection with the
Reorganization and Merger are expected to total approximately
$450,000.
COMPARISON OF SHAREHOLDER RIGHTS
If the Merger is consummated, holders of TC Stock may
become holders of Mylan Common Stock, which would result in
their rights as shareholders being governed by the laws of the
Commonwealth of Pennsylvania and the Amended and Restated
Articles of Incorporation, as amended, of Mylan ("Mylan's
Articles") and the By-Laws, as amended, of Mylan ("Mylan's By-
Laws"). The rights of holders of TC Stock currently are
governed by the laws of the State of Delaware and the
Certificate of Incorporation, as amended, of TC ("TC's
Articles") and the Bylaws, as amended, of TC ("TC's Bylaws").
It is not practical to describe all of the
differences between the laws of the Commonwealth of
Pennsylvania and the laws of the State of Delaware, between
Mylan's Articles and TC's Articles and between Mylan's By-Laws
and TC's Bylaws. The following is a summary of certain
differences between the rights of a holder of TC Common Stock
and the rights of a holder of Mylan Common Stock. The summary
is qualified in its entirety by reference to Mylan's Articles
and Mylan's By-Laws, copies of which are filed as exhibits to
the Registration Statement of which this Proxy
Statement/Prospectus is a part, TC's Articles and TC's Bylaws,
which are filed herewith and incorporated in reference into
this Proxy Statement/Prospectus, and the laws of the
Commonwealth of Pennsylvania and the State of Delaware.
Shareholder Rights Generally
Notice of Meetings. Under the Pennsylvania Business
Corporation Law of 1988, as amended (the "PBCL"), holders of
Mylan Common Stock are entitled to at least 10 days' prior
written notice for a meeting called to consider a fundamental
change (as defined in the PBCL) and five days' prior written
notice for any other meeting. Under the DGCL and TC's Bylaws,
holders of TC Stock are entitled to at least 10 days' prior
written notice for a special meeting called to consider general
matters, and at least 20 days' notice is required to consider a
merger.
Proxies. Under the DGCL and TC's Bylaws, a proxy is
invalid after three years from its date, unless the proxy
provides for a longer period. Under the PBCL, there are no
limitations on the duration of proxies except that an unrevoked
proxy is not valid after three years unless a longer time is
expressly provided therein.
Right to Call Special Meetings. Under the PBCL,
holders of Mylan Common Stock have no right to call special
meetings of shareholders except that an interested shareholder
(i.e., the beneficial owner of at least 20% of the
corporation's outstanding voting securities) has the right to
call a special meeting of shareholders to approve certain
business combinations. Under the DGCL, a special meeting of
stockholders may be called only by the board of directors or by
such person or persons as may be authorized by TC's Articles or
TC's Bylaws. Under the TC's Bylaws, the holders of a majority
of capital stock of TC can request a special meeting of
stockholders, but business transacted must be limited to that
stated in the notice of such
meeting.
Removal of Directors. Under the PBCL, the entire
Board of Directors of Mylan, or any individual director, may be
removed from office without assigning any cause by the vote of
a majority of the votes cast at any duly noticed and called
meeting. Under the DGCL the entire board or any director may
be removed with or without cause, by the majority of the shares
then entitled to vote at an election of directors. However,
since TC's Certificate of Incorporation provides cumulative
voting, if less than the entire board is to be removed, no
director may be removed without cause if the vote cast against
his removal would be sufficient to elect him.
Shareholder Voting Rights
General Vote Required. Under the PBCL, corporate
action taken by shareholders, including shareholder action to
amend the articles of incorporation or to approve mergers,
consolidations or dissolution, generally is authorized upon
receiving the affirmative vote of a majority of the votes cast
by all shareholders entitled to vote thereon (and, if any class
of shares is entitled to vote thereon as a class, the
affirmative vote of a majority of the votes cast in such
class). Under the DGCL and TC's Bylaws, the affirmative vote
of the holders of a majority of the stock having voting power
present in person or represented by proxy at a meeting at which
a quorum is present is required for stockholder action unless
the DGCL requires otherwise. Under DGCL, the affirmative vote
of the majority of the outstanding shares entitled to vote
thereon generally is required to effect mergers, or
consolidations.
Special Vote Required for Certain Business
Combinations. Mylan's Articles require the affirmative vote of
at least 75% of the outstanding shares of Mylan Common Stock
entitled to vote in order to effect certain business
combinations. See "Description of Capital Stock - Special
Considerations."
In addition, Mylan is subject to provisions of the
PBCL regarding business combinations. The PBCL prohibits
certain business combinations (as defined in the PBCL)
involving a Pennsylvania corporation that has shares registered
under the Exchange Act and an "interested shareholder" unless
one of five conditions is satisfied or an exemption is found.
An "interested shareholder" is generally defined to include a
person who beneficially owns at least 20% of the votes that all
shareholders would be entitled to cast in an election of
directors of the corporation.
In general, a corporation can effect a business
combination involving an interested shareholder under the PBCL
if one of the following five conditions is satisfied (i) prior
to the date on which the person becomes an interested
shareholder, the board of directors approves the business
combination or the purchase of shares that causes the person to
become an interested shareholder; (ii) the business combination
is approved by an affirmative vote of the holders of all
outstanding shares; (iii) the business combination is approved
by a majority of the disinterested shareholders at a meeting
called at least five years after the date the person becomes an
interested shareholder; (iv) the interested shareholder holds
80% or more of the votes that all shareholders would be
entitled to cast in an election of directors of the corporation
and the business combination is approved by a majority of the
disinterested shareholders at a meeting held at least three
months after the
interested shareholder acquired such 80% interest, provided
that the fair price and procedural requirements set forth in
the PBCL are satisfied; or (v) the business combination is
approved by the shareholders at a meeting called at least five
years after the date the person becomes an interested
shareholder, provided that the fair price and procedural
requirements set forth in the PBCL are satisfied.
The DGCL prohibits certain business combinations (as
defined in the DGCL) between a Delaware corporation that has
shares listed on a national stock exchange, authorized for
quotation on The NASDAQ Stock Market or held of record by more
than 2,000 stockholders and an interested stockholder that
occur within three years of the time that such stockholder
became an interested stockholder, unless one of three
conditions is satisfied or an exemption is found. An
"interested shareholder" is generally defined to include a
person who beneficially owns at least 15% of the voting stock
of the corporation. In general, a corporation can effect a
business combination involving an interested stockholder under
the DGCL within three years of the time that such stockholder
became an interested stockholder if one of the following three
conditions is satisfied: (i) prior to such time, the board of
directors approves the business combination or the transaction
that causes the person to become an interested stockholder;
(ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock at the time
the transaction commenced; or (iii) at or subsequent to such
time the business combination is approved by the board of
directors and authorized by the affirmative vote of two-thirds
of the disinterested shareholders. Since TC's voting stock is
not listed on any national stock exchange, authorized for
trading on The NASDAQ Stock Market or held by more than 2,000
stockholders of record, these provision of the DGCL do not
presently apply to TC.
Merger or Consolidation Without Shareholder Approval.
Under the PBCL, no vote of the shareholders of a corporation is
required if (i) the plan does not alter the corporation's
status as a Pennsylvania corporation or in any respect the
articles and each share is to continue as or be converted into
an identical share of the surviving corporation; or (ii)
another corporation directly or indirectly owns 90% or more of
shares of each class of the corporation.
Under the DGCL, no vote of the stockholders of a
corporation is required if (i) the plan does not amend in any
respect the certificate of incorporation; (ii) each share is to
continue as or be converted into an identical share of the
surviving corporation; or (iii) either no stock of the
surviving corporation is to be issued under the plan or the
treasury or unissued authorized shares of the surviving
corporation to be issued plus those shares issuable upon
conversion of other shares to be issued in the plan do not
exceed 20% of the outstanding shares of such corporation plan
to the merger.
Rights With Respect to Shares
Dividends; Purchases and Redemptions of Shares.
Under the PBCL, Mylan may pay dividends and make stock
purchases and redemptions unless, after giving effect to the
distribution: (i) the corporation would be unable to pay its
debts as they become due in the usual course of its business,
or (ii) the total assets of the corporation would be less than
the sum of its total liabilities plus the amount that would be
needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those
receiving the distribution. The Board of Directors may base
its determination of total assets and total liabilities on any
factors it considers relevant, including the book values of the
corporation's assets and liabilities as reflected on its books
and records, unrealized appreciation and depreciation of the
corporation's assets or the current value of the corporation's
assets and liabilities, either valued separately or valued in
segments or as an entirety as a going concern.
The DGCL provides that a corporation shall not redeem
its stock for cash or property if such redemption would cause
an impairment of capital of the corporation. The DGCL further
provides that TC may pay dividends (1) out of its capital
surplus or (2) in the event there is no capital surplus, out of
its net profits for the fiscal year in which the dividend is
declared and/or the preceding year.
Rights and Powers of Directors
Consideration of Factors; General Powers. The PBCL
expressly permits directors, in discharging the duties of their
positions and in considering the best interests of the
corporation, to consider the effects of any action upon
employees, upon suppliers and customers of the corporation and
upon communities in which offices or other establishments of
the corporation are located, and all other pertinent factors.
The PBCL states that consideration of those factors shall not
constitute a violation of the standard of conduct for directors
described in the PBCL. Further, the PBCL expressly authorizes
the corporation's board of directors to accept, reject, respond
or take no action in respect of an actual or proposed
acquisition, takeover or other fundamental change.
The DGCL provides that directors are fully protected
in relying in good faith upon representations of experts or the
corporation's officers or employees.
Director and Officer Liability and Indemnification
In accordance with the PBCL, Mylan's By-Laws provide
that a director of Mylan shall not be personally liable for
monetary damages for any action taken, or any failure to take
any action, unless the director has breached or failed to
perform the duties required under Pennsylvania law and the
breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness.
As permitted by the PBCL, Mylan's By-Laws provide
that directors of Mylan are indemnified under certain
circumstances for expenses, judgment, fines or settlements
incurred in connection with suits and other legal proceedings.
The PBCL allows indemnification in cases where the person
"acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the corporation
and, with respect to any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful."
The DGCL and TC's Bylaws generally provide that a
corporation may, and in certain circumstances, must, indemnify
its directors, officers, employees or agents ("indemnities")
for expenses (including attorneys' fees), judgments, fines or
settlements actually and reasonably incurred by them in
connection with suits and other legal actions or proceedings if
they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. In the
case of stockholder derivative suits, the corporation may
indemnify its directors, officers, employees or agents if they
acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation,
except that no indemnification may be made in respect of any
claim, issue or matter as to which such person shall have been
adjudged liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which the action was
brought determined upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems
proper. The DGCL also permits a corporation to adopt procedures
for advancing expenses to indemnities without the need for a
caseby-case determination of eligibility, so long as in the case
of officers and directors they undertake to repay the amounts
advanced if it is ultimately determined that the officer or
director was not entitled to be indemnified.
DESCRIPTION OF MYLAN CAPITAL STOCK
The authorized capital stock of Mylan consists of
305,000,000 shares of Mylan Common Stock, of which, as of the
date of this Proxy Statement/Prospectus, ___________ shares are
outstanding, and 5,000,000 shares of preferred stock, par value
$.50 per share ("Mylan Preferred Stock"), issuable in series,
none of which are outstanding as of the date of this Proxy
Statement/Prospectus. The following description of the capital
stock of Mylan is qualified in its entirety by reference to
Mylan's Articles and Mylan's By-Laws, copies of which are filed
as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part.
Mylan Common Stock
Holders of Mylan Common Stock have one vote per share
on all matters submitted to a vote of shareholders.
Shareholders do not have cumulative voting rights. The holders
of Mylan Common Stock have the right to receive dividends when,
as and if declared by the Board of Directors of Mylan out of
funds legally available therefor, subject to the rights of the
holders of any outstanding Mylan Preferred Stock to receive
preferential dividends. Upon the liquidation of Mylan, holders
of Mylan Common Stock would share ratably in any assets
available for distribution to shareholders after payment of all
obligations of Mylan and the aggregate liquidation preference
(including accrued and unpaid dividends) of any outstanding
Mylan Preferred Stock.
The Mylan Common Stock is not redeemable and has no
preemptive, subscription or conversion rights. Shares of Mylan
Common Stock currently outstanding are, and the Mylan Common
Stock to be issued in the Merger will be, validly issued, fully
paid and nonassessable.
American Stock Transfer Co., New York, New York, is
the transfer agent and registrar for the Mylan Common Stock.
Mylan Preferred Stock
The authorized Mylan Preferred Stock is available for
issuance from time to time at the discretion of the Board of
Directors of Mylan without shareholder approval. The Board of
Directors has authority to prescribe for each series of Mylan
Preferred Stock it establishes the number of shares in that
series, the dividend rate, and the voting rights, conversion
privileges, redemption, sinking fund and liquidation rights, if
any, and any other rights, preferences, qualifications and
limitations of the particular series. The issuance of Mylan
Preferred Stock could decrease the amount of earnings and
assets available for distribution to the holders of Mylan
Common Stock or adversely affect the rights and powers,
including voting rights, of the holders of Mylan Common Stock.
Mylan has no present plans to issue any Mylan Preferred Stock.
Special Considerations
Mylan is subject to provisions of the PBCL regarding
business combinations. See "Comparison of Shareholder Rights
Special Vote Required for Certain Business Combinations."
In addition, Mylan's Articles provide that each of
the following corporate actions requires approval in compliance
with all applicable provisions of the PBCL and Mylan's Articles
and, with certain exceptions, the affirmative vote of at least
75% of the outstanding shares of Mylan Common Stock entitled to
vote, at a meeting called for such purpose: (i) any merger or
consolidation to which Mylan and an Interested Person (as
defined in Mylan's Articles) are parties; (ii) any sale, lease,
exchange or other disposition, in a single transaction or
series of related transactions, of all or substantially all or
a Substantial Part (as defined in Mylan's Articles) of the
properties or assets of Mylan to an Interested Person; (iii)
the adoption of any plan or proposal for the liquidation or
dissolution of Mylan under or pursuant to which the rights or
benefits inuring to an Interested Person are different in kind
or character from the rights or benefits inuring to the other
holders of Mylan Common Stock; (iv) any transaction of the
foregoing character involving an Affiliate or Associate (as
defined in Mylan's Articles) of an Interested Person or
involving an Associate of any such Affiliate. The 75% voting
requirement will not apply if the Board of Directors shall have
approved the transaction by a majority vote of all directors
prior to the time the Interested Person connected with the
transaction became an Interested Person or if the Board of
Directors shall have approved the transaction prior to
consummation thereof by a majority vote of all directors,
disregarding the vote of each director who was an Interested
Person, or an Affiliate, Associate or agent of such Interested
Person, or an Associate or agent of any such Affiliate. The
affirmative vote of the holders of at least 75% of the
outstanding shares of Mylan Common Stock entitled to vote is
required to amend or repeal the foregoing provisions.
The By-Laws of Mylan provide that a director shall
not be personally liable for monetary damages as such for any
action, or any failure to take any action, unless he has
breached or failed to perform his statutory duties and the
breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness; provided, however, that such
limitation of liability shall not apply to the responsibility
or liability of a director pursuant to any criminal statute or
to liability for payment of taxes pursuant to local, state or
federal law. If the Pennsylvania law is amended in the future
to authorize corporate action further limiting the personal
liability of directors, the liability of a director will be
limited to the fullest extent permitted by such amendment.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by
Mylan (File No. 1-9114) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement/Prospectus:
1. Mylan's Annual Report on Form 10-K for the
year ended March 31, 1995 ("Mylan's 10-K");
2. Mylan's Proxy Statement for the Annual
Meeting of Shareholders held on June 29, 1995 ("Mylan's Proxy");
3. Mylan's Quarterly Report on Form 10-Q for
the three months ended June 30, 1995 ("Mylan's First Quarter 10-Q");
4. Mylan's Quarterly Report on Form 10-Q for
the three months ended September 30, 1995 ("Mylan's Second
Quarter 10Q"); and
5. Mylan's Current Report on Form 8-K filed
with the Commission on September 22, 1995.
All documents and reports subsequently filed by Mylan
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of this Proxy Statement/Prospectus and prior
to the date of the Special Meeting shall be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and
to be part hereof from the date of filing of such documents or
reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained
herein or in any subsequently filed document which also is or is
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.
LEGAL MATTERS
The validity of the shares of Mylan Common Stock to be
issued in connection with the Merger and other legal matters in
connection with the Merger are being passed upon for Mylan by
Buchanan Ingersoll Professional Corporation, Pittsburgh,
Pennsylvania. Certain legal matters in connection with the
Merger are being passed upon for TC by Rivkin, Radler & Kremer,
Chicago, Illinois. See "Certain Related Transactions and
Relationships of TC and Mylan."
EXPERTS
The consolidated financial statements of Mylan
Laboratories Inc. and subsidiaries at March 31, 1995 and 1994
and for each of three years in the period ended March 31, 1995,
incorporated in this Proxy Statement/Prospectus by reference to
the Mylan 10-K have been audited by Deloitte & Touche, LLP,
independent auditors, as stated in their report which is
incorporated by referenced herein, and have been so included in
reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of TC
Manufacturing Co., Inc. and subsidiaries as of October 31, 1994
and 1993, and for each of the years in the three-year period
ended October 31, 1994, have been included herein and in the
registration statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts
in accounting and auditing.
BY ORDER OF THE BOARD OF
DIRECTORS OF TC MANUFACTURING
CO., INC.
/s/ Herbert L. Stern, Jr.
---------------------------------------
Herbert L. Stern, Jr., Secretary
INDEX TO FINANCIAL STATEMENTS
Page Pro Forma Financial Information F-2
TC Independent Auditors' Report F-12
TC Consolidated Balance Sheets at October 31, 1994 and October 31, 1995 F-13
TC Consolidated Statements of Operations for the Years Ended
October 31, 1994, 1993 and 1992 F-15
TC Consolidated Statements of Stockholders' Equity for the
Years Ended October 31, 1994, 1993 and 1992 F-16
TC Consolidated Statements of Cash Flows for the Years Ended
October 31, 1994, 1993 and 1992 F-18
TC Notes to Consolidated Financial Statements F-20
TC Condensed Consolidated Balance Sheets at October 31, 1994
and July 31, 1995 (unaudited) F-29
TC Condensed Consolidated Statements of Income for Three Months
Ended July 31, 1995 and 1994 and the Nine Months Ended
July 31, 1995 and 1994 (unaudited) F-30
TC Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended July 31, 1995 and 1994 (unaudited) F-31
TC Notes to Condensed Consolidated Financial Statements
(unaudited) F-32
PRO FORMA FINANCIAL INFORMATION
The following tables present the combination of Mylan
Laboratories Inc. and subsidiaries and TC Manufacturing Co.,
Inc. ("TC") and certain subsidiaries of TC. The combination
will be accounted for by Mylan under the purchase method of
accounting. The results of operations of TC have been converted
to a fiscal March 31 year-end and are unaudited.
The pro forma financial information included herein
gives effect to the Reorganization of TC, effective immediately
prior to the consummation of the Merger.
The pro forma financial information included herein
does not purport to represent what the consolidated financial
position or results of operations actually would have been if
the Reorganization of TC and the Merger in fact had occurred on
such dates or at the beginning of the period indicated or to
project the consolidated financial position or results of
operations as of any future date or any future period.
The pro forma financial information included
herein should be read in conjunction with the historical
consolidated financial statements of Mylan and TC, including
the notes thereto, and other financial information
incorporated by reference into this Proxy
Statement/Prospectus.
Mylan Laboratories Inc. and Subsidiaries
Pro Forma Condensed Income Statement
For the Six Months Ended September 30, 1995
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Pro Forma Pro Forma
Mylan TC Adjustments Combined
---------- ---------- ----------- -----------
Net Sales $206,907 $31,2884 $(2,668) ( $235,523)
Costs and expenses:
Cost of sales 95,487 22,277 178 (7) 116,067
(1,875) (5)
Research and development 17,612 597 18,209
Selling, general and
administrative 27,663 5,1 68 1,319 (7) 34,150
Interest 0 350 (350) (8) 0
Total Costs and Expenses 140,762 28,392 (728) 168,426
Income (Loss) from Operations 66,145 2,892 (1,940) 67,097
Equity in Earnings of
Somerset 11,709 0 11,709
Other Income (Expense) 8,723 192 (194) (8) 8,721
Earnings (Loss) Before 86,577 3,084 (2,134) 87,527
Income Taxes
Income Taxes 23,934 1,141 (244) (9) 24,831
Net Earnings (Loss) $ 62,643 $ 1,943 $(1,890) $ 62,696
====== ====== ====== ======
Earnings per Share $ .53 $.52
Weighted Average Common 119,294 2,388 121,682
Shares
See notes to pro forma condensed financial information
</TABLE>
Mylan Laboratories Inc. and Subsidiaries TC
Pro Forma Condensed Income Statement
For the Six Months Ended September 30, 1995
(Amounts in thousands)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Coating &
TC Packaging Pro Forma
Consolidated Groups Adjustmentments TC
---------------- ----------- ------------------- ------------
Net Sales $47,042 $15,758 $31,284
Costs and expenses:
Cost of sales 33,486 11,209 22,277
Research and development 673 76 597
Selling, general and
administrative 9,779 3,346 $(1,265) (11) 5,168
Interest 350 0 0 350
Total Costs and Expenses 44,288 14,631 (1,265) 28,392
Income from Operations 2,754 1,127 1,265 2,892
Other Income (Expense) (339) (531) 0 192
Earnings Before Income Taxes 2,415 596 1,265 3,084
Income Taxes 860 162 443(11) 1,141
Net Earnings $ 1,555 $ 434 $ 822 $ 1,943
</TABLE>
See notes to pro forma condensed financial information Mylan
Laboratories Inc. and Subsidiaries
Pro Forma Condensed Income Statement
For the Year Ended March 31, 1995
(Amounts in thousands, except per share data)
(Unaudited)
Pro Forma Pro Forma
Mylan TC Adjustments Combined
------- ------- ------------- -------------
Net Sales $396,120 $47,301 $(6,038) (5) $437,383
Costs and expenses:
Cost of sales 169,590 38,897 356 (7) 204,570
Research and development 30,533 1,030 31,563
Selling, general and
administrative 58,035 8,914 2,637 69,586
Total Costs and Expenses 258,158 49,619 (2,058) 305,719
Income (Loss) from
Operations 137,962 (2,318) (3,980) 131,664
Equity in Earnings of
Somerset 25,406 0 25,406
Other Income (Expense) 7,958 542 (388) (8 8,112
Earnings (Loss) Before
Income Taxes 171,326 (1,776) (4,368) 165,182
Income Taxes 50,457 (606) (354) (9) 49,497
Net Earnings (Loss) $120,869 $(1,170)$(4,014) $115,685
Earnings per Share $1.02 $0.95
Weighted Average Common
Shares 118,964 2,388 121,352
======= ====== =======
See notes to pro forma condensed financial information
Mylan Laboratories Inc. and Subsidiaries
TC Pro Forma Condensed Income Statement
For the Year Ended March 31, 1995
<TABLE>
<S> <C> <C> <C> <C>
(Amounts in thousands)
(Unaudited)
Coating &
TC Packaging Pro Forma
Consolidated Groups Adjustmentments TC
---------------- ----------- ------------------- ------------
Net Sales $75,235 $27,934 $47,301
Costs and expenses:
Cost of sales 57,443 18,546 38,897
Research and development 1,145 115 1,030
Selling, general and
administrative 15,912 5,948 $(1,050) (11) 8,914
Interest 1,089 311 0 778
Total Costs and Expenses 75,589 24,920 (1,050) 49,619
Income (Loss) from Operations (354) 3,014 1,050 (2,318)
Other Income (Expense) 167 (375) 0 542
Earnings (Loss)Before Income Taxes (187) 2,639 1,050 (1,776)
Income Taxes (36) 937 367(11) (606)
Net Earnings (Loss) $ (151) $ 1,702 $ 683 $ (1,170)
======= ====== ====== =======
</TABLE>
See notes to pro forma condensed financial information
Mylan Laboratories Inc. and Subsidiaries
Pro Forma Condensed Balance Sheet
September 30, 1995
(Amounts in thousands)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Pro Forma Pro Forma
Mylan TC Adjustments Combined
------------ ---------- --------------- -------------
Current Assets:
Cash and cash equivalents $151,823 $ 3,503 $ (2,850) (4) $144,656
(8,900) (3) 1,080 (1)
Marketable securities 28,263 0 28,263
Accounts receivable 69,064 6,104 75,168
Inventories 75,177 11,232 86,409
Deferred income tax benefit 7,733 0 7,733
Other current assets 6,376 1,180 7,556
------------ ------------ ------------- -------------
Total Current Assets 338,436 22,019 (10,670) 349,785
Property, Plant &
Equipment - net of
accumulated depreciation 105,913 7,554 3,200 (6) 116,667
Deferred Income Tax
Benefit, non-current 1,032 0 1,032
Marketable Securities,
non- current 22,253 0 22,253
Investment in and Advances
to Somerset 23,557 0 23,557
Intangible Assets - net
of accumulated amortization 26,238 2,391 40,895 (6) 69,524
Other Assets 68,988 319 69,307
----------- ------------ ------------ -----------
Total Assets $586,417 $32,283 $33,425 $652,125
Current Liabilities:
Trade accounts payable $11,093 $ 3,240 $ 14,333
Income taxes payable 6,315 511 6,826
Other current liabilities 17,498 6,610 24,108
Cash dividend payable 4,776 0 4,776
Notes payable 0 2,850 $(2,850) (4) 0
Current portion of
long-term obligations 0 1,400 (2400) (3) 0
Total Current Liabilities 39,682 14,611 (4,250) 50,043
Long-Term Obligations 8,581 6,500 (6,500) (3) 8,581
Deferred Income Taxes 0 547 7,300 (6) 7,847
Shareholders' Equity:
Preferred stock 0 424 (424) (1) 0
Common stock 60,027 5,405 (4,211) (1) 61,221
Additional paid-in capital 38,231 (24) 46,330 (1) 84,537
Retained earnings 440,105 5,700 (5,700) (1) 440,105
Unrealized gain on investment 2,145 0 2,145
Less - Treasury stock (2,354) (880) 880 (1) (2,354)
----------- ----------- ------------ -------------
Net Worth 538,154 10,625 36,875 585,654
Total Liabilities
and Shareholders' Equity $586,417 $32,283 $33,425 $652,125
======= ======= ====== =======
</TABLE>
See Notes to pro forma condensed financial information
Mylan Laboratories Inc. and Subsidiaries
TC Pro Forma Condensed Balance Sheet
September 30, 1995
(Amounts in thousands)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Coating &
TC Packaging Pro Forma
Consolidated Groups Adjustmentments TC
---------------- ----------- ---------------- ------------
Current Assets:
Cash and cash equivalents $ 6,266 $ 763 $(2,000) (10) $ 3,503
Accounts receivable 10,147 4,043 6,104
Inventories 15,293 4,061 11,232
Other current assets 1,414 234 1,180
---------- -------- ------------ ------------
Total Current Assets 33,120 9,101 (2,000) 22,019
Property, Plant & Equipment -
net of accumulated depreciation 16,013 8,459 7,554
Intangible Assets 2,391 (2) 2,391
Other Assets 932 613 319
----------- -------- ---------- ------------
Total Assets $50,065 $18,173 $ 391 $32,283
====== ======= ====== =======
Current Liabilities:
Trade accounts payable $ 4,158 $ 918 $ 3,240
Income taxes payable 613 102 511
Other current liabilities 7,768 1,158 6,610
Note payable $ 2,850 (2) 2,850
Current portion of
long-term obligations 1,400 0 0 1,400
---------- --------- --------- ----------
Total Current Liabilities 13,939 2,178 2,850 14,611
Long-Term Obligations 6,500 0 6,500
Deferred Income Taxes 1,648 1,101 547
Minority Interest 459 0 (459) (2) 0
Shareholders' Equity:
Preferred stock 424 0 424
Common stock 5,410 5 5,405
Additional paid-in capital (24) 0 (24)
Retained earnings 22,589 14,889 (2,000) (1) 5,700
Less - Treasury stock (880) 0 (880)
---------- ------- --------- ---------
Net Worth 27,519 14,894 (2,000) 10,625
---------- -------- ---------- ---------
Total Liabilities
and Shareholders' Equity $50,065 $18,173 $ 391 $32,283
====== ====== ======= ======
</TABLE>
See Notes to pro forma condensed financial information
Mylan Laboratories Inc. and Subsidiaries
Notes to Pro Forma Condensed Financial Statements
(Unaudited)
1. To reflect the issuance of 2,388,135 shares of Mylan common
stock, at an estimated price per common share of $19.89 (as
provided in the Merger Agreement) in satisfaction of the
$47.5 million purchase price, to reflect the exercise of
216,308 TC stock options and the conversion of TC preferred
stock into Mylan common stock. The total number of shares
issued may be adjusted as described in "The Merger
Agreement - Adjustment of Common Stock Exchange Ratio."
2. To record the acquisition of the 6% minority interest in TC
in exchange for a note payable.
3. Reflects the repayment of all outstanding debt obligations
of TC.
4. Reflects payment of the note payable to acquire the 6%
minority interest.
5. To eliminate intercompany sales of Mylan to TC and related
cost of sales.
6. Reflects the purchase accounting adjustments (pursuant to
APB No. 16) necessary to record Mylan's acquisition of TC's
net assets for $47.5 million. The allocation of the purchase
price is subject to change based on final valuation and
appraisals and was estimated as follows:
Pro forma net worth of $10,625
TC at 9-30-95
Cash received upon 1,080
exercise of TC
stock options
Fixed asset step-up 3,200
Intangible asset 15,100
recorded
Prepayment liability (1,000)
Deferred tax liability (7,300)
Goodwill 25,795
------------
Purchase price $47,500
=======
7. Reflects the estimated amortization of intangibles
(including goodwill) and the depreciation of property, plant
and equipment that are recorded pursuant to the purchase
method of accounting. Intangibles are amortized on a
straight line basis over a period of ten to twenty years. The
allocation of the purchase price is subject to change based
on final valuation and appraisals.
8. Reflects the reduction in interest income and interest
expense due to the repayment of all outstanding debt
obligations as discussed in notes 3 and 4.
9. Reflects income tax consequences of adjustments 5, 7 and 8.
10. To record the allocation of cash per the merger agreement.
11. To record the reduction for corporate charges unrelated to
the acquired company and the related tax impact.
TC MANUFACTURING CO., INC.
AND SUBSIDIARIES
Consolidated Financial Statements
October 31, 1994, 1993 and 1992
(With Independent Auditors' Report Thereon)
Entire document Changes Only
Pro Typed Typed/Oper Proofed Footed Ref'd Proofed Footed Ref'd
Forma changes
/ / / / / / / / / / / / / / / / / /
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Operator____________________________
Proofer_______________________________
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Manager's Signature: _________________________________
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page(s)
Independent Auditors' Report 1
Consolidated Balance Sheets 2-3
Consolidated Statements of Operations 4
Consolidated Statements of Stockholders' Equity 5-6
Consolidated Statements of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-17
Independent Auditors' Report
<TABLE>
<S> <C>
The Board of Directors
TC Manufacturing Co., Inc.:
We have audited the accompanying consolidated balance sheets of TC Manufacturing Co., Inc.
and subsidiaries as of October 31, 1994 and 1993, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the three-year period
ended October 31, 1994. These consolidated financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those
standards 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. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of TC Manufacturing Co., Inc. and subsidiaries as of
October 31, 1994 and 1993, and the results of their operations and their cash flows for each of
the years in the three-year period ended October 31, 1994 in conformity with generally accepted
accounting principles.
</TABLE>
December 9, 1994
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 1994, and 1993"
(Amounts in thousands)
Assets 1994 1993
- -----------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 5,674 3,327
Accounts receivable:
Trade, net of allowances of $5,560 in 1994 and
$5,690 in 1993 7,180 18,157
Other 694 275
Inventories 16,342 13,822
Prepaid expenses 632 423
Refundable income taxes 1,114 -
Deferred income taxes 936 -
---------- ---------
Total current assets 32,572 36,004
---------- ---------
Property, plant, and equipment 29,475 26,680
Less accumulated depreciation and amortization 14,044 12,406
---------- --------
15,431 14,274
Intangibles and other assets:
Goodwill (pre-1970) 539 539
Trademarks and patent, net of amortization of $25 in
1994 and $20 in 1993 25 30
Excess of cost over net assets of businesses acquired,
less accumulated amortization of $189 in 1994 and
$167 in 1993 13 35
Cash value of officers' life insurance, net of loans of
$-0- in 1994 and $291 in 1993 385 76
Other assets 144 84
1,106 764
---------- ---------
$ 49,109 51,042
------------ ---------
See accompanying notes to consolidated financial statements.
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 1994, and 1993
(Amounts in thousands, except share data)
Liabilities and Stockholders' Equity 1994 1993
Current liabilities:
Current maturities of long-term debt $ 1,600 508
Accounts payable 6,646 5,678
Accrued liabilities:
Product returns 2,038 1,640
Salaries, wages, and bonuses 1,083 1,648
Profit sharing contribution 372 888
Property taxes 306 238
Interest 258 295
Income taxes - 1,107
Medicaid rebates 435 364
Other 1,049 1,253
---------- ---------
Total current liabilities 13,787 13,619
Long-term debt 7,900 10,550
Deferred income taxes 1,649 851
-------- --------
Minority interest in subsidiary 339 435
--------- ----------
Stockholders' equity:
8% cumulative preferred stock, par value $100 per share.
Authorized 14,000 shares; issued and outstanding
4,243 shares in 1994 and 1993 424 424
Special preferred stock, without par value.
Authorized 10,000
shares of which none have been issued - -
Common stock, par value $1 per share.
Authorized 7,000,000 shares;
issued 5,410,444 in 1994 and
2,753,570 shares in 1993 5,410 2,754
Additional paid-in capital - -
Equity adjustment from foreign
currency translation (29) (17)
Retained earnings 20,661 23,697
------------------------------------------------------------------------
26,466 26,858
Treasury stock, at cost (96,696 shares in 1994
and 119,076 in 1993) (1,032) (1,271)
---------------------------------------------------------------------------
25,434 25,587
--------- ----------
$ 49,109 51,042
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended October 31, 1994, 1993, and 1992
(Amounts in thousands, except per share data)
1994 1993 1992
Net sales $ 78,780 79,617 69,920
Cost of sales 60,520 55,789 48,400
Gross profit 18,260 23,828 21,520
Operating expenses:
Payroll and related expenses 6,568 7,331 6,867
Selling expense 3,715 2,960 2,524
General and administrative expense 3,152 2,693 2,297
Freight expense 2,102 1,964 1,876
Provision for doubtful accounts 1,530 51 157
Research and development expense 369 322 156
Quality control 190 77 111
---------- ------- ----------
Total operating expenses 17,626 15,398 13,988
Operating income 634 8,430 7,532
Other income (expense):
Interest income 2 96 221
Interest expense (1,002) (1,228) (1,322)
Miscellaneous - net 71 (78) 36
---------- ------- --------
Income (loss) before income taxes and
minority interest (295) 7,220 6,467
Income tax benefit (expense) 79 (2,664) (2,367)
Income (loss) before minority interest (216) 4,556 4,100
Minority interest 96 (198) (154)
Net income (loss) $ (120) 4,358 3,946
--------- ------ ----------
Earnings (loss) per common share $ (.03) .82 .75
See accompanying notes to consolidated financial statements.
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended October 31, 1994, 1993, and 1992
(Amounts in thousands, except share data)
Preferred Stock Common Stock
Number Number
of of
shares Amount shares Amount
- -------------------------------------------------------------------------------
Balance at October 31, 1991 4,815 $ 481 2,753,565 $2,754
Net income - - - -
Purchase of treasury stock - - - -
Exercise of stock options and
common stock adjustment - - 5 -
Purchase and retirement of preferredstock (572) (57) - -
Cash dividends
Preferred ($8.00 per share) - - - -
Common ($.06)per share) - - - -
Current year foreign currency translation
adjustment - - - -
- --------------------------------------------------------------------------------
Balance at October 31, 1992 4,243 424 2,753,570 2,754
Net income - - - -
Exercise of stock options - - - -
Cash dividends:
Preferred ($8.00 per share) - - - -
Common ($.115 per share) - - - -
Current year foreign currency translation
adjustment - - - -
- -------------------------------------------------------------------------------
Balance at October 31, 1993 4,243 424 2,753,570 2,754
Net loss - - - -
Purchase of treasury stock - - - -
Exercise of stock options - - - -
Cash dividends:
Preferred ($8.00 per share) - - - -
Common ($.045 per share) - - - -
Stock dividend - - 2,656,874 2,656
Current year foreign currency
translation adjustment - - - -
- -------------------------------------------------------------------------------
Balance at October 31, 1994 4,243 424 5,410,444 5,410
Consolidated Statements of Stockholders' Equity
Years ended October 31, 1994,1993, and 1992
(Amounts in thousands, except share data)
Foreign Treasury Stock
Additional currency Number
paid-in translation Retained of
capital adjustment earnings shares Amount Total
- --------------------------------------------------------------------------------
125 84 16,168 166,735 $ (1,791) 17,821
- - 3,946 - - 3,946
- - - 5,800 (53) (53)
(125) - (92) (29,760) 319 102
- - - - - (57)
- - (38) - - (38)
- - (157) - - (157)
- (64) - - - (64)
- -----------------------------------------------------------------------------
- 20 19,827 142,775 (1,525) 21,500
- - 4,358 - - 4,358
- - (152) (23,699) 254 102
- - (34) - - (34)
- - (302) - - (302)
- (37) - - - (37)
- -------------------------------------------------------------------------------
- (17) 23,697 119,076 (1,271 25,587
- - (120) - - (120)
- - - 2,220 (25 (25)
- - (106) (24,600) 264 158
- - (34) - - (34)
- - (120) - - (120)
- - (2,656) - - -
- (12) - - - (12)
- -------------------------------------------------------------------------------
- (29) 20,661 96,696 (1,032) 25,434
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended October 31, 1994, 1993, and 1992
(Amounts in thousands)
<TABLE>
<S> <C> <C> <C>
1994 1993 1992
Cash flows from operating activities:
Net income (loss) $ (120) 4,358 3,946
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,638 1,449 1,329
Deferred income taxes (138) (324) (24)
Increase (decrease) in accounts receivable allowances
(130) 1,768 2,231
Amortization of excess of cost over assets of businesses
acquired, trademarks, and patent 27 23 26
Minority interest in subsidiary (96) 199 154
Loss (gain) on disposition of equipment (10) 57 6
Change in assets and liabilities:
Marketable securities - 2,143 (715)
Accounts receivable 10,688 (4,465) (6,008)
Inventories (2,520) (2,722) (2,091)
Prepaid expenses (209) (89) 313
Refundable income taxes (1,114) 74 (20)
Other assets and cash value of life insurance (369) (32) (27)
Accounts payable 968 681 577
Accrued liabilities (1,892) 1,503 1,190
Net cash provided by operating activities 6,723 4,623 887
Cash flows from investing activities:
"Additions to property, plant, and equipment" (2,801) (3,545) (2,108)
Proceeds from sale of equipment 16 21 11
Net cash used in investing activities $ (2,785) (3,524) (2,097)
</TABLE>
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(Amounts in thousands)
1994 1993 1992
Cash flows from financing activities:
Repayment of long-term debt $ (1,558) (707) (846)
Proceeds from exercise of stock options 158 102 102
Dividends paid and payable (154) (336) (195)
Purchase of treasury stock (25) - (53)
Purchase and retirement of preferred stock - - (57)
Net cash used in financing activities (1,579) (941) (1,049)
Effect of exchange rate changes on cash
and cash equivalents (12) (37) (64)
Net increase (decrease) in cash
and cash equivalents 2,347 121 (2,323)
Cash and cash equivalents at beginning of year 3,327 3,206 5,529
Cash and cash equivalents at end of year $5,674 3,327 3,206
Supplemental disclosures of cash flow information - cash paid
during the year for:
Interest $ 1,095 1,278 1,319
Income taxes, net of refunds 2,256 2,616 1,857
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statemants
October 31,1994,1993, and 1992
(1) Summary of Significant Accounting Policies
Principles of Consolidation
<TABLE>
<S> <C>
The accompanying consolidated financial statements include the accounts of TC
Manufacturing Co., Inc. and subsidiaries (the Company), including UDL Laboratories, Inc., a
94% owned subsidiary, Pak-Sher Company, Tapecoat Company, and Tapecoat Canada Ltd. All
intercompany balances and transactions have been eliminated in consolidation. UDL
Laboratories manufactures, packages, and markets generic pharmaceuticals in unit dose
configuration. Pak-Sher manufactures and markets specialized packaging to the food industry,
primarily supermarkets and chain restaurants. Tapecoat manufactures protective coating, to
provide corrosion protection primarily for underground metal pipes.
Allowances for Chargebacks, Cash Discounts,
and Doubtful Accounts
One of the Company's subsidiaries markets a portion of its product at negotiated or
competitively bid contract prices. It is the policy of this subsidiary to sell its product to
distributors at the wholesale price. If the product is subsequently resold at the lower contract
price, a "chargeback" for the difference between wholesale and contract price is credited to the
distributor.
Allowances for chargebacks, cash discounts, and doubtful accounts at October 31, 1994
and 1993 consisted of the following approximate amounts (in thousands):
1994 1993
Chargebacks $ 4,000 4,940
Cash discounts 239 500
Doubtful accounts 1,321 250
$ 5,560 5,690
Product Returns
Management has estimated product returns based upon available information and sales
have been reduced to reflect such estimates.
Inventories
Inventories are principally valued at the lower of cost or market, determined by the
last-in, first-out method (LIFO). At October 31, 1994 and 1993, inventories approximating
$1,757,000 and $1,861,000, respectively, were valued using the first-in, first-out method (FIFO).
Property, Plant, and Equipment
Property, plant, and equipment are carried at cost. Major additions and improvements are
added to the property, plant, and equipment accounts, while replacement, maintenance, and
repairs which do not improve or extend the life of the respective assets are charged to income as
incurred. When assets are retired or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is reflected in income
for the period.
Intangible Assets
Goodwill (pre-1970) is stated at cost and is not amortized because in the opinion of
management there has been no diminution in value.
Trademarks and patent are stated at cost and are amortized straight-line over a ten-year
period.
The excess of cost over net assets of businesses acquired is amortized over 10- to 20-year
periods using the straight-line method.
Accrued Medicaid Rebates
Medicaid rebates represent payments mandated under law to be made by one of the
Company's subsidiaries. The law requires rebates to be paid to individual states with respect to
all pharmaceutical sales, other than through hospitals, where the ultimate cost of the product is
reimbursable by Medicaid.
Income Taxes
The Company files consolidated income tax returns with its domestic subsidiaries.
Effective November 1, 1993, the Company adopted FASB Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (Statement 109). As permitted by Statement
109, the Company elected not to restate the financial statements of any prior years. Under
Statement 109, deferred income taxes are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which temporary differences are
estimated to be recovered or settled. The cumulative effect of the change in method of
accounting for income taxes as of November 1, 1993 is not material.
Tax credits are treated as a reduction of income tax expense in the year in which they are
utilized.
Prior to fiscal 1994, income taxes were accounted for under the deferred method, in
accordance with APB Opinion No. 11. Under the deferred method, provisions were made for
deferred income taxes resulting from timing differences in the recognition of revenue and
expense for tax and financial statement purposes.
Profit Sharing Plan
Profit sharing contributions are authorized annually by the Board of Directors in amounts
determined at its discretion.
Treasury Stock
Purchases of treasury stock are recorded at cost. Upon the sale of treasury stock, the
difference between the cost and selling price of such stock is either credited to additional paid-in
capital or charged against additional paid-in capital or retained earnings if additional paid-in
capital has been depleted.
Foreign Currency Translation
The accounts of the Canadian subsidiary have been translated from their functional
currency to the U.S. dollar. Such translation adjustments are not included in income, but are
accumulated directly in a separate component of stockholders' equity.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash on hand and
funds held in money market accounts or invested in highly liquid debt instruments generally with
maturities of three months or less.
Earnings per Common Share
Earnings per common share have been computed by dividing net income after preferred
stock dividends by the weighted average number of common shares and common equivalent
shares outstanding during the year. Stock options are considered common stock equivalents.
Shares assumed to be purchased at the average formula price (as defined) during the year with
the proceeds from the exercise of such options have been subtracted from the average shares
outstanding.
Reclassifications
Certain items relating to prior years have been reclassified to conform to the presentation
in the current year.
(2) Related-party Transactions
The Chairman of the Executive Committee, who owns approximately 48% of the
outstanding common stock of the Company, was also affiliated with two law firms which served
as legal counsel for the Company. These law firms charged the Company legal fees, including
consulting fees for the services of the Chairman of the Executive Committee, of approximately
$515,000, $444,000, and $249,000 in 1994, 1993, and 1992, respectively. As of October 31,
1994 and 1993, $62,112 and $89,595 of these fees remain outstanding as current liabilities,
respectively.
(3) Inventories
Inventories at October 31, 1994 and 1993 consisted of the following (in thousands):
1994 1993
Raw materials $ 5,604 5,602
Work in process 1,689 1,427
Finished goods 8,972 6,330
Total at FIFO value 16,265 13,359
LIFO adjustment 77 463
$ 16,342 13,822
(4) Property, Plant, and Equipment
Property, plant, and equipment at October 31, 1994 and 1993 consisted of the following
(in thousands):
Depreciation/
amortization -
1994 1993 annual rates
Land $ 432 432
Buildings 6,334 5,371 3%
Machinery and equipment 20,766 17,171 10 to 33
Leasehold improvements 227 1,504 Life of lease
Construction in progress 1,716 2,202
$ 29,475 26,680
Depreciation and amortization expense charged to income was $1,638,000 in 1994,
$1,449,000 in 1993, and $1,329,000 in 1992.
(5) Debt
Long-term debt at October 31, 1994 and 1993 consisted of the following (in thousands):
1994 1993
Noninterest-bearing note payable to former stockholder
of UDL Laboratories $ - 8
12% senior promissory notes - 1,550
10.5% senior promissory notes 9,500 9,500
9,500 11,058
Less current maturities of:
Note payable to former stockholder - 8
12% senior promissory notes - 500
10.5% senior promissory notes 1,600 -
1,600 508
Long-term debt $ 7,900 10,550
The noninterest-bearing note payable to the former stockholder of UDL Laboratories, Inc.
was payable in annual installments of $7,600 commencing July 1, 1988 and continuing through
July 1, 1994.
The remaining unpaid balance of $1,550,000 at October 31, 1993 for the 12% senior
promissory notes was paid in fiscal 1994.
The 10.5% senior promissory notes require payments ranging from $1,000,000 to
$1,600,000 beginning July 31, 1995 and continuing through July 31, 2000 inclusive. The
remaining unpaid principal balance is due July 31, 2001.
The 10.5% senior promissory note was issued pursuant to a loan agreement which
requires, among other things, that the Company maintain a certain amount of consolidated
working capital, not incur senior funded indebtedness and current indebtedness in excess of
certain limits, and not declare or pay cash dividends in excess of 50% of net income subsequent
to October 31, 1989. At October 31, 1994, the Company was in compliance with the loan
agreement covenants, retained earnings of approximately $4,173,000 was unrestricted for cash
dividends or the repurchase of common stock by the Company, and the Company's borrowing
limit as set forth in the loan agreement is approximately $14,244,000.
The Company has two unsecured lines of credit totaling $13,000,000, of which
$12,401,217 is available as of October 31, 1994. Maximum borrowings are reduced by a letter
of credit in the amount of $598,783 outstanding at October 31, 1994. Borrowings under both
lines of credit bear interest at either the banks' prime lending rates or, at the Company's option,
LIBOR plus 1%. The Company is required to pay a 1/8% commitment fee on the unused credit
lines at each bank. There were no borrowings outstanding under the lines of credit at October 31,
1994 and 1993.
Maturities of long-term debt are as follows (in thousands):
Fiscal year Amount
1995 $ 1,600
1996 1,400
1997 1,400
1998 1,100
1999 1,000
Thereafter 3,000
$ 9,500
(6) Stock Options
Under the qualified stock option plan, shares of common stock are reserved for issuance
upon exercise of options granted or available for future grants to officers and key employees.
Under the plan, options may be granted at prices not less than fair market value at date of grant
as determined by a defined formula price and as set forth in the plans and stockholders'
agreements. Such options are exercisable for a five-year period. At October 31, 1994, 1993, and
1992, exercisable options amounted to 96,123, 126,419, and 155,898, respectively. The number
of shares available for future grants under the stock option plan was 319,700 at October 31,
1994. Transactions and other information relating to the plan for the three-year period ended
October 31, 1994, adjusted to reflect the stock dividend discussed in note 10, are summarized as
follows:
Number
of shares Option price
Options outstanding as of October 31, 1991 259,096 $1.72 to $5.38
Exercised during 1992 (59,520) $1.72 to $5.38
Issued during 1992 62,400 $4.60
Canceled during 1992 (1,600) $1.72
Options outstanding as of October 31, 1992 260,376 $2.17 to 5.38
Exercised during 1993 (47,398) $2.17
Issued during 1993 - -
Canceled during 1993 (8,400) $2.17 to 5.38
Options outstanding as of October 31, 1993 204,578 $2.99 to 5.38
Exercised during 1994 (49,200) $2.99 to 5.38
Expired during 1994 (8,020) $2.99 to 5.38
Issued during 1994 80,300 $5.02
Options outstanding as of October 31, 1994 227,658 $4.60 to 5.38
(7) Income Taxes
Effective November 1, 1993, the Company adopted Statement 109, which changed the
Company's method of accounting for income taxes from the deferred method to an asset and
liability approach. The Company has elected not to restate the financial statements of prior years
for this change in accounting. The cumulative effect of the change on net income was not
material.
Federal income tax expense (benefit) for the years ended October 31, 1994, 1993, and 1992
included (in thousands):
1994 1993 1992
Current
Federal $ 8 2,637 2,113
State 2 350 283
Foreign 28 1 (5)
Deferred (117) (324) (24)
$ (79) 2,664 2,367
The deferred tax provisions for 1994, 1993, and 1992 result primarily from temporary differences
between financial statement and tax income arising from different accounting for receivable
allowances, inventory, and depreciation.
The tax effects of temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities as of October 31, 1994 are presented below (in thousands):
Allowance for doubtful accounts $ 450
Inventory reserves 440
Other 46
Total current deferred tax assets $ 936
Foreign tax credit carryforwards 351
State tax loss carryforwards 273
Valuation allowance (624)
Non-current deferred tax assets, net $ -
Property, plant, and equipment 1,649
Non-current deferred tax liabilities $ 1,649
The valuation allowance for deferred tax assets at October 31, 1994 was approximately
$624,000, the same amount as of November 1, 1993, the effective date of Statement 109
adoption.
The provision (benefit) for income taxes differed from the amount obtained by applying the
federal statutory income tax rate to income (loss) before income taxes, as follows (in thousands):
1994 1993 1992
Expected federal statutory tax (benefit) $ (100) 2,455 2,199
Differences resulting from:
Goodwill amortization 8 5 5
Officers life insurance 9 6 14
Meals and entertainment 17 14 17
State income tax, net of federal benefit (8) 138 124
Other (5) 46 8
Effective income tax (benefit) $ (79) 2,664 2,367
(8) Profit Sharing Plan
The Company has a qualified profit sharing plan covering all eligible employees. Profit
sharing expense was approximately $312,000, $956,000, and $480,000 in 1994, 1993, and 1992,
respectively.
(9) Leases
The aggregate rental obligations of the Company under noncancelable operating leases in
effect at October 31, 1994 are as follows (in thousands):
Machinery
Fiscal Real and
year estate equipment
1995 $ 224 72
1996 76 50
1997 - 41
1998 - 28
1999 - 11
Rental expense for all leases for the years ended October 31, 1994, 1993, and 1992 was as
follows (in thousands):
1994 1993 1992
Under cancelable leases $ 95 136 154
Under noncancelable leases 367 453 547
$ 462 589 701
(10) Stock Dividend
On October 25, 1994, the Board of Directors declared a stock split effected in the form of
a stock dividend of one share for each of the Company's outstanding shares of common stock,
payable October 28, 1994 to stockholders of record on October 28, 1994. Earnings per share
have been adjusted for this stock dividend retroactive to October 31, 1992 in the accompanying
consolidated financial statements and notes.
</TABLE>
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
July 31 October 31,
1995 1994
(unaudited)
------------- -------------
Assets
Current Assets:
Cash $3,249 $5,674
Accounts Receivable 8,927 7,874
Inventories 16,278 16,342
Prepaid Expenses 541 632
Refundable Income Taxes 333 1,114
Other Current Assets 532 936
--------- -------
Total Current Assets 29,860 32,572
Property, Plant & Equipment, at cost 31,543 29,475
less accumulated depreciation 15,464 14,044
Intangibles and Other Assets 1,133 1,106
Total Assets $47,072 $49,109
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term $1,400 $1,600
Accounts payable 3,324 6,646
Other current liabilities 6,426 5,541
Total Current Liabilities 11,150 13,787
Long-term debt 6,500 7,900
Deferred income taxes 1,649 1,649
Minority interest in subsidiary 422 339
Stockholders' equity:
8% cumulative preferred stock, par value $100 per
share. Authorized 14,000 shares; issued and
outstanding 4,243 shares in 1995and 1994 424 424
Common stock, par value $1 per share. Authorized
7,000,000 shares; issued 5,410,444 in 1995 and
1994 5,410 5,410
Additional paid-in capital - -
Equity adjustment from foreign (34) (29)
Retained earnings 22,311 20,661
Treasury stock, at cost (57,552 shares in 1995 and
96,696 in 1994) (820) (1,032)
Net Worth 27,291 25,434
Total Liabilities and Shareholders'
Equity $47,072 $49,109
See accompanying notes to condensed consolidated financial statements.
Page I
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
Three Months Nine Months
Ended July 31, Ended July 31,
--------------------- -------------------
1995 1994 1995 1994
------ ------- ------- ------
Net Sales $23,119 $22,973 $65,370 $61,837
Cost of Sales 16,976 17,129 48,361 46,560
-------- ------- --------- ----------
Gross Profit 6,143 5,844 17,009 15,277
Selling 2,442 2,840 7,501 7,605
General and Administrative 1,718 1,811 4,997 4,981
Research and Development 339 362 1,009 968
--------- --------- --------- ---------
Operating Income 1,644 831 3,502 1,723
Interest Expense, net (188) (239) (615) (770)
Other Income (Net) 11 10 45 65
------- -------- ------ -------
Income before Income taxes and
minority Interest 1,467 602 2,932 1,018
Income tax expense 506 205 976 375
-------- --------- --------- --------
Income before minority Interst 961 397 1,956 643
Minority Interest (36) (25) (84) (12)
----------- ---------- ---------- ---------
Net Income $925 $372 $1,872 $631
Earnings per share $0.1728 $0.0700 $0.3507 $0.1190
---------- ---------- --------- ----------
Weighted ave. common share 5,353 5,312 5,338 5,304
---------- ---------- --------- ----------
See accompanying notes to condensed consolidated financial statements.
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months
Ended July 31,
1995 1994
------- -------
Cash flows from operating activities:
Net income $1,872 $631
Adjustments to reconcile net income to net
Cash provided by (used in) operating activities:
Depreciation and amortization 1,420 1,260
Deferred income taxes 60 100
Amortization of excess of cost over assets of businesses
aquired, trademarks ans patent costs (27) (329)
Minority interest in subsidiary 83 12
Loss (gain) on disposition of assets 0 (12)
Foreign currency translation adjustment (5) (26)
Increase (decrease) in cash flows resulting
from the change in assets and liabilities:
Accounts receivable (1,053) 1,805
Inventories 64 386
Prepaid expenses 91 (177)
Other assets and cash value of life insurance 1,185 (101)
Accounts payable (3,322) (824)
Accrued liabilities 885 (2,490)
Net cash provided by operating activities 1,253 235
Cash flows used in investing activities -
Additions to property, plant and equipment (2,068) (1,992)
Proceeds from sale of equipment 0 16
Net cash used in investing activities (2,068) (1,976)
Cash flows from financing activities:
Net increase (decrease) in debt (1,600) (1,558)
Dividends paid and payable (194) (113)
Proceeds from exercise of stock options 197 138
Purchase of treasury stock (13) (22)
Net cash used in financing activities (1,610) (1,555)
Net increase (decrease) in cash and cash equivalents (2,425) (3,296)
Cash and cash equivalents at beginning of period 5,674 3,327
Cash and cash equivalents at end of period $3,249 $31
Supplemental disclosure of cash flow information - cash paid
during the 9 months ended:
Interest $998 $596
Income taxes $475 $2,256
See accompanying notes to condensed consolidated financial statements.
TC MANUFACTURING CO., INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements (Unaudited)
July 31, 1995 and 1994
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<S> <C>
Note A - Basis of Presentation
The condensed financial statements reflect, in the opinion of management, all normal recurring
adjustments necessary to present fairly the Company's financial position at July 31, 1995 and
1994, and the results of operations and cash flows for the nine months ended July 31, 1995 and
1994.
Note B - Accounting Standard To Be Adopted
Statemant of Financial Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment
of Long - Lived Assets and for Long - Lived Assets to Be Disposed of" will be adopted by the
company effective October 31,1996. SFAS No. 121 established criteria for recognizing,
measuring and disclosing impairments of Long - Lived Assets. The company does not expect the
adoption of SFAS No. 121 to have a material impact on its consolidated financial position or
results of operations.
Note C - Merger
In October 1995, TC Manufacturing Co., Inc. (TC) entered into a merger agreement with Mylan
Laboratories Inc. (Mylan), subject to approval by the shareholders of both companies and by
certain governmental agencies. As a result of the merger, TC will become a wholly-owned
subsidiary of Mylan, and each outstanding share of TC Common Stock will be converted into
.42589 of a share of Mylan Common Stock, subject to adjustment and each outstanding share of
TC 8% Cumulative Preferred Stock will be converted into 5.02765 shares of Mylan Common
Stock.
As a precondition to the merger TC must first divest itself of its non-pharmaceutical operations.
These non-pharmaceutical operations will be split-off into a new corporation as part of a plan of
reorganization. Additionally, in anticipation of the split-off and merger, TC will: (a) accelerate
the vesting period for, and permit the immediate exercise of, all outstanding options to purchase
shares of TC common stock; and (b) acquire the outstanding 6% minority interest in UDL
Laboratories (Illinois) from Michael K. Reicher, President of UDL at a purchase price of
$2,850,000.
Both the split-off and merger are intended to qualify as tax-free reorganizations. The merger is
expected to be completed by February 28, 1996.
</TABLE>
ANNEX A
Section 262 of the DGCL
262 APPRAISAL RIGHTS. - (a) Any
stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection
(d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of
this section and who has neither voted in favor of the merger or
consolidation nor consented thereto in writing pursuant to 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.
(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 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 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; 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 surviving corporation as provided in subsection (f) of 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 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;
b. Shares of stock of any other corporation 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 more
than 2,000;
c. Cash in lieu of fractional shares described in the foregoing
subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, and cash in lieu of
fractional shares 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 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 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 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) and (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
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
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 this 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 attorneys' 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. (Last amended by Ch. 262, L. '94, eff.
7-1-94)
Annex B
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TC MANUFACTURING CO., INC.
AND
MLI ACQUISITION CORP.
AND
MYLAN LABORATORIES INC.
October 10, 1995
<PAGE>
1. NAME OF SURVIVING CORPORATION, CERTIFICATE OF INCORPORATION,
BYLAWS. . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.1 Name of Surviving Corporation. . . . . . . . . . . . .4
1.2 Certificate of Incorporation . . . . . . . . . . . . .4
1.3 Bylaws; Directors and Officers . . . . . . . . . . . .4
1.4 The Company's Stockholder Meetings . . . . . . . . . .5
1.5 Filing of Certificate of Merger; Effective Date;
Effective Time 5
1.6 Certain Effects of Merger. . . . . . . . . . . . . . .6
2. STATUS AND CONVERSION OF SECURITIES . . . . . . . . . . . .7
2.1 Company Capital Stock. . . . . . . . . . . . . . . . .7
2.2 The Subsidiary Common Stock. . . . . . . . . . . . . 22
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. . . . . . . . 23
3.1 Representations, Warranties and Agreements
of the Company 23
3.2 Representations, Warranties and Agreements
of the Parent 43
3.3 Representations and Warranties as to Subsidiary . . 50
4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 53
4.1 Covenants of the Company . . . . . . . . . . . . . . 53
4.2 Covenants of the Parent. . . . . . . . . . . . . . . 64
4.3 Covenants of the Subsidiary. . . . . . . . . . . . . 68
4.4 Covenants of the Company and the Parent. . . . . . . 69
5. CONDITIONS TO CLOSING; ABANDONMENT AND TERMINATION. . . . 71
5.1 Conditions to the Company's Closing and
Its Right to Abandon 71
5.2 Conditions to the Parent's and the Subsidiary's
Closing and Right of
the Parent and the Subsidiary to Abandon. . . . . 74
6. ADDITIONAL TERMS OF ABANDONMENT . . . . . . . . . . . . . 80
6.1 Terms of Abandonment . . . . . . . . . . . . . . . . 80
6.2 Termination of Agreement . . . . . . . . . . . . . . 81
6.3 Effect of Abandonment or Termination . . . . . . . . 81
7. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . 82
7.1 Costs and Expenses . . . . . . . . . . . . . . . . . 82
7.2 Termination Pursuant to Section 5.2 Generally. . . . 82
7.3 Termination Pursuant to Section 5.1 Generally. . . . 83
8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 83
8.1 Certification of the Company's
Stockholder Votes, etc. 83
8.2 Certification of the Parent's
Stockholder Votes, etc. 84
8.3 Termination of Covenants, Representations
and Warranties 84
8.5 Execution in Counterparts. . . . . . . . . . . . . . 87
8.6 Waivers and Amendments . . . . . . . . . . . . . . . 87
8.7 Confidentiality. . . . . . . . . . . . . . . . . . . 87
8.8 Schedules. . . . . . . . . . . . . . . . . . . . . . 87
8.9 Payments to Dissenting Stockholders. . . . . . . . . 87
8.10 Indemnification by the Company . . . . . . . . . . . 88
8.11 Indemnification by the Parent. . . . . . . . . . . . 89
8.13 Notices. . . . . . . . . . . . . . . . . . . . . . . 92
8.14 Entire Agreement; No Third-Party Beneficiaries;
Rights of Ownership 93
8.15 Governing Law. . . . . . . . . . . . . . . . . . . . 93
8.16 No Remedy in Certain Circumstances . . . . . . . . . 93
8.17 Closing. . . . . . . . . . . . . . . . . . . . . . . 93
APPENDIX A GLOSSARY OF DEFINED TERMS/SECTION REFERENCES
LIST OF EXHIBITS
EXHIBIT DESCRIPTION SECTION REFERENCE
EXHIBIT A AGREEMENT FOR BUSINESS COMBINATION WITH EXHIBITS RECITAL 1
Exhibit Description Exhibit Number
Form of Plan of Reorganization 1
Form of Reicher Stock Purchase Agreement 2
Form of Agreement and Plan of Merger 3
Pro-forma Effective Date Balance Sheet for Phico on
a Stand-alone Basis 4(d)
Form of Indemnification Agreement 5
Form of Phico Stockholder Indemnification and
Contribution Agreement 6
Form of Rule 145 Affiliate Agreement 7.1
Letter Concerning Continuity of Stockholder Interest 7.2
Form of Announcement 9
Form of Stockholder Power of Attorney 10(a)
Table of Contents
EXHIBIT DESCRIPTION SECTION REFERENCE
EXHIBIT B PLAN OF REORGANIZATION WITH EXHIBITS RECITAL 2
Exhibit Description Section Reference
A Calculation of Yield
Maintenance Penalty Imposed
by Senior Notes Preamble C(ii)
1.1-A Common Article 1
Stockholders/Number of
Shares Held
1.1-B Option Holders - Grant Date, Article 1
Expiration Date, Exercise Price
and Number of Shares
2.1 Directors and Officers of the Article II, Section 2.1
Corporation
2.2-A Articles of Incorporation of Article II, Section 2.2
Newco
2.2-B Bylaws of Newco Article II, Section 2.2
2.2-C Directors and Officers of Article II, Section 2.2
Newco
3.1 Form of Plan of Complete Article III, Section 3.1
Liquidation of HSW
Investment Co.
3.2 Form of Distribution Article III, Section 3.2
Agreement between the
Corporation and Newco
3.4-A Pro Forma Consolidating Article III, Section 3.4
Balance Sheet for the
Corporation
3.4-A Pro Forma Consolidating ArticleVI, Section 3.4
Balance Sheet for Newco
5.1-A Shareholder/Option Holder - ArticleV, Section 5.1(b)
Pharmaceutical Business
Employee List
5.1-B Pro Forma Demonstration Article V, Section 5.1 (b)
Application of Distribution
Formula
TABLE OF CONTENTS
Page
EXHIBIT C FORM OF AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF RODERICK CORPORATION 1.2
EXHIBIT D FORM OF CERTIFICATE OF MERGER 1.5
EXHIBIT E FORM OF LETTER OF TRANSMITTAL 2.1(e)(i)
EXHIBIT F FORM OF RULE 145 AFFILIATE AGREEMENT 2.1(e)(iv)
EXHIBIT G FORM OF OPINION OF BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION 5.1(d)
EXHIBIT H FORM OF OPINION OF RIVKIN, RADLER & KREMER 5.2(d)
<TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated October 10, 1995 by and among TC
MANUFACTURING CO., INC., a Delaware corporation (hereinafter called the "Company"),
and MLI ACQUISITION CORP., a Delaware corporation (hereinafter called the "Subsidiary")
(the Company and the Subsidiary being hereinafter sometimes called the "Constituent
Corporations"), and MYLAN LABORATORIES INC., a Pennsylvania corporation (hereinafter
called the "Parent"), which is joining as a third party and is not a Constituent Corporation.
RECITALS:
1. Concurrently with the execution of this Agreement, the Company and the Parent
have entered into an Agreement for Business Combination dated the date hereof and attached
hereto as Exhibit A (the "Agreement for Business Combination") pursuant to which the parties
have agreed to participate in a series of transactions which will culminate with the transactions
described in this Agreement;
2. Prior to the execution of this Agreement and as a condition to the willingness of the
Parent and the Subsidiary to enter into this Agreement, the Board of Directors of the Company
has adopted the Plan of Reorganization attached hereto as Exhibit B (the "Plan of
Reorganization") pursuant to which the Company intends to take the following actions as part of
a reorganization of its corporate structure:
(a) the Company will accelerate the vesting and time of exercise of all of the
outstanding options to acquire shares of Company Common Stock and will cancel all of such
options which are not then exercised;
(b) the Company will cause HSW Investment Co., an Illinois corporation and
wholly owned subsidiary of the Company to adopt a plan of liquidation and pursuant thereto to
distribute to the Company all of the issued and outstanding capital stock of AndaPharma Corp.,
and Pharmadyne Corp., both Virginia corporations and wholly owned subsidiaries of HSW, after
which the Company will contribute such capital stock to UDL Laboratories, Inc., an Illinois
corporation and wholly owned subsidiary of the Company ("UDL-IL") and UDL-IL will assume
and agree to pay the entire balance of any intercompany indebtedness then due to the Company
from each of such Virginia corporations;
(c) the Company will transfer to [TC] Manufacturing Co., Inc., a newly
organized Illinois corporation ("Newco"), all of the assets and liabilities of its Pak-Sher Division
and Tapecoat Division in exchange for the capital stock of Newco and will distribute such
capital stock to certain stockholders of the Company;
(d) the Company will acquire the stock of UDL-IL, held by Michael K. Reicher,
thereby making the Company the holder of all of the issued and outstanding capital stock of
UDL-IL; and
(e) the Company and Newco will execute and deliver such of the agreements
attached to the Plan of Reorganization as Exhibits which require such execution and delivery
including, without limitation, the Distribution Agreement and the Indemnification Agreement.
3. The Boards of Directors of the Company and the Subsidiary have resolved that,
immediately following consummation of the transactions contemplated by the Plan of
Reorganization, the Company and the Subsidiary be merged under and pursuant to the Delaware
General Corporation Law into a single corporation existing under the laws of the State of
Delaware to wit, the Company, one of the Constituent Corporations, which shall be the
surviving corporation (such corporation in its capacity as such surviving corporation being
sometimes referred to herein as the "Surviving Corporation");
4. The authorized capital stock of the Company consists of 7,000,000 shares of
Common Stock with a par value of $1.00 per share (hereinafter called "Company Common
Stock"), of which 5,340,992 shares are issued and outstanding and 69,452 shares are held in the
treasury of the Company as of the date hereof; 14,000 shares of 8% Cumulative Preferred Stock
with a par value of $100.00 per share (hereinafter called "Company Preferred Stock"), of which
4,243 shares are issued and outstanding and none are held in the treasury of the Company as of
the date hereof; and 10,000 shares of Special Preferred Stock no par value, of which none are
outstanding and none are held in the treasury of the Company as of the date hereof;
5. The authorized capital stock of the Subsidiary consists of 1,000 shares of Common
Stock, par value $.50 per share, 1,000 of which shares are issued and outstanding and owned by
the Parent;
6. The Parent, as sole stockholder of the Subsidiary, and the respective Boards of
Directors of each of the Constituent Corporations and the Parent have approved the Merger (as
hereinafter defined) of the Constituent Corporations upon the terms and conditions hereinafter
set forth and have approved this Agreement;
7. The Merger of the Constituent Corporations is permitted pursuant to the Delaware
General Corporation Law;
8. For federal income tax purposes it is intended that the Merger shall qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended and the regulations promulgated thereunder (the "Code"); and
9. Immediately prior to the execution of this Agreement and as a condition and
inducement to the Parent's and the Subsidiary's willingness to enter into this Agreement, the
Parent has been granted irrevocable proxies with respect to all shares of Company Preferred
Stock and Company Common Stock held by certain holders thereof (the "Irrevocable Proxies");
NOW, THEREFORE, in consideration of and subject to the premises and the mutual
agreements, provisions and covenants herein contained, the parties hereto hereby agree that the
Company and the Subsidiary shall, at the Effective Time (as hereinafter defined), be merged in
accordance with the Delaware General Corporation Law (hereinafter called the "Merger") into a
single corporation existing under the laws of the State of Delaware, to wit, the Company, one of
the Constituent Corporations, which shall be the Surviving Corporation, and the parties hereto
adopt and agree to the following agreements, terms and conditions relating to the Merger and the
mode of carrying the same into effect.
1. NAME OF SURVIVING CORPORATION, CERTIFICATE OF INCORPORATION,
BYLAWS.
1.1 Name of Surviving Corporation. The name of the Surviving Corporation from and
after the Effective Date shall be Roderick Corporation.
1.2 Certificate of Incorporation. The Certificate of Incorporation of the Company as in
effect on the date hereof shall from and after the Effective Time be and continue to
be the Certificate of Incorporation of the Surviving Corporation until changed or
amended as provided by law, except that at the Effective Time and upon filing of
the Certificate of Merger, the Certificate of Incorporation of the Company shall be
amended and restated as attached hereto as Exhibit C.
1.3 Bylaws; Directors and Officers. The Bylaws of the Company, as in effect
immediately prior to the Effective Time, shall from and after the Effective Time be
and continue to be the Bylaws of the Surviving Corporation until amended as
provided therein. The directors and officers of the Subsidiary shall, from and after
the Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Restated Certificate of Incorporation and Bylaws.
1.4 The Company's Stockholder Meetings. The Company shall call a meeting of its
stockholders to be held in accordance with the Delaware General Corporation Law
no more than thirty (30) days after the Registration Statement (as defined in Section
4.4) has been declared effective by the Securities and Exchange Commission (the
"SEC"), upon due notice thereof to its stockholders, to consider and vote upon,
among other matters, the adoption and approval of this Agreement and the Merger.
The Company will, through its Board of Directors, use commercially reasonable
efforts, consistent with its legal obligations, to solicit the requisite vote of the
holders of the Company Preferred Stock, as a class, and the holders of the
Company Common Stock, as a class, to approve this Agreement and the Merger
pursuant to a combined prospectus and proxy statement (the "Prospectus/Proxy
Statement").
1.5 Filing of Certificate of Merger; Effective Date; Effective Time. If this Agreement has
been adopted, and the Merger approved, by the requisite vote of the holders of
Company Preferred Stock, as a class and the holders of Company Common Stock,
as a class; and if this Agreement is not thereafter, and has not theretofore been,
terminated or abandoned as permitted by the provisions hereof, then a Certificate of
Merger substantially in the form of Exhibit D attached hereto shall be filed and
recorded in accordance with Section 103 and Section 251 of the Delaware General
Corporation Law. Said Certificate of Merger shall be submitted for filing in
accordance with the Delaware General Corporation Law as soon as practicable after
the Closing (as defined in Section 8.19). The Merger shall become effective
immediately upon such filing with the Secretary of State of the State of Delaware,
which time is herein referred to as the "Effective Time," and which date is herein
referred to as the "Effective Date."
1.6 Certain Effects of Merger. At the Effective Time, the separate existence of the
Subsidiary shall cease, and the Subsidiary shall be merged with and into the
Company which, as the Surviving Corporation, shall possess all the rights,
privileges, powers and franchises as well of a public as of a private nature, and
being subject to all the restrictions, disabilities and duties of each of the Constituent
Corporations; and all and singular, the rights, privileges, powers and franchises of
each of the Constituent Corporations, and all property, real, personal and mixed,
and all debts due to either of the Constituent Corporations on whatever account, as
well for stock subscriptions as all other things in action or belonging to each of such
Constituent Corporations shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as they
were of the Constituent Corporations, and the title to any real estate vested by deed
or otherwise, under the laws of Delaware or any other jurisdiction, in any of the
Constituent Corporations, shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property of any of the Constituent Corporations shall
be preserved unimpaired, and all debts, liabilities and duties of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts, liabilities and duties had
been incurred or contracted by it. At any time, or from time to time, after the
Effective Date, the last acting officers of the Subsidiary, or the corresponding
officers of the Surviving Corporation, may, in the name of the Subsidiary, execute
and deliver all such proper deeds, assignments, and other instruments and take or
cause to be taken all such further or other action as the Surviving Corporation may
deem necessary or desirable in order to vest, perfect, or confirm in the Surviving
Corporation title to and possession of all of the Subsidiary's property, rights,
privileges, powers, franchises, immunities, and interests and otherwise to carry out
the purposes of this Agreement.
2. STATUS AND CONVERSION OF SECURITIES.
The manner and basis of converting the shares of the capital stock of the Constituent
Corporations and the nature and amount of securities of the Parent which the holders of
shares of Company Preferred Stock and Company Common Stock are to receive in
exchange for such shares are as follows:
2.1 Company Capital Stock.
a. Conversion of Company Preferred Stock into Parent Common Stock. At the
Effective Time, each outstanding share of Company Preferred Stock, other than
Company Preferred Stock (if any) owned by the Company, and other than
Company Preferred Stock as to which dissenters' rights have been exercised
as referred to in Section 8.9 (Payments to Dissenting Shareholders) hereof,
shall by virtue of the Merger and without action on the part of the holder
thereof automatically be canceled and converted into shares of Common
Stock, par value $.50 per share, of the Parent ("Parent Common Stock") at
a ratio equal to 5.02765 shares of Parent Common Stock for each share of
Company Preferred Stock (the "Preferred Stock Exchange Ratio"), subject to
the provisions of Sections 2.1(d) (Fractional Shares) and 2.1(e) (Surrender
and Exchange of Company Stock Certificates). Any shares of Company
Preferred Stock (if any) owned by the Company, or as to which dissenters'
rights have been exercised as referred to in Section 8.9 hereof, shall be
canceled. The Preferred Stock Exchange Ratio has been determined by
dividing: (i) $100 (the liquidation preference of each share of Company
Preferred Stock), by (ii) the Average Market Price of Parent Common Stock.
The "Average Market Price of Parent Common Stock" shall mean $19.89.
b. Conversion of Company Common Stock Into Parent Common Stock. At the
Effective Time, each outstanding share of Company Common Stock, other than
Company Common Stock owned by the Company, and other than Company
Common Stock as to which dissenters' rights have been exercised as
referred to in Section 8.9 (Payments to Dissenting Shareholders) hereof,
shall, by virtue of the Merger and without any action on the part of the
holder thereof, automatically be canceled and be converted into the number
of shares of Parent Common Stock (the "Common Stock Exchange Ratio")
determined as follows:
(i) the difference between: (A) $47,500,000 and (B) the aggregate
liquidation preference of all shares of Company Preferred Stock
issued and outstanding on the Effective Date shall be divided by the
Average Market Price of Parent Common Stock; and
(ii) the quotient resulting from the calculation in clause (i) above shall be
divided by the number of outstanding shares of the Company
Common Stock calculated to be outstanding on the Effective Date
after giving effect to the timely exercise of outstanding stock
options, and all other transactions involving the issuance of shares of
Company Common Stock contemplated by the Agreement for
Business Combination, the Plan of Reorganization and this
Agreement (the "Outstanding Shares of Company Common Stock").
The foregoing conversion shall be subject to the provisions of
Sections 2.1(d) (Fractional Shares) and 2.1(e) (Surrender and Exchange of
Company Stock Certificates) and subject to adjustment as provided for in
Section 2.1(f). Any shares of Company Common Stock owned by the
Company, or as to which dissenters' rights have been exercised as referred
to in Section 8.9 hereof shall be canceled. The shares of Parent Common
Stock into which shares of Company Common Stock are to be converted
pursuant to the terms of this Agreement valued at the Average Market Price
of Parent Common Stock shall be referred to herein as the "Company
Common Stock Consideration."
c. Stock Options. On the Effective Date, any options covering Company
Common Stock granted under any of the Company's stock option plans
which are outstanding but have not been exercised shall be canceled.
d. Fractional Shares.
i. No certificate or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
certificates of Company Preferred Stock or Company Common
Stock, and such fractional share interests will not entitle the owner
thereof to vote or to enjoy any other rights of a stockholder of the
Parent.
ii. As promptly as practicable following the Effective Date, the
Exchange Agent (as hereinafter defined) shall determine the excess
of (x) the aggregate number of shares of Parent Common Stock
delivered to the Exchange Agent by the Parent pursuant to Section
2.1(e) to which the holders of Company Preferred Stock are entitled
pursuant to Section 2.1(a) with respect to the Company Preferred
Stock over (y) the sum of the number of whole shares of Parent
Common Stock to be distributed to each holder of Company
Preferred Stock pursuant to Section 2.1(e) (such excess being
hereinafter called the "Preferred Stock Excess Shares"). As promptly
as practicable after the Effective Date, the Exchange Agent, as
agent for the holders of the Company Preferred Stock, shall sell the
Preferred Stock Excess Shares at then prevailing prices on the New
York Stock Exchange, Inc. ("NYSE"), all in the manner provided in
paragraph (iii) of this Section 2.1(d). As promptly as practicable
following the determination of the adjustment provided for in
Section 2.1(f) (Adjustment to Number of Shares of Parent Company
Stock to be Delivered), the Parent shall determine the excess of
(x) the aggregate number of shares of Parent Common Stock
delivered to the Exchange Agent by the Parent pursuant to
Section 2.1(e) to which the holders of Company Common Stock are
entitled pursuant to Section 2.1(b) with respect to the Company
Common Stock over (y) the sum of the number of whole shares of
Parent Common Stock to be distributed to each holder of Company
Common Stock pursuant to Section 2.1(e) (such excess being
hereinafter called the "Common Stock Excess Shares"). As promptly
as practicable after the determination of the number of Common
Stock Excess Shares, the Exchange Agent, as agent for the holders
of Company Common Stock, shall sell the Common Stock Excess
Shares at then prevailing prices on the NYSE, all in the manner
provided in paragraph (iii) of this Section 2.1(d).
iii. The sale of the Preferred Stock Excess Shares and the Common
Stock Excess Shares by the Exchange Agent shall be executed on
the NYSE through one or more member firms of the NYSE and shall
be executed in round lots to the extent practicable. Until the net
proceeds of such sale or sales have been distributed to the holders
of Company Preferred Stock and Company Common Stock, the
Exchange Agent will hold such proceeds in trust, one trust for the
holders of Company Preferred Stock (the "Preferred Stock Trust")
and one trust for the holders of Company Common Stock (the
"Common Stock Trust"). Except as otherwise expressly provided in
Section 2.1(e)(iv), the Parent shall pay all commissions, transfer
taxes and other out-of-pocket reorganization transaction costs,
including the expenses and compensation of the Exchange Agent,
incurred in connection with such sale of the Preferred Stock Excess
Shares and the Common Stock Excess Shares. The Exchange Agent
shall determine the portion of the Preferred Stock Trust to which
each holder of Company Preferred Stock shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the
Preferred Stock Trust by a fraction, the numerator of which is the
amount of the fractional share interest, if any, to which such holder
of Company Preferred Stock is entitled and the denominator of
which is the aggregate amount of fractional share interests to which
all holders of Company Preferred Stock are entitled. The Exchange
Agent shall determine the portion of the Common Stock Trust to
which each holder of Company Common Stock shall be entitled, if
any, by multiplying the amount of the aggregate net proceeds
comprising the Common Stock Trust by a fraction, the numerator of
which is the amount of the fractional share interest, if any, to which
such holder of Company Common Stock is entitled and the
denominator of which is the aggregate amount of fractional share
interests to which all holders of Company Common Stock are
entitled.
iv. As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Company Preferred Stock and
Company Common Stock in lieu of any fractional share interests, the
Exchange Agent shall make available such amounts to such holders
of Company Preferred Stock and Company Common Stock. The
cash proceeds to be paid to holders of Company Preferred Stock and
Company Common Stock realized from the sale of the Preferred
Stock Excess Shares and the Common Stock Excess Shares
represents merely a mechanical rounding of fractional shares
received in the Merger and is not separately bargained for
consideration.
v. Any portion of the Exchange Fund (as hereinafter defined), the
Preferred Stock Trust and Common Stock Trust which remains
undistributed to the stockholders of the Company one hundred
eighty (180) days after the Effective Date shall be delivered to
Parent, upon demand, and any stockholders of the Company who
have not theretofore complied with this Section 2 shall thereafter
look only to the Parent for delivery of their Parent Common Stock
and payment of any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to
Parent Common Stock.
vi. Neither the Parent nor the Company shall be liable to any holder of
shares of Company Preferred Stock, Company Common Stock or
Parent Common Stock, as the case may be, for such shares (or
dividends or distributions with respect thereto) or cash from the
Common Shares Trust delivered by the Exchange Agent to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
e. Surrender and Exchange of Company Stock Certificates.
i. After the Effective Date, each holder of an outstanding certificate or
certificates theretofore representing Company Preferred Stock and
Company Common Stock, except those to be canceled in
accordance with the provisions of Section 2.1(a) (Conversion of
Company Preferred Stock into Parent Common Stock) and
Section 2.1(b) (Conversion of Company Common Stock into Parent
Common Stock), shall surrender such certificate or certificates to
American Depository Trust or such other bank, trust company or
other entity designated by Parent (the "Exchange Agent"), duly
endorsed in blank or otherwise in proper form for transfer, together
with a letter of transmittal in the form of Exhibit E hereto, and shall
be entitled to receive in exchange therefor a certificate or certificates
representing the number of whole shares of Parent Common Stock
and cash representing the number of fractional shares of Parent
Common Stock to which such holder shall be entitled by reason of
holding Company Preferred Stock or Company Common Stock. Until
so surrendered and exchanged, each certificate theretofore
representing outstanding shares of Company Preferred Stock or
Company Common Stock shall be deemed to represent the number
of whole shares of Parent Common Stock and cash representing the
number of fractional shares of Parent Common Stock into which
such shares shall have been converted; provided, however, that until
so surrendered and exchanged, the Parent shall not be required to
pay over or transfer to any holder of such certificates any dividends
to which the holder is entitled, and provided further that upon the
surrender and exchange of such certificate or certificates, there shall
be paid over or transferred to such holder of Company Preferred
Stock or Company Common Stock the amount, without interest, of
all dividends and other distributions, if any, with respect to the
number of shares of Parent Common Stock to which such holder is
entitled, unless they have theretofore been paid. On the Effective
Date, the Parent shall deliver to the Exchange Agent, (i) certificates
for sufficient shares of Parent Common Stock to permit the
exchange, at the Preferred Stock Exchange Ratio, of each
outstanding share of Company Preferred Stock as provided herein to
be made and (ii) certificates for the number of shares of Parent
Common Stock required in order to permit the exchange, at the
Common Stock Exchange Ratio, of each outstanding share of
Company Common Stock as provided herein to be made (such
shares of Parent Common Stock, together with any dividends or
distributions with respect thereto, being referred to as the "Exchange
Fund").
ii. The Exchange Agent shall deliver to each holder of Company
Preferred Stock (A) certificates for the number of whole shares of
Parent Common Stock to which such holder shall be entitled, (B)
cash in lieu of fractional shares to which such holder shall be entitled
and (C) dividends, if any, related to the shares of Parent Common
Stock so delivered, upon surrender of the certificates representing
such holder's shares of Company Preferred Stock in accordance with
the provisions of Section 2.1(e)(i).
iii. The Exchange Agent shall deliver to each holder of Company
Common Stock (A) certificates for the number of whole shares of
Parent Common Stock which most closely approximates ninety-five
percent (95%) of the total number of shares of Parent Common
Stock delivered to the Exchange Agent by the Parent for exchange
with the Company Common Stock to which such holder shall be
entitled and (B) dividends, if any, related to the shares of Parent
Common Stock so delivered, upon surrender of the certificates
representing such holder's shares of Company Common Stock in
accordance with the provisions of Section 2.1(e)(i). Until such time
as the Joint Certification (as defined in Section 2.1(f)) has been
issued, the Exchange Agent shall hold the remaining number of
shares of Parent Common Stock so delivered to the Exchange Agent
by the Parent pending the calculation of the adjustment to the
number of shares of Parent Common Stock to be delivered to the
holders of Company Common Stock pursuant to Section 2.1(f)
(Adjustment to Number of Shares of Parent Company Stock to be
Delivered). Any shares of Parent Common Stock being held in the
Exchange Fund which are not deliverable to the holders of Company
Common Stock on account of the adjustment described in Section
2.1(f) shall be returned to the Parent by the Exchange Agent as
promptly as practicable after the delivery to the Exchange Agent of a
copy of the Joint Certification (as defined in Section 2.1(f)). Upon
the completion of the calculation of the adjustment described in
Section 2.1(f), and the delivery by the Parent of the additional shares
of Parent Common Stock, if any, to the Exchange Agent as provided
in Section 2.1(f), the Exchange Agent shall deliver to each holder of
Company Common Stock (A) certificates for the balance of whole
shares of Parent Common Stock to which such holder shall be
entitled, (B) cash in lieu of fractional shares to which such holder of
Company Common Stock shall be entitled and (C) dividends, if any,
related to the shares of Parent Common Stock so delivered. Any
certificates for Parent Common Stock remaining in the Exchange
Fund and not delivered upon exchange in accordance with this
Section 2.1(e) at the expiration of one hundred eighty (180) days
from the Effective Date shall be returned immediately by the
Exchange Agent to the Parent.
iv. As a condition of the exchange of Company Preferred Stock and
Company Common Stock for shares of Parent Common Stock by any
holder thereof who, in the opinion of counsel for the Company
described in Section 5.2(f) (Rule 145), may be deemed to be an
"affiliate" of the Company within the meaning of Rule 145 under the
Securities Act of 1933, as amended (the "1933 Act") (individually
an "Affiliate" and collectively, "Affiliates") on the Effective Date, the
Exchange Agent shall have received from such holder a written
agreement in the form of Exhibit F hereto between the Company and
such holder executed by and containing the agreement of such
holder that the shares of Parent Common Stock issuable by the
Parent pursuant to this Agreement in exchange for shares of
Company Common Stock held by or for the benefit of such holder
(A) will not be sold or otherwise disposed of except in accordance
with Rule 145 (provided that with respect to sales under such Rule,
such holder shall have furnished the Parent such information as the
Parent may deem necessary to assure that such sales are to be made
in full compliance with such Rule) under the 1933 Act, as the same
may, from time to time, be in effect, unless such holder shall have
furnished to the Parent an opinion of counsel, which opinion and
counsel are satisfactory to the Parent, that such sale or other
disposition may be effected without violation of the registration
requirements of the 1933 Act; and (B) shall be represented by
certificates which bear the following legend:
"Sale or other disposition of the shares represented
by this certificate and the transfer thereof are
restricted by the terms of a Rule 145 Affiliate
Agreement between the registered holder hereof and
Mylan Laboratories Inc. made pursuant to an
Agreement and Plan of Merger, dated October 10,
1995, among TC Manufacturing Co., Inc., MLI
Acquisition Corp. and Mylan Laboratories Inc."
v. No transfer taxes shall be payable by any stockholder other than
transfer taxes which are the sole liability of such stockholder in
respect of the issuance of certificates for Parent Common Stock,
except that, if any certificate for Parent Common Stock is to be
issued in a name other than that in which the certificate for shares
of Company Preferred Stock or Company Common Stock
surrendered shall have been registered, it shall be a condition of such
issuance that the person requesting such issuance shall pay to the
Parent any transfer taxes payable by reason thereof or of any prior
transfer of such surrendered certificate or establish to the
satisfaction of the Parent that such taxes have been paid or are not
payable.
vi. The Parent shall pay all expenses and compensation of the Exchange
Agent in connection with the performance of the duties described in
this Section 2 as reorganization expenses incident to the Merger.
f. Adjustment to Number of Shares of Parent Company Stock to be Delivered.
i. On or before the 15th day after the Effective Date, a representative
of the holders of the Company Common Stock designated pursuant
to Section 10(a) of the Agreement for Business Combination (the
"Stockholders Representative") and a representative of the Parent
(the "Parent Representative") shall jointly prepare and certify to the
former holders of the Company Common Stock and the Parent the
following items, in each case, as of the close of business on the
Effective Date, after giving effect to all of the transactions
contemplated by the Agreement for Business Combination, the Plan
of Reorganization and this Agreement (the "Joint Certification"):
(A) the amount of cash on hand or in bank accounts of the
Company (the "Company Cash");
(B) all other assets which would appear on a balance sheet of
the Company (parent company only) prepared in accordance
with generally accepted accounting principles applied on a
consistent basis (the "Other Assets");
(C) the amount of the indebtedness owed to the Company by its
wholly owned direct and indirect subsidiaries, UDL-IL,
AndaPharma Corp. and Pharmadyne Corp., whether on
account or evidenced by one or more promissory notes
(the "Intercompany Indebtedness");
(D) the amount necessary to pay in full the 10 1/2% Senior
Promissory Notes of the Company due July 31, 2001 held by
Metropolitan Life Insurance Company, including, without
limitation, principal, accrued but unpaid interest and any yield
maintenance or prepayment penalty (the "Senior Note
Indebtedness");
(E) the amount necessary to pay in full the line of credit granted
to the Company by LaSalle National Bank, including, without
limitation, principal, accrued but unpaid interest and any yield
maintenance or prepayment penalty (the "Line of Credit
Indebtedness");
(F) the amount necessary to pay in full any outstanding
obligations of the Company in favor Michael K. Reicher in
connection with its acquisition of the shares of common
stock of UDL-IL held by Mr. Reicher (the "Reicher
Indebtedness");
(G) all other liabilities which would appear on a balance sheet of
the Company (parent company only) prepared in accordance
with generally accepted accounting principles applied on a
consistent basis including, without limitation, any liabilities
under the group health insurance plans of the Company
which are not covered by insurance and any costs or
expenses associated with the transactions contemplated by
the Agreement for Business Combination, the Plan of
Reorganization or this Agreement which have not been paid
by the Company (the "Other Liabilities");
(H) the amount equal to (1) the sum of the Company Cash, the
Other Assets and the Intercompany Indebtedness minus
(2) the sum of the Senior Note Indebtedness, the Line of
Credit Indebtedness, the Reicher Indebtedness and the Other
Liabilities, which may be a positive or negative amount
(the "Net Adjustment Amount");
(I) the sum of the Company Common Stock Consideration plus
the Net Adjustment Amount (if a positive amount) or minus
the Net Adjustment Amount (if a negative amount) (the
"Adjusted Company Common Stock Consideration");
(J) the Adjusted Company Common Stock Consideration divided
by the Average Market Price of Parent Common Stock, which
quotient is then divided by the Outstanding Shares of
Company Common Stock (the "Adjusted Exchange Ratio");
and
(K) the number of shares of Parent Common Stock calculated at
the Adjusted Exchange Ratio for each of the Outstanding
Shares of Company Common Stock (the "Adjusted Shares of
Parent Company Shares").
ii. Upon delivery of the Joint Certification: (A) the Parent shall deliver
to the Exchange Agent within two (2) business days after receipt of
the Joint Certification shares of Parent Common Stock equal to the
excess, if any, of (1) the number of Adjusted Shares of Parent
Common Stock over (2) the number of whole shares of Parent
Common Stock delivered to the Exchange Agent by the Parent
pursuant to Section 2.1(e) (Surrender and Exchange of Company
Stock Certificates), together with dividends, if any, related to the
shares of Common Stock so delivered; or (B) the Exchange Agent
shall deliver to the Parent within two (2) business days after receipt
of the Joint Certification shares of Parent Common Stock equal to
the excess, if any, of (3) the number of whole shares of Parent
Common Stock delivered to the Exchange Agent by the Parent
pursuant to Section 2.1(e) over (4) the number of Adjusted Shares
of Parent Common Stock and, in such event, the Parent shall have
no further obligation to deliver shares of Parent Common Stock to
holders of Company Common Stock except as provided in the last
sentence of Section 2.1(e)(iii).
iii. In the event of any controversy or dispute between the Stockholders
Representative and the Parent Representative arising out of or
relating to the preparation of the Joint Certification, either the
Stockholders Representative or the Parent Representative may give
notice to the other of its desire to engage Arthur Andersen LLP or, if
unavailable, another "big six" accounting firm mutually acceptable to
the Stockholders Representative and the Parent Representative (the
"Independent Accountant") to resolve the controversy or dispute
within 15 days after such engagement. The Independent
Accountant's determination shall be final and binding, and the
Stockholders Representative and the Parent Representative shall
deliver the Joint Certification based upon the decision of the
Independent Accountant. The fees and disbursements of the
Independent Accountant shall be borne by the Parent as
reorganization expenses incident to the Merger.
iv. If, prior to the Effective Time, the Parent should split Parent
Common Stock or pay a stock dividend in Parent Common Stock or
otherwise change Parent Common Stock into any other securities, or
make any other dividend or distribution in respect of Parent Common
Stock (other than normal cash dividends as the same may be
adjusted from time to time), then the Common Stock Exchange Ratio
will be appropriately adjusted to reflect such split, stock dividend,
other dividend or distribution or change.
2.2 The Subsidiary Common Stock. Each share of the Subsidiary Common Stock
outstanding on the Effective Date shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and be one share of the
Common Stock of the Surviving Corporation.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
3.1 Representations, Warranties and Agreements of the Company. The Company
represents and warrants to the Parent and the Subsidiary as follows:
a. Organization, Good Standing, Capitalization.
i. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with all
requisite corporate power and authority to own, operate and lease its
properties, to carry on its business as now being conducted, to enter
into this Agreement and, subject to the approval of the Company's
stockholders in accordance with the Delaware General Corporation
Law, to perform its obligations hereunder. The Company is duly
qualified or licensed to do business and in good standing in the
States of Illinois and Texas and in each other jurisdiction in which
the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed and
in good standing would not have a material adverse effect on the
Company. The authorized and issued capital stock of the Company
as of the date hereof is as set forth in the recitals of this Agreement;
all capital stock of the Company listed therein as authorized has
been duly authorized, and all capital stock of the Company listed
therein as issued and outstanding has been validly issued and is fully
paid and nonassessable. Except for the agreements referred to in
Sections 5.2(m) (TC Stockholders' Agreement) and 5.2(n) (UDL
Stockholders' Agreement), there are no outstanding rights, options,
warrants, conversion rights or agreements for the purchase or
acquisition from, or the sale or issuance by, the Company of any
shares of its capital stock of any class other than Options (as
defined in the Plan of Reorganization) to purchase 216,308 shares of
the Company's Common Stock under the Company's stock option
plans. The only direct or indirect subsidiary corporations of the
Company are the following: UDL Laboratories, Inc., an Illinois
corporation ("UDL-IL"), which, in turn, owns all of the issued and
outstanding capital stock of UDL Laboratories, Inc., a Florida
corporation ("UDL-FL"); The Tapecoat Company of Canada, Limited,
a Canada (Ontario) corporation ("Tapecoat Limited"), which, in turn,
owns all of the issued and outstanding capital stock of Tapecoat
Canada, Inc., a Canada (Ontario) corporation ("Tapecoat, Inc.");
HSW Investment Co., an Illinois corporation ("HSW"), which, in turn,
owns all of the issued and outstanding capital stock of AndaPharma
Corp., a Virginia corporation ("AP"), and Pharmadyne Corp., a
Virginia corporation ("PD"); and The Tapecoat Company, Inc., a
Delaware corporation ("Tapecoat-DE") (individually, a "Company
Subsidiary" and collectively, the "Company Subsidiaries").
ii. UDL-IL is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois with all corporate
power and authority to own, operate and lease its properties and to
carry on its business as now being conducted. UDL-IL is duly
qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification
or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a material
adverse effect on UDL-IL. The authorized capital stock of UDL-IL
consists of 20,000,000 shares of common stock, no par value.
Forty-seven (47) of the issued and outstanding shares of common
stock of UDL-IL are held by the Company and the remaining three (3)
issued and outstanding shares of UDL-IL are held by Michael K.
Reicher, and all such shares have been validly issued and are fully
paid and nonassessable. Except for the agreement referred to in
Section 5.2(n) (UDL Stockholders' Agreement), there are no
outstanding rights, options, warrants, conversion rights or
agreements for the purchase or acquisition from, or the sale or
issuance by, UDL-IL of any of its common stock.
iii. UDL-FL is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida with all corporate
power and authority to own, operate and lease its properties and to
carry on its business as now being conducted. UDL-FL is duly
qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification
or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a material
adverse effect on UDL-FL. The authorized capital stock of UDL-FL
consists of 100 shares of common stock, no par value. All of the
issued and outstanding shares of common stock of UDL-FL are held
by UDL-IL, and all such shares have been validly issued and are fully
paid and nonassessable. There are no outstanding rights, options,
warrants, conversion rights or agreements for the purchase or
acquisition from, or the sale or issuance by, UDL-FL of any of its
common stock.
iv. Tapecoat Limited is a corporation duly organized, validly existing and
in good standing under the laws of Canada (Ontario) with all
corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted.
Tapecoat Limited is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by
it makes such qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good standing would
not have a material adverse effect on Tapecoat Limited. The
authorized capital stock of Tapecoat Limited consists of 40,000
shares of common stock, par value $1.00 per share. All of the
issued and outstanding shares of common stock of Tapecoat
Limited, except for directors' qualifying shares, are held by the
Company, and all such shares have been validly issued and are fully
paid and nonassessable. There are no outstanding rights, options,
warrants, conversion rights or agreements for the purchase or
acquisition from, or the sale or issuance by, Tapecoat Limited of any
of its common stock.
v. Tapecoat, Inc. is a corporation duly organized, validly existing and in
good standing under the laws of Canada (Ontario) with all corporate
power and authority to own, operate and lease its properties and to
carry on its business as now being conducted. Tapecoat, Inc. is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification
or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a material
adverse effect on Tapecoat, Inc. The authorized capital stock of
Tapecoat, Inc. consists of 500,000 shares of common stock, no par
value and 500 shares of non-voting preference shares, par value
$1.00 per share. All of the issued and outstanding shares of
common stock of Tapecoat, Inc. are held by Tapecoat Limited, and
all such shares have been validly issued and are fully paid and
nonassessable. None of the non-voting preference shares of
Tapecoat, Inc. have been issued. There are no outstanding rights,
options, warrants, conversion rights or agreements for the purchase
or acquisition from, or the sale or issuance by, Tapecoat, Inc. of any
of its common stock.
vi. Tapecoat-DE is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with all
corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted.
Tapecoat-DE is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to
be so duly qualified or licensed and in good standing would not have
a material adverse effect on Tapecoat-DE. The authorized capital
stock of Tapecoat-DE consists of 1,000 shares of common stock, no
par value. All of the issued and outstanding shares of common
stock of Tapecoat-DE are held by the Company, and all such shares
have been validly issued and are fully paid and nonassessable. There
are no outstanding rights, options, warrants, conversion rights or
agreements for the purchase or acquisition from, or the sale or
issuance by, Tapecoat-DE of any of its common stock.
vii. HSW (formerly Engineered Coated Products, Inc.) is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Illinois with all corporate power and authority to own,
operate and lease its properties and to carry on its business as now
being conducted. HSW is duly qualified or licensed to do business
and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in
good standing would not have a material adverse effect on HSW.
The authorized capital stock of HSW consists of two classes of
stock: 9000 shares of Class A stock, par value $100 per share and
3000 shares of Class B stock, par value $50.00 per share. All of the
issued and outstanding shares of Class A stock of HSW are held by
the Company, and all such shares have been validly issued and are
fully paid and nonassessable. None of the Class B stock of HSW has
been issued. There are no outstanding rights, options, warrants,
conversion rights or agreements for the purchase or acquisition from,
or the sale or issuance by, HSW of any of its common stock.
viii. AP is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia with all
corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. AP
is not, and is not required to be, qualified or licensed to do business
in any jurisdiction other than the Commonwealth of Virginia. The
authorized capital stock of AP consists of 5,000 shares of common
stock, no par value. All of the issued and outstanding shares of
common stock of AP are held by HSW, and all such shares have
been validly issued and are fully paid and nonassessable. There are
no outstanding rights, options, warrants, conversion rights or
agreements for the purchase or acquisition from, or the sale or
issuance by, AP of any of its common stock.
ix. PD is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia with all
corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. PD
is not, and is not required to be, qualified to do business in any
jurisdiction other than the Commonwealth of Virginia. The
authorized capital stock of PD consists of 5,000 shares of common
stock, no par value. All of the issued and outstanding shares of
common stock of PD are held by HSW, and all such shares have
been validly issued and are fully paid and nonassessable. There are
no outstanding rights, options, warrants, conversion rights or
agreements for the purchase or acquisition from, or the sale or
issuance by, PD of any of its common stock.
b. Financial Statements.
i. The consolidated and consolidating balance sheets of the Company
and its subsidiaries as of October 31, 1994, 1993, 1992, 1991, and
1990 and the related consolidated and consolidating statements of
operations, stockholders' equity and cash flows for the fiscal years
then ended, including the footnotes thereto, have been prepared in
accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved, except as may be
noted in the accompanying footnotes, and fairly present the financial
position of the Company and the Company Subsidiaries as of the
dates thereof and the results of their operations for the periods then
ended. Such consolidated financial statements of the Company have
been audited by KPMG Peat Marwick, independent certified public
accountants, and such firm has issued thereon an auditor's report
without qualification. To the best knowledge of the Company, the
Company's internal unaudited consolidated balance sheet as of
August 31, 1995 and the related statement of operations,
stockholders' equity and cash flows for the ten months then ended
(the "Interim Company Financial Statements") have been prepared in
accordance with the past practice of the Company in preparing
interim financial statements and in accordance with generally
accepted accounting principles applied on a consistent basis during
such period and fairly present the financial position, subject to
normal year-end accruals and adjustments, none of which, either
individually or in the aggregate, will be material, of the Company and
the Company Subsidiaries and the consolidated results of their
operations for the period ended as of, and on, such date.
ii. The consolidated and consolidating balance sheets of UDL-IL and
UDL-FL as of October 31, 1994, 1993, 1992, 1991, and 1990 and
the related consolidated and consolidating statements of operations,
stockholders' equity and cash flows for the fiscal years then ended,
including the footnotes thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be noted in the
accompanying footnotes, and fairly present the financial position of
the UDL-IL and UDL-FL as of the dates thereof and the results of
their operations for the periods then ended. Such consolidated
financial statements of UDL-IL and UDL-FL have been audited by
KPMG Peat Marwick, independent certified public accountants, and
such firm has issued thereon an auditor's report without
qualification. To the best knowledge of the Company, the internal
unaudited consolidated balance sheets of UDL-IL and UDL-FL as of
August 31, 1995 and the related statement of operations,
stockholders' equity and cash flows for the ten months then ended
(the "Interim UDL Financial Statements"), have been prepared in
accordance with the past practice of the Company in preparing
interim financial statements and in accordance with generally
accepted accounting principles applied on a consistent basis during
such period and fairly present the financial position, subject to
normal year-end accruals and adjustments, none of which, either
individually or in the aggregate, will be material, to UDL-IL and UDL-FL, taken
as a whole, and the consolidated results of their operation for the period ended as
of, and on, such date.
c. Absence of Certain Changes or Events.
i. Since October 31, 1994, and except as specifically contemplated by
or disclosed pursuant to this Agreement or except as set forth in
certain disclosure schedules with respect, UDL-IL, UDL-FL, AP and
PD (individually, a "member of the Pharmaceutical Group" and
collectively, the "Pharmaceutical Group") dated the date hereof and
delivered to the Parent by the Company prior to the execution of this
Agreement (the "Disclosure Schedules") or the documents
referenced to therein, there has not been: (i) any material adverse
change in the business, assets, financial condition or results of
operation of the Pharmaceutical Group taken as a whole; (ii) any
declaration, payment or setting aside for payment of any dividend or
any redemption, purchase or other acquisition of any shares of
capital stock or securities of the Pharmaceutical Group, except in the
ordinary course of business consistent with past practice; (iii) any
return of any capital or other distribution of assets by any member of
the Pharmaceutical Group to the Company except as reflected in the
intercompany accounts between the Company and any member of
the Pharmaceutical Group; (iv) any material investment of a capital
nature by the Pharmaceutical Group either by the purchase of any
property or assets or by any acquisition (by merger, consolidation or
acquisition of stock or assets) of any corporation, partnership or
other business organization or division thereof other than capital
expenditures for items to be used in the ordinary course of business
of the Pharmaceutical Business up to a maximum expenditure of
$1,000,000; (v) any sale, disposition or other transfer, either
individually or in the aggregate, of assets or properties material to
the business of the Pharmaceutical Group other than sales of
inventory in the ordinary course of business; (vi) any employment or
consulting agreement entered into by any member of the
Pharmaceutical Group with any officer or consultant or any
amendment or modification to, or termination of, any current
employment or consulting agreement to which any member of the
Pharmaceutical Group is a party; (vii) any agreement by any member
of the Pharmaceutical Group to take, whether in writing or
otherwise, any action which, if taken prior to the date hereof, would
have made any representation or warranty in this Article 3 untrue or
incorrect in any material respect; (viii) any change in accounting
methods or practices or any change in depreciation or amortization
policies or rates by any member of the Pharmaceutical Group; and
(ix) any material failure by any member of the Pharmaceutical Group
to conduct its business only in the ordinary course consistent with
past practice.
ii. Since October 31, 1994, and except as specifically contemplated or
disclosed pursuant to this Agreement, there has not been: (i) any
material adverse change in the business, assets, financial condition
or results of operation of the Company, taken as a whole; (ii) any
declaration, payment or setting aside for payment of any dividend or
any redemption, purchase or other acquisition of any shares of
capital stock or securities of the Company, except in the ordinary
course of business consistent with past practice; (iii) any return of
any capital or other distribution of assets to stockholders of the
Company except for dividends paid on Company Preferred Stock and
Company Common Stock in the ordinary course of business
consistent with past practice; (iv) any employment or consulting
agreement entered into by the Company with any officer or
consultant or any amendment or modification to, or termination of,
any current employment or consulting agreement to which the
Company is a party; (v) any agreement by the Company to take,
whether in writing or otherwise, any action which, if taken prior to
the date hereof, would have made any representation or warranty in
this Article 3 untrue or incorrect in any material respect; (vi) any
change in accounting methods or practices or any change in
depreciation or amortization policies or rates by the Company; and
(vii) any material failure by the Company to conduct its business only
in the ordinary course consistent with past practice.
d. Authorization: Binding Agreement. Pursuant to its Certificate of Incorporation,
the Company has requisite corporate power and authority to execute and
deliver this Agreement and the Agreement for Business Combination and all
of the documents, agreements and instruments to which it is a party
contemplated hereby and thereby and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the Agreement for Business Combination and the
consummation of the transactions contemplated hereby and thereby,
including but not limited to the Merger, have been duly and validly
authorized by the Company's Board of Directors and no other corporate
proceedings on the part of the Company or any Company Subsidiary are
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions so contemplated (other than the adoption of
this Agreement and approval of the Merger by the stockholders of the
Company in accordance with the Delaware General Corporation Law and the
Certificate of Incorporation and Bylaws of the Company). This Agreement
has been duly and validly executed and delivered by the Company, and,
subject to the approval and adoption of this Agreement by the stockholders
of the Company, constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except to the extent that enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity
regarding the availability of remedies.
e. Compliance with Other Instruments, etc. The execution and delivery by the
Company of this Agreement and the Agreement for Business Combination,
the performance by the Company of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby
and thereby, will not (i) conflict with or result in a breach of any of the
provisions of its Certificate of Incorporation or Bylaws, (ii) require any
consent, approval or notice under or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or increase
in the level of performance required) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which the Company or any Company
Subsidiary is a party or by which it or any of its respective properties or
assets may be bound, other than (x) the Senior Note Indebtedness and (y)
the Line of Credit Indebtedness, (iii) result in the creation or imposition of
any lien or encumbrance of any kind upon any of the assets of the Company
or any Company Subsidiary or (iv) subject to the obtaining of the
governmental and other consents referred to in Section 3.1(f) (Governmental
and other Consents, etc.), contravene any law, rule or regulation of any
state or of the United States or any political subdivision thereof or therein,
or any order, writ, judgment, injunction, decree, determination or award
currently in effect to which the Company or any Company Subsidiary or any
of its respective assets or properties are subject.
f. Governmental and other Consents, etc. Subject to requisite stockholder approval,
no consent, approval or authorization of, or designation, declaration or filing
with, any court, tribunal, administrative agency or commission or other
governmental or regulatory agency or authority or other public persons or
entities in the United States (each, a "Governmental Entity") on the part of
the Company or any Company Subsidiary is required in connection with the
execution or delivery by the Company of this Agreement or the Agreement
for Business Combination or the consummation by the Company of the
transactions contemplated hereby or thereby other than (i) filings in the
State of Delaware in accordance with the Delaware General Corporation
Law, (ii) filings under state securities or "Blue Sky" laws, (iii) filings with the
state authorities having jurisdiction over businesses which distribute drugs
and controlled substances (the "State Drug Regulatory Authorities"),
Canadian Foreign Investment Review Board or other filings related to the
transactions contemplated by the Agreement for Business Combination or
the Plan of Reorganization, (iv) federal, state or local regulatory approvals
and (v) filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder
(the "HSR Act").
g. No Misleading Statements. The Disclosure Schedules are true, correct and
complete in all material respects as qualified as set forth therein. The
Disclosure Schedules, the annual reports of the Company for the last five
years and any exhibits to any of the foregoing, all of which have been
delivered to the Parent by the Company, do not, as of their respective dates,
contain any untrue statement of a material fact or any omission to state a
fact necessary to make any statement of fact contained therein, in light of
the circumstances under which they are made, not misleading. None of the
information relating to the Pharmaceutical Group supplied by the Company in
writing specifically for inclusion in the Registration Statement described in
Section 4.4 (Covenants of the Company and the Parent as to Registration
Statement) will be false or misleading with respect to any material fact or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
h. Compliance with Applicable Law. Each member of the Pharmaceutical Group
holds all permits, licenses, variances, exemptions, orders and approvals of
each Governmental Entity necessary for the lawful conduct of their
respective businesses (collectively, the "Pharmaceutical Group Permits"),
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals which would not, individually or in the aggregate, have
a material adverse effect on the Pharmaceutical Group, taken as a whole.
Each member of the Pharmaceutical Group is in compliance with the terms
of the Pharmaceutical Group Permits issued to it, except where the failure so
to comply would not have a material adverse effect on the Pharmaceutical
Group, taken as a whole. Except as disclosed in the Disclosure Schedules,
the businesses of the Pharmaceutical Group are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity,
except for possible violations which individually or in the aggregate do not,
and is not reasonably expected to have a material adverse effect on the
Pharmaceutical Group, taken as a whole. As of the date of this Agreement,
no investigation or review by any Governmental Entity with respect to the
Pharmaceutical Group is pending or, to the best knowledge of the Company,
threatened, nor has any Governmental Entity indicated an intention to
conduct the same, other than, in each case, those the outcome of which is
not reasonably expected to have a material adverse effect on the
Pharmaceutical Group, taken as a whole. Neither AP nor PD has been or is
an "owner" or "operator" of any "facility" or "vessel" as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of
1980.
i. Vote Required. The affirmative vote of the holders of a majority of the issued
and outstanding shares of Company Preferred Stock, voting as a class, and
the issued and outstanding shares of Company Common Stock, voting as a
class, are the only votes of the holders of any class or series of the
Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
j. No Broker. Except as set forth in the Disclosure Schedules, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
k. Litigation. Except as set forth in the Disclosure Schedules, there is not now
pending, and to the best knowledge of the Company, there is not threatened
in writing, nor is there any basis for, any litigation, action, suit or proceeding
to which the Pharmaceutical Group is or will be a party in or before or by
any court or governmental or regulatory agency or body, except for any
litigation, action, suit or proceeding (whether instituted, pending or, to the
best knowledge of the Company, threatened) involving claims which in the
aggregate are not, and which the Company reasonably expects, will not,
have a material adverse effect on the Pharmaceutical Group taken as a
whole. In addition, there is no judgment, decree, injunction, rule or order of
any court, governmental department, commission, board, bureau, agency,
instrumentality or arbitrator outstanding against the Pharmaceutical Group
having or which the Company reasonably expects, may have, a material
adverse effect upon the Pharmaceutical Group taken as a whole.
l. FDA Matters. Notwithstanding anything to the contrary in Sections 3.1(h)
(Compliance with Applicable Law) and 3.1(k) (Litigation) hereof and except
as set forth in the Disclosure Schedules, neither the Company nor any
members of the Pharmaceutical Group, (i) is a party to any pending
investigation or proceeding by or before the Food and Drug Administration
(the "FDA") or any other duly authorized State Drug Regulatory Authorities
or any other duly authorized governmental authority which regulates the sale
of drugs and controlled substances in any jurisdiction; (ii) has knowledge of
any facts which would form the basis for an investigation or proceeding or
regulatory action of any sort (other than routine or periodic investigations or
reviews) against either the Company or any member of the Pharmaceutical
Group by the FDA or any other duly authorized State Drug Regulatory
Authorities or any other duly authorized governmental authority which
regulates the sale of drugs and controlled substances in any jurisdiction
which could affect adversely, or in any way limit or restrict the ability of the
Company or any member of the Pharmaceutical Group to market existing
products; (iii) has committed or permitted to exist any violation of the rules
and regulations of the FDA or any other duly authorized State Drug
Regulatory Authorities or any other duly authorized governmental authority
which regulates the sale of drugs and controlled substances in any
jurisdiction which has not been cured by the Company or member of the
Pharmaceutical Group or waived by the FDA or any such regulatory
authority; (iv) has received notice from any third party (whether or not in
writing) of any claim, dispute or controversy relating to the supply of
regulated materials used in the products of the Company or any member of
the Pharmaceutical Group, or the quality, formulation, potency, toxicity or
efficacy of such materials; and (v) anticipates, or knows of any pending,
threatened or potential action by any duly authorized State Drug Regulatory
Authorities or any other duly authorized governmental authority which
regulates the sale of drugs and controlled substances in any jurisdiction
which could affect adversely, or in any way limit or restrict the ability of the
Company or any member of the Pharmaceutical Group to market existing
products. To the knowledge of the Company, the Company and each
member of the Pharmaceutical Group have fulfilled all regulatory
requirements necessary or requisite to the continued marketing of their
existing pharmaceutical and ancillary products.
m. ERISA Matters. As of the date hereof and during the five year period
preceding the date hereof, neither the Company nor any of the Company
Subsidiaries (including, for this purpose any entity that is or, during the five
year period preceding the date hereof, has been a member of the controlled
group of corporations (within the meaning of Section 414(b), (c), (m) or (o)
of the Code) of which the Company and the Company Subsidiaries are a
part):
i. maintains or has maintained any pension plan (within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) intended to be qualified under Section
401(a) of the Code other than the TC Manufacturing Co., Inc.
Consolidated Employees' Profit-Sharing Plan and Trust;
ii. maintains or has maintained any nonqualified pension plan (within
the meaning of Section 3(2) of ERISA);
iii. has any obligation to make any deferred compensation payments
other than severance or salary continuation payments to former
employees;
iv. contributes or has contributed to nor has or had any obligation
(contingent or otherwise) to contribute to any multiemployer pension
or welfare plan within the meaning of Section 3(37) of ERISA other
than obligations to contribute to the Service Employees International
Union National Industry Pension Plan;
v. contributes or has contributed to nor has or had any obligation to
contribute to any welfare plan (within the meaning of Section 3(1) of
ERISA) other than those identified in the Disclosure Schedules;
vi. provides or has provided nor has or had any obligation to provide
coverage under any welfare plan (within the meaning of Section 3(1)
of ERISA) to any former employees or dependents of former
employees other than certain benefits payable under the
Consolidated Omnibus Budget Reconciliation Act ("COBRA"); or
vii. has or had reason to believe that any employee, dependent or
government agency has commenced, or has made inquiries which
could reasonably be expected to result in the commencement of, any
adverse action with respect to any employee benefit plan matter.
Each plan referred to in clauses (i) and (v) of this Section 3.1(m), and to the
best knowledge of the Company, each plan referred to in clause (iv) of
Section 3.1(m), is in compliance in all material respects with applicable
provisions of ERISA, the Code and other applicable laws, except where
noncompliance would not have a material adverse effect on the Company or
any Company Subsidiary.
As of the date hereof, the Company and the Company Subsidiaries have in
place insurance coverage which limits their liability for claims incurred under
any group health program maintained by the Company and the Company
Subsidiaries to $50,000 with respect to any single illness or accident
incurred by any covered individual and to $1,647,000 (as of September 1,
1995) with respect to all claims incurred by all covered individuals under any
such program, in both cases for a twelve-month plan year which ends on
August 31 in each year.
n. Intercompany Transactions. All transactions between the Company, HSW or
any member of the Pharmaceutical Group are reflected in the intercompany
accounts between the Company and UDL-IL and HSW, respectively, and
there have been no loans, dividends or other distributions of cash or
property from any member of the Pharmaceutical Group to the Company
which have not been reflected in such intercompany accounts.
3.2 Representations, Warranties and Agreements of the Parent. The Parent represents
and warrants to the Company as follows:
a. Organization, Good Standing, Capitalization. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania with all requisite corporate power and
authority to own, operate and lease its properties, to carry on its business as
now being conducted, and to enter into this Agreement and perform its
obligations hereunder. The Parent is duly qualified or licensed to do
business in each jurisdiction in which the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not have a material adverse
effect on the Parent. The Parent had, as of March 31, 1995, authorized
capital stock consisting of 300,000,000 shares of Common Stock, par value
of $.50 per share, of which 79,972,248 shares were issued and outstanding
and 476,523 shares were held in Parent's treasury; and 5,000,000 shares
of Preferred Stock, par value $.50 per share, of which none were issued and
outstanding or held in treasury; all of such capital stock of the Parent has
been duly authorized, and all issued and outstanding shares of capital stock
of the Parent have been validly issued and are fully paid and nonassessable.
As of March 31, 1995, there were no outstanding rights, options, warrants,
conversion rights or agreements for the purchase or acquisition from, or the
sale or issuance by, the Parent of any shares of its capital stock of any class
other than 1,770,674 shares of Parent Common Stock that may be issued
pursuant to employee benefit arrangements. Since March 31, 1995, the
Parent has not issued, granted, awarded or agreed or committed to issue,
grant or award any rights, options, warrants, conversion rights or purchase
rights with respect to the sale and issuance by the Parent of any shares of
its capital stock of any class or issued any shares of Parent Common Stock
except for Parent Common Stock issued upon the stock split with respect to
the Parent Common Stock effective on August 15, 1995, and except for
shares of Parent Common Stock issued pursuant to the stock option plans of
the Parent.
b. The Subsidiary. The Subsidiary had, as of August 31, 1995, authorized
capital stock consisting of 1,000 shares of Common Stock, par value of
$.50 per share, of which 1,000 shares were issued and outstanding and
owned by the Parent. The Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. All
of the issued and outstanding shares of the Subsidiary have been validly
issued and are fully paid and nonassessable. There are no outstanding
rights, options, warrants, conversion rights or agreements for the purchase
or acquisition from, or the sale or issuance by, the Subsidiary of any shares
of its capital stock, other than this Agreement. Since its organization, the
Subsidiary has conducted no business activities, except such as are related
to this Agreement and the performance of its obligations hereunder.
c. Financial Statements. The consolidated balance sheets of the Parent as of
March 31, 1995, 1994, 1993, 1992 and 1991 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
then ended, including the footnotes thereto have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved and fairly present the financial
position of the Parent and its consolidated subsidiaries as of the dates
thereof and the results of their operations for the periods then ended. Such
consolidated balance sheets of the Parent and related consolidated
statements have been audited by Deloitte & Touche LLP, independent
certified public accountants, and such firm has issued thereon an auditor's
report without qualification.
d. No Material Change. Since March 31, 1995, there has not been any material
adverse change in the business, assets, financial condition, or results of
operation of the Parent and its subsidiaries taken as a whole.
e. Authorization: Binding Agreement. Pursuant to its Articles of Incorporation, the
Parent has requisite corporate power and authority to execute and deliver
this Agreement and the Agreement for Business Combination and all of the
other documents, agreements and instruments to which it is a party
contemplated hereby and thereby and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the Agreement for Business Combination and the
consummation of the transactions contemplated hereby, including but not
limited to the Merger, have been duly and validly authorized by the Parent's
Board of Directors on behalf of the Parent both for itself and in its capacity
as the sole stockholder of the Subsidiary and no other corporate proceedings
on the part of the Parent are necessary to authorize the execution and
delivery of this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and
delivered by the Parent and constitutes the legal, valid and binding
agreement of the Parent, enforceable against the Parent in accordance with
its terms, except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by principles of
equity regarding the availability of remedies.
f. Compliance with Other Instruments, etc. The execution and delivery by the
Parent of this Agreement and the Agreement for Business Combination, the
performance by the Parent of its obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby will
not (i) conflict with or result in a breach of any of the provisions of its
Articles of Incorporation or Bylaws, (ii) require any consent, approval or
notice under or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration or augment the performance
required) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which the Parent or any of its subsidiaries is a party or by which it or any of
its respective properties or assets may be bound, (iii) result in the creation or
imposition of any lien or encumbrance of any kind upon any of the assets of
the Parent or any of its subsidiaries or (iv) subject to the obtaining of the
governmental and other consents referred to in Section 3.2(g)
(Governmental and other Consents, etc.), contravene any law, rule or
regulation of any state or of the United States or any political subdivision
thereof or therein, or any order, writ, judgment, injunction, decree,
determination or award currently in effect to which the Parent or any of its
subsidiaries or any of its respective assets or properties are subject.
g. Governmental and other Consents, etc. No consent, approval or authorization of
or designation, declaration or filing with any Governmental Entity on the part
of the Parent is required in connection with the execution or delivery by the
Parent of this Agreement or the Agreement for Business Combination or the
consummation of the transactions by the Parent contemplated hereby and
thereby other than (i) filings under state securities or "Blue Sky" laws,
(ii) filings with the SEC and any applicable national securities exchange,
(iii) approval for listing the Parent Common Stock to be issued in the Merger
on the NYSE, (iv) federal, state or local regulatory approvals and (v) filings
under the HSR Act.
h. Parent Common Stock. The shares of Parent Common Stock to be issued in
accordance with this Agreement will be, upon issuance, duly authorized,
validly issued, fully paid and nonassessable. Such issuance of shares of
Parent Common Stock will be free of any restrictions on transfer imposed by
Parent, other than those contemplated by this Agreement, by the Agreement
for Business Combination or by the Plan of Reorganization. There are no
pre-emptive rights or other anti-dilution rights which would become effective
upon or prohibit such issuance of shares of Parent Common Stock.
i. No Misleading Statements. The Form 10-K of the Parent for each of its last five
fiscal years, the Proxy Statements of the Parent for its annual stockholders
meetings for each of its last five fiscal years and any quarterly or other
reports of the Parent filed with the SEC during its last five fiscal years, and
any exhibits to any of the foregoing, do not, as of their respective dates,
contain any untrue statement of a material fact or any omission to state a
fact necessary to make any statement of fact contained therein, in light of
the circumstances under which it is made, not misleading in any material
respect. All such filings and reports have been filed in a timely manner.
j. No Broker. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Parent or the Subsidiary.
k. Litigation. There is not now pending, and to the best knowledge of the
Parent, there is not threatened in writing, nor is there any basis for, any
litigation, action, suit, investigation or proceeding to which the Parent or its
subsidiaries is or will be a party in or before or by any court or governmental
or regulatory agency or body, except for any litigation, action, suit or
proceeding (whether instituted, pending or, to the best knowledge of the
Parent, threatened in writing) involving claims which in the aggregate are
not, and insofar as the Parent reasonably expects, will not, have a material
adverse effect on the Parent and its subsidiaries taken as a whole. In
addition, there is no judgment, decree, injunction, rule or order of any court,
governmental department, commission, board, bureau, agency,
instrumentality or arbitrator outstanding against the Parent or its subsidiaries
having or which, insofar as the Parent reasonably expects, may have a
material adverse effect upon the Parent and its subsidiaries, taken as a
whole.
l. Securities Laws Compliance. During the five year period ended on the date
hereof, the Parent has complied in all material respects with the applicable
provisions of the Securities Act of 1933 and the Securities Exchange Act of
1934 and the rules and regulations of the SEC promulgated thereunder.
m. FDA Matters. Neither the Parent nor any of its subsidiaries (i) is a party to
any pending investigation or proceeding by or before the FDA or any other
duly authorized State Drug Regulatory Authorities or any other duly
authorized governmental authority which regulates the sale of drugs and
controlled substances in any jurisdiction; (ii) has knowledge of any facts
which would form the basis for an investigation or proceeding or regulatory
action of any sort (other than routine or periodic investigations or reviews)
against the Parent or any of its subsidiaries by the FDA or any other duly
authorized State Drug Regulatory Authorities or any other governmental
authority which regulates the sale of drugs and controlled substances in any
jurisdiction which could affect adversely, or in any way limit or restrict the
ability of the Parent or any of its subsidiaries to market existing products;
(iii) has committed or permitted to exist any violation of the rules and
regulations of the FDA or any other duly authorized State Drug Regulatory
Authorities or any other governmental authority which regulates the sale of
drugs and controlled substances in any jurisdiction which has not been cured
by the Parent or any of its subsidiaries or waived by the FDA or any such
regulatory authority; (iv) has received notice from any third party (whether
or not in writing) of any claim, dispute or controversy relating to the supply
of regulated materials used in the products of the Parent or any of its
subsidiaries, or the quality, formulation, potency, toxicity or efficacy of such
materials; and (v) anticipates, or knows of any pending, threatened or
potential action by any duly authorized State Drug Regulatory Authorities or
any other governmental authority which regulates the sale of drugs and
controlled substances in any jurisdiction which could affect adversely, or in
any way limit or restrict the ability of the Parent or any of its subsidiaries to
market existing products. To the knowledge of the Parent, it and each of its
subsidiaries have fulfilled all regulatory requirements necessary or requisite
to the continued marketing of their existing products.
3.3 Representations and Warranties as to Subsidiary. The Parent and Subsidiary
represent and warrant to the Company as follows:
a. Organization, Good Standing, Capitalization. The Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware with all requisite corporate power and authority to carry on the
business to be conducted by it prior to the Effective Date and to enter into
this Agreement and perform its obligations hereunder. The Subsidiary is not,
and is not required to be, qualified to do business in any jurisdiction other
than the State of Delaware. The Subsidiary has duly authorized capital
stock consisting of 1,000 shares of Common Stock, par value $1 per share,
all of which are issued and outstanding and owned by the Parent. All of
such issued and outstanding shares have been validly issued and are fully
paid and nonassessable. There are no outstanding rights, options, warrants,
conversion rights or agreements for the purchase or acquisition from, or the
sale or issuance by, the Subsidiary of any shares of its capital stock, other
than in connection with this Agreement.
b. Business of the Subsidiary. Since its organization, the Subsidiary has not
engaged in any business activities, entered into any transactions or incurred
any liabilities whatsoever except such as are related to the transactions
contemplated by this Agreement. The Subsidiary has no subsidiaries.
c. Authorization: Binding Agreement. Pursuant to its Certificate of Incorporation,
the Subsidiary has requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including but not
limited to the Merger, have been duly and validly authorized by the Parent as
sole stockholder of the Subsidiary and by the Subsidiary's Board of Directors
and no other corporate proceedings on the part of the Subsidiary are
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions so contemplated. This Agreement has been
duly and validly authorized, executed and delivered by the Subsidiary and
constitutes the legal, valid and binding agreement of the Subsidiary,
enforceable against it in accordance with its terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies.
d. Compliance with Other Instruments, etc. Neither the execution nor delivery of
this Agreement nor the consummation of the transactions contemplated
hereby will conflict with, result in any violation of, or constitute a default
under, the Articles of Incorporation or Bylaws of the Subsidiary or any
judgment, decree, order or any material law or regulation by which the
Subsidiary is bound or affected.
e. Governmental and Other Consents, etc. No consent, approval or authorization of
or designation, declaration or filing with any Governmental Entity on the part
of the Subsidiary is required in connection with the execution or delivery of
this Agreement by the Subsidiary or the Subsidiary's consummation of the
transactions contemplated hereby other than (i) filings in the State of
Delaware in accordance with the Delaware General Corporation Law and (ii)
filings under the HSR Act.
4. COVENANTS.
4.1 Covenants of the Company. The Company agrees that prior to the Effective Date:
a. Action in Furtherance of Merger. Subject to the terms and conditions herein
provided, the Company agrees to use commercially reasonable efforts to
take, or cause to be taken, such action, and to do, or cause to be done,
such things as are necessary, proper or advisable to consummate and make
effective as promptly as practicable the Merger and the transactions
contemplated by this Agreement, including (i) the defending of any lawsuits
or other legal proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated
hereby, (ii) obtaining all governmental consents required for the
consummation of the Merger and the transactions contemplated thereby,
and (iii) making and causing their respective stockholders, as applicable, to
timely make all necessary filings under the HSR Act. Upon the terms and
subject to the conditions hereof, the Company agrees to use commercially
reasonable efforts to take, or cause to be taken, such actions and to do, or
cause to be done, such things as are necessary to satisfy the other
conditions of the closing set forth herein. The Company will consult with
counsel for the Parent as to, and will permit such counsel to participate in,
at the Parent's expense, any lawsuits or proceedings referred to in clause (i)
above brought against the Company, but not against the Parent, provided
that counsel for Company shall retain control of any such lawsuits or
proceedings. In case at any time after the Effective Date any further action
is necessary or desirable to carry out the purposes of this Agreement, the
officers and directors of the Surviving Corporation shall take all such
necessary action.
b. Maintenance of Properties. The Company will, and will cause each Company
Subsidiary to, maintain all of its and their respective properties in customary
repair, order and condition, reasonable wear and use and damage by fire or
other casualty excepted, and will maintain, and will cause each Company
Subsidiary to maintain, insurance upon all of its and their properties and with
respect to the conduct of its and their businesses in amounts and kinds
comparable to that in effect on the date of this Agreement.
c. Access and Information.
i. Between the date of this Agreement and the Effective Date, upon
reasonable notice, the Company and each Company Subsidiary will
give the Parent and its authorized representatives (including its
financial advisors, accountants and legal counsel) access, at all
reasonable times and in a manner which shall not cause
unreasonable disturbance, to all plants, offices, warehouses and
other facilities and to all contracts, agreements, commitments, books
and records (including tax returns) of the Company and each
Company Subsidiary (except to the extent any such agreements or
contracts by their terms restrict access to third parties and the
consent of the other party(ies) thereto cannot be obtained after
commercially reasonable efforts to do so), will permit the Parent to
make such inspections as it may require and will cause its officers
and those of the Company Subsidiaries promptly to furnish the
Parent with such financial and operating data and other information
with respect to the business and properties of the Company and
each Company Subsidiary, as may from time to time be reasonably
requested.
ii. The Company will hold and will cause its affiliates, employees,
representatives, consultants and advisors to hold in strict
confidence, unless compelled to disclose by judicial or administrative
process, or, in the opinion of its counsel, by other requirements of
law, all documents and information concerning the Parent and its
affiliates furnished to the Company in connection with the
transactions contemplated by this Agreement pursuant to
Section 4.2(c) (Access and Information) (except to the extent that
such information can be shown to have been (A) previously known
by the Company or any affiliate of it, (B) in the public domain
through no fault of the Company, or any of its affiliates, (C) later
lawfully acquired from other sources unless the Company knew such
information was obtained in violation of an agreement of
confidentiality or (D) publicly disclosed by the Parent) and will not
release or disclose such information to any other person, except its
auditors, attorneys, financial advisors, and other consultants and
advisors and lending institutions (including banks) in connection with
this Agreement (it being understood that such persons shall be
informed by the Company of the confidential nature of such
information and shall be directed by the Company to treat such
information confidentially). If the transactions contemplated by this
Agreement are not consummated, such confidence shall be
maintained except to the extent such information comes into the
public domain under judicial or administrative process or other
requirements of law or through no fault of the Company or any of its
affiliates and, if requested by the Parent, the Company will destroy
or return to the appropriate party all copies of written information
furnished by the Parent or its affiliates, agents, representatives or
advisors and all copies thereof and excerpts therefrom. If the
Company shall be required to make disclosure of any such
information by operation of law, the Company shall give the Parent
prior notice of the making of such disclosure and shall use all
reasonable efforts to afford such party an opportunity to contest the
making of such disclosures.
d. Conduct of Business. Except as expressly contemplated by the Agreement for
Business Combination, the Plan of Reorganization or this Agreement, during
the period from the date of this Agreement to the Effective Date, the
Company shall, and the Company shall cause each Company Subsidiary to,
conduct its business in the ordinary course and consistent with past
practice, and the Company shall, and the Company shall cause each
Company Subsidiary to, (1) use commercially reasonable efforts to preserve
intact its business organization, (2) keep available the services of its officers
and employees and (3) maintain satisfactory relationships with all persons
with which it does business. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Effective Date, neither the Company nor any Company
Subsidiary will, without the prior written consent of Parent:
i. amend or propose to amend its Articles of Incorporation or Bylaws
(or comparable governing instruments);
ii. other than in the ordinary course of business consistent with past
practice: (A) create, incur or assume any short-term debt, long-term debt
or obligations in respect of capital leases; (B) assume,
guarantee, endorse or otherwise become liable or responsible
(whether directly, indirectly, contingently or otherwise) for the
obligations of any other person except the Company or any
Company Subsidiary; (C) make any capital expenditures or make
any loans, advances or capital contributions to, or investments in,
any other person not currently committed or budgeted (other than
transactions between the Company and UDL-IL and between the
Company and HSW which are reflected in the intercompany
accounts between the Company and UD-IL and HSW, respectively,
or other transactions between the Company and any Company
Subsidiary or customary travel or business advances to employees
made in the ordinary course of business consistent with past
practice); or (D) incur any material liability or obligation (absolute,
accrued, contingent or otherwise);
iii. sell, transfer, mortgage, or otherwise dispose of, or encumber, or
agree to sell, transfer, mortgage or otherwise dispose of or
encumber, any assets or properties, real, personal or mixed, other
than the sale, transfer or disposition of inventory in the ordinary
course of business; or
iv. agree, commit or arrange to do any of the foregoing.
e. Capital Stock. Between the date hereof and the Effective Date, except as
specifically contemplated by the Agreement for Business Combination, the
Plan of Reorganization or this Agreement, neither the Company nor any
member of the Pharmaceutical Group will (i) make any changes in its
authorized capital stock, (ii) issue any stock options, warrants, or other
rights calling for the issue, transfer, sale or delivery of its capital stock or
other securities, (iii) declare or pay any stock dividend or effect any
recapitalization, split-up, combination, exchange of shares or other
reclassification in respect of its outstanding shares of capital stock,
(iv) issue, transfer, sell or deliver any shares of its capital stock (or securities
convertible into or exchangeable, with or without additional consideration,
for such capital stock) except for Company Common Stock issuable upon
the exercise of stock options previously granted pursuant to existing stock
option plans, or, (v) declare, pay or set apart for payment in respect of its
capital stock any dividends or other distribution or payments (whether in
cash, stock or property or any combination thereof), except for cash
dividends on the Company Common Stock and Company Preferred Stock
consistent with past practices of the Company. Except in a manner
consistent with past practice, no award or grant under the Company stock
option plans or any other benefit plan or program shall be made without the
consent of the Parent. Except as specifically contemplated by the
Agreement for Business Combination, the Plan of Reorganization or this
Agreement, the Company shall not make any material amendment to any of
(i) the Company stock option plans or options outstanding thereunder, (ii)
any other option or warrant agreement, or (iii) the terms of any other
security convertible into or exchangeable for Common Stock without the
consent of the Parent.
f. No Solicitations. The Company shall not, nor shall it permit any Company
Subsidiary to, nor shall it authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any Company Subsidiary to continue
negotiations with respect to any Takeover Proposal (as hereinafter defined)
previously received by the Company; to solicit, initiate or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal; or agree to
or endorse any Takeover Proposal. The Company shall promptly advise the
Parent orally and in writing of any such inquiries or proposals. As used in
this Agreement, "Takeover Proposal" shall mean any tender or exchange
offer, proposal for a merger, consolidation or other business combination
involving the Company or any Company Subsidiary or any proposal or offer
to acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of, the Company or any Company Subsidiary other
than the transactions contemplated by this Agreement. Notwithstanding the
foregoing, the Company shall not be obligated to take any of the actions set
forth in this Section 4.1(f), or refrain from taking any of the actions set forth
in this Section 4.1(f), if the Board of Directors of the Company, acting with
the advice of the Company's counsel, determines that such actions or
inactions would be contrary to their legal obligations as Directors of the
Company.
g. Limitation on Indebtedness.
i. Neither the Company nor any Company Subsidiary will create or
incur any indebtedness except for current liabilities incurred in the
ordinary course of business and increases in the Line of Credit
Indebtedness to fund the operations of the business of Company
and the Company Subsidiaries and to fund the transactions
contemplated by the Agreement for Business Combination, the Plan
of Reorganization and this Agreement.
ii. All changes in the amount of the inter-company indebtedness of
UDL-IL and HSW in favor of the Company shall be made in the
ordinary course of business consistent with past practice. At
Closing, the Company shall provide the Parent with a detailed
reconciliation of all changes to such intercompany indebtedness
since August 31, 1995 and through the Effective Date, on a pro
forma basis after giving effect to the consummation of the
transactions contemplated by the Agreement for Business
Combination and the Plan of Reorganization. There will be no
loans, dividends, distributions or other transactions between the
Company and UDL-IL or HSW which are not reflected in the
intercompany accounts between the Company and UDL-IL and
HSW, respectively.
h. Compensation Matters. The Company shall not permit any member of the
Pharmaceutical Group to (i) pay to any officer or employee any bonus,
severance or other compensation not currently required under an existing
agreement or employee benefit plan or arrangement except for increases in
compensation of employees who are not directors or holders of an office at
the rank of Senior Vice President or higher of any such member of the
Pharmaceutical Group consistent with past practices, (ii) create any new
employee benefit plan or arrangement, (iii) modify any existing employee
benefit plan, arrangement or agreement in any respect which would
materially increase the compensation payable thereunder to employees or
materially increase the level of contribution payable by the employer
thereunder, or (iv) enter into any new employment agreement or modify any
existing employment agreement of any employee who is an officer or
director of any such member of the Pharmaceutical Group.
i. Contracts. No member of the Pharmaceutical Group shall enter into,
terminate or modify in any material respect any material contract, agreement
or commitment without the prior written consent of the Parent, which
consent will not be unreasonably withheld.
j. Tax Matters. The Company and each Company Subsidiary will continue to file
when due all federal, state, local, foreign and other tax returns, reports and
declarations required to be filed by them, and will pay or make full and
adequate provision for the payment of all taxes and governmental charges
due or payable by them.
k. Amendments to the Disclosure Schedules. The Company shall make such
amendments to the Disclosure Schedules on the Effective Date as are
necessary to reflect therein the occurrence of events or transactions
occurring after the date hereof and shall deliver a copy of each such
amendment to the Parent on the same date as the date of the amendment.
The Company will deliver such additional amendments from time to time as
are necessary to reflect any material event occurring between the date
hereof and the Effective Date.
l. Notification of Certain Matters. The Company shall give prompt notice to the
Parent of: (i) any notice of, or other communication relating to, a default or
event which, with notice or lapse of time or both, would become a default
under any agreement, indenture or instrument material to the business,
assets, property, condition (financial or otherwise) or the results of
operations of the Company or any Company Subsidiary, to which the
Company or any Company Subsidiary, is a party or is subject; (ii) any notice
or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement including the Merger; (iii) any notice or
other communication from any regulatory authority or national securities
exchange in connection with the transactions contemplated by this
Agreement; (iv) any material adverse change in the business, assets,
prospects, condition (financial or otherwise) or results of operations of the
Company or any Company Subsidiary, or the occurrence of an event which
would be reasonably expected to result in any such change; and (v) any
claims, actions, proceedings or investigations commenced or threatened in
writing involving or affecting the Company or any Company Subsidiary, or
any of their respective property or assets, or any employee, consultant,
director or officer, in his or her capacity as such, of the Company or any
Company Subsidiary, which, if pending on the date hereof, would have been
required to have been disclosed pursuant to this Agreement or which relates
to the consummation of the Merger.
m. Stockholder Approval. The Company will take all steps necessary to duly call,
give notice of, convene and hold no later than thirty (30) days after the
Registration Statement has been declared effective by the SEC a meeting of
its stockholders in accordance with the Delaware General Corporation Law
to consider and vote upon, among other matters, the adoption and approval
of this Agreement and the Merger and the transactions contemplated
hereby. The Company, through its Board of Directors (i) will, consistent
with its legal obligations, adopt a recommendation to the stockholders of the
Company that they adopt and approve this Agreement and (ii) will use
commercially reasonable efforts, consistent with its legal obligations, to
obtain any necessary approval by its stockholders of the transactions
contemplated hereby.
n. Financial Statements. The Company, promptly after the preparation thereof,
shall send to the Parent any financial statements prepared by or on behalf of
it for periods subsequent to those referenced in Section 3.1(b) as to which
the representations and warranties of said section shall apply.
o. No Amendment. The Company shall not amend or permit the amendment of
the Plan of Reorganization or any of the Exhibits thereto without the prior
written consent of the Parent, which consent will not be unreasonably
withheld.
p. Proxy Statement. The Company shall deliver to the Parent the final form of
proxy statement which the Company intends to distribute to its stockholders
in connection with the adoption and approval of this Agreement and the
Merger at least two (2) business days prior to such distribution.
q. No Transactions. The Company shall not enter into any transactions nor
transfer any assets or property to Newco between the date hereof and the
Effective Date except as necessary to prepare for the implementation on the
Effective Date of the Plan of Reorganization in accordance with its terms.
r. Participation by Parent. The Company shall permit representatives of the
Parent to participate in the allocation and apportionment of consolidated
items of the Company to the Pharmaceutical Group provided for in Section
3.3 of the Plan of Reorganization and in the establishment of separate cash
management systems, separate bank accounts, lockboxes, cash balances
and other investments with respect to the Pharmaceutical Group provided
for in Section 1.4(c) of the Distribution Agreement attached as Exhibit 3.2
to the Plan of Reorganization
4.2 Covenants of the Parent. The Parent agrees that prior to the Effective Date:
a. Action in Furtherance of Merger. Subject to the terms and conditions herein
provided, the Parent agrees to use commercially reasonable efforts to take,
or cause to be taken, such action, and to do, or cause to be done, such
things as are necessary, proper or advisable to consummate and make
effective as promptly as practicable the Merger and the transactions
contemplated by this Agreement, including (i) the defending of any lawsuits
or other legal proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated
hereby, (ii) obtaining all governmental consents required for the
consummation of the Merger and the transactions contemplated thereby,
(iii) making all necessary filings under the HSR Act, (iv) filing the Registration
Statement (as defined in Section 4.4) and causing the same to become
effective; and (v) voting the Irrevocable Proxies in favor of approving this
Agreement and the transactions contemplated hereby, all on the terms and
conditions provided for herein. Upon the terms and subject to the
conditions hereof, the Parent agrees to use commercially reasonable efforts
to take, or cause to be taken, such actions and to do, or cause to be done,
such things as are necessary to satisfy the other conditions of the closing
set forth herein. The Parent will consult with counsel for the Company as
to, and will permit such counsel to participate in, at the Company's expense,
any lawsuits or proceedings referred to in clause (i) above (which shall not
include any such lawsuits or proceedings to the extent that they relate to
the Registration Statement) brought against the Parent, but not against the
Company, provided that counsel for the Parent shall retain control of any
such lawsuits or proceedings. In case at any time after the Effective Date
any further action is necessary or desirable to carry out the purposes of this
Agreement, the officers and directors of the Surviving Corporation shall take
such necessary action.
b. Maintenance of Properties. The Parent will, and will cause each of its
subsidiaries to, maintain all of its and their respective properties in
customary repair, order and condition, reasonable wear and use and damage
by fire or other casualty excepted, and will maintain, and will cause each of
its subsidiaries to maintain, insurance upon all of its and their properties and
with respect to the conduct of its and their businesses in amounts and kinds
comparable to that in effect on the date of this Agreement.
c. Access and Information.
i. Between the date of this Agreement and the Effective Date, upon
reasonable notice, the Parent will give the Company and its
authorized representatives (including its financial advisors,
accountants and legal counsel) access, at all reasonable times and
in a manner which shall not cause unreasonable disturbance, to
officers and senior executives of the Parent as well as to financial
and operating data and other information with respect to the
business and properties of the Parent as has been disclosed
publicly by the Parent.
ii. The Parent will hold and will cause its affiliates, employees,
representatives, consultants and advisors to hold in strict
confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of its counsel, by other
requirements of law, all documents and information concerning the
Company and each Company Subsidiary and their respective
affiliates furnished to the Parent in connection with the
transactions contemplated by this Agreement pursuant to Section
4.1(c) (Access and Information) (except to the extent that such
information can be shown to have been (A) previously known by
the Parent or any affiliate of it, (B) in the public domain through no
fault of the Parent, or any of its affiliates, (C) later lawfully
acquired from other sources unless the Parent knew such
information was obtained in violation of an agreement of
confidentiality or (D) publicly disclosed by the Company,) and will
not release or disclose such information to any other person,
except its auditors, attorneys, financial advisors, and other
consultants and advisors and lending institutions (including banks)
in connection with this Agreement (it being understood that such
persons shall be informed by the Parent of the confidential nature
of such information and shall be directed by the Parent to treat
such information confidentially). If the transactions contemplated
by this Agreement are not consummated, such confidence shall be
maintained except to the extent such information comes into the
public domain under judicial or administrative process or other
requirements of law or through no fault of the Parent or any of its
affiliates and, if requested by the Company, the Parent will destroy
or return to the appropriate party all copies of written information
furnished by the Company or any Company Subsidiary, or their
respective affiliates, agents, representatives or advisors and all
copies thereof and excerpts therefrom. If the Parent shall be
required to make disclosure of any such information by operation of
law, the Parent shall give the Company prior notice of the making
of such disclosure and shall use all reasonable efforts to afford
such party an opportunity to contest the making of such
disclosures.
d. Listing Application. The Parent will use its commercially reasonable efforts to
effect listing of the Parent Common Stock to be delivered in accordance
with this Agreement on the NYSE upon notice of issuance.
e. Public Filings. The Parent shall promptly file all periodic reports required to
be filed with the SEC and provide the Company with a copy of such reports
promptly after such filing.
f. Voting of Irrevocable Proxies. The Parent shall vote the Irrevocable Proxies in
favor of the adoption of this Agreement, in the form as executed on the
date hereof, and the approval of the Merger on the terms and conditions set
forth in this Agreement, at the meeting of the stockholders of the Company
to be called as provided for in Section 1.4.
g. Registration Statement. The Parent shall deliver to the Company the final form
of Registration Statement (as defined in Section 4.4) which the Parent
intends to have declared effective by the SEC at least two (2) business days
prior to such declaration.
h. Conduct of Business. Except as expressly contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Date, the
Parent shall, and the Parent shall cause each of its subsidiaries to, conduct
its business in the ordinary course and consistent with past practice.
4.3 Covenants of the Subsidiary. The Subsidiary agrees that prior to the Effective Date:
a. No Business. The Subsidiary will not engage in any business activities or
enter into any transaction whatsoever except such as are related to this
Agreement and the performance of its obligations hereunder.
b. Access. Until the Effective Date or until the abandonment of the Merger as
permitted by this Agreement, the Subsidiary will give to the Company and
its representatives full access during normal business hours and upon
reasonable notice, to all of the properties, books, contracts, documents and
records of it and will furnish to the Company such financial and other
information concerning the Subsidiary as the Company and its
representatives may from time to time reasonably request.
c. Action in Furtherance of Merger. The Subsidiary shall use commercially
reasonable efforts to obtain such consents and authorizations of third
parties, to make such filings, and to give such notices to third parties, which
may be necessary or reasonably required on the part of the Subsidiary in
order to effect, or in connection with, the transactions contemplated by this
Agreement.
4.4 Covenants of the Company and the Parent.
a. Registration Statement. The Company shall cooperate with the Parent in the
preparation by the Parent of, and the Parent shall file with the SEC on
Form S-4 and shall use commercially reasonable efforts to cause to become
effective, a registration statement under the 1933 Act, covering the shares
of Parent Common Stock to be delivered pursuant to this Agreement (the
"Registration Statement"). The Parent shall use commercially reasonable
efforts to qualify such securities, if required, under applicable state securities
laws and to cause the shares of Parent Common Stock which are to be
delivered pursuant to this Agreement to be listed on the NYSE. The
Prospectus/Proxy Statement shall include the prospectus which forms a part
of the Registration Statement. The obligations of the Company pursuant to
this Section 4.4 shall be limited to providing the information required by
items 17 and 18 of Form S-4, and the expense of providing such information
shall be borne by the Company. The Company and the Parent hereby agree
that, with respect to the information to be furnished by each of them in
writing specifically for inclusion in the Registration Statement, none of such
information will be false or misleading with respect to any material fact or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
b. Public Announcements. So long as this Agreement is in effect, neither the
Parent nor the Company shall, nor any of their affiliates shall, issue or cause
the publication of any press release or any other announcement with respect
to the Merger or the transactions contemplated by this Agreement without
the consent of the other party as to the nature, contents and dissemination
thereof, in which case the party proposing such publication will deliver a
copy of such release or announcement to the Company along with its
request for consent.
5. CONDITIONS TO CLOSING; ABANDONMENT AND TERMINATION.
5.1 Conditions to the Company's Closing and Its Right to Abandon. The Company shall
(x) not be required to close the Merger if any of the following shall not be true or
shall not have occurred or shall not have been waived in writing by the Company at
the Closing and (y) have the right to abandon the Merger and terminate this
Agreement if any of the following shall not be true or shall not have occurred, or
shall not have been waived in writing by the Company, as the case may be, by
5:01 p.m., Eastern Standard Time, on February 28, 1996.
a. Material Adverse Effect. No event or circumstance shall have occurred
which has, or is reasonably expected to have, a material adverse effect on
the business, assets, financial condition or results of operation of the Parent
and its subsidiaries, taken as a whole, including, without limitation, any
material adverse effect caused by any of the following:
i. The failure of the representations and warranties of the Parent and
the Subsidiary herein contained to be true and correct in all respects
on and as of the Effective Date with the same force and effect as
though made on and as of the Effective Date except as affected by
transactions specifically contemplated by this Agreement;
ii. The failure of either the Parent or the Subsidiary to have performed
all its obligations and agreements and complied with all covenants
contained in this Agreement to be performed and complied with by it
on or prior to the Effective Date; and
iii. The execution, delivery and performance by the Parent of this
Agreement and the consummation of the Merger having, directly or
indirectly, resulted in a breach of, constituted an event of default
under or resulted in the acceleration of, with or without the giving of
notice, lapse of time, or both, an obligation under any agreement of
the Parent.
b. No Material Adverse Change. Between June 30, 1995 and the Effective Date,
there shall have been no material adverse change in the business, assets,
financial condition or results of operation of the Parent and its subsidiaries
taken as a whole.
c. Officer's Certificate. The Company shall have received a certificate of the
Chairman of the Board, the President or any Vice-President of each of the
Parent and the Subsidiary, dated the Effective Date, certifying as to the
absence of any of the matters mentioned in Sections 5.1(a) (Material
Adverse Effect) and (b) (Material Adverse Change).
d. Opinion of Counsel. Buchanan Ingersoll Professional Corporation, special
counsel to the Parent and the Subsidiary, shall deliver to the Company its
opinion, dated the Effective Date and delivered immediately prior to the
Effective Time substantially in the form and substance of Exhibit G attached
hereto.
e. Consents. Except to the extent such consents are not required at the
Effective Date: (A) the Parent shall have received the consents or
exemptions or made the filings, as the case may be, which are referred to in
Section 3.2(g) (Government and Other Consents, etc.) hereof; and (B) all
notification and report forms required to be filed on behalf of the parties to
this Agreement with the Federal Trade Commission and the Department of
Justice under the HSR Act and rules thereunder shall have been filed, and
the waiting period required to expire under the HSR Act and rules
thereunder, including any extension thereof, shall have expired or early
termination of the waiting period shall have been granted.
f. Effectiveness. The Registration Statement shall have become effective under
the 1933 Act and shall not be the subject of any stop order or proceeding
seeking a stop order.
g. Listing. The Parent Common Stock to be issued in the Merger shall have
been approved for listing on the NYSE upon notice of issuance.
h. Consummation of Transactions under Agreement for Business Combination and Plan
of Reorganization. The transactions contemplated by the Agreement for
Business Combination and the Plan of Reorganization shall have been
consummated in accordance with the terms of the Agreement for Business
Combination and the Plan of Reorganization and all agreements attached to
the Agreement for Business Combination and Plan of Reorganization as
Exhibits which require execution and delivery shall have been executed and
delivered on the Effective Date prior to the Effective Time, other than as a
result of a failure by the Company to use commercially reasonable efforts to
consummate such transactions or to execute and deliver, or cause to be
executed and delivered, such agreements.
i. No Legal Restraints. No temporary restraining order, preliminary or permanent
injunction or other order issued by a court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger
shall be in effect.
5.2 Conditions to the Parent's and the Subsidiary's Closing and Right of the Parent and
the Subsidiary to Abandon. The Parent and the Subsidiary shall (x) not be required
to close the Merger if any of the following shall not be true or shall not have
occurred or shall not have been waived in writing by the Parent at the Closing and
(y) have the right to abandon the Merger and terminate this Agreement if any of the
following shall not be true or shall not have occurred, or shall not have been waived
in writing by the Parent, as the case may be, by 5:01 p.m., eastern standard time,
on February 28, 1996:
a. Material Adverse Effect. No event or circumstance shall have occurred which has,
or is reasonably expected to have, a material adverse effect on the business, assets,
financial condition or results of operation of the Pharmaceutical Group, taken as a
whole, including, without limitation, any material adverse effect caused by any of
the following:
i. The failure of the representations and warranties of the Company herein
contained to be true and correct in all respects on and as of the Effective
Date with the same force and effect as though made on and as of the
Effective Date, except as affected by transactions specifically contemplated
by the Agreement for Business Combination or Plan of Reorganization;
ii. The failure of the Disclosure Schedules, as amended immediately prior to,
but on the same day as, the Merger on the Effective Date for events or
transactions occurring after the date of this Agreement, to be true and
correct in all respects on and as of the Effective Date with the same force
and effect as though made on and as of the Effective Date;
iii. The disclosure by any amendment to the Disclosure Schedules of the
existence of any adverse change in the business, assets, financial condition
or the results of operation of the Pharmaceutical Group, taken as a whole;
iv. The failure of the Company to have performed all its obligations and
agreements and complied with all covenants contained in this Agreement to
be performed and complied with by it on or prior to the Effective Date; and
v. The execution, delivery and performance by the Company of this Agreement
and the consummation of the Merger having, directly or indirectly, resulted
in a breach of, constituted an event of default under or resulted in the
acceleration of, with or without the giving of notice, lapse of time, or both,
an obligation under any agreement of the Company.
b. No Material Adverse Change. Between August 31, 1995 and the Effective
Date, there shall have been no material adverse change in the business,
assets, financial condition or results of operation of the Pharmaceutical
Group taken as a whole except for those changes arising from the
transactions contemplated by the Agreement for Business Combination and
the Plan of Reorganization.
c. Officer's Certificate. The Parent and the Subsidiary shall have received a
certificate of the Chairman of the Board, the President or any Vice-President
of the Company, dated the Effective Date, certifying as to:
i. the absence of any of the matters mentioned in Sections
5.2(a)(Material Adverse Effect) and (b) (Material Adverse Change);
ii. the number of shares of the Special Preferred Stock of the Company
issued and outstanding and the number of shares of Company
Preferred Stock issued and outstanding;
iii. the number of Outstanding Shares of Company Common Stock;
iv. the information relating to the Pharmaceutical Group supplied by the
Company in writing specifically for inclusion in the Registration
Statement; and
v. the adoption of resolutions by the Board of Directors of the
Company adopting the Plan of Reorganization in the form of
Exhibit B attached hereto.
d. Opinion of Counsel. Rivkin, Radler & Kremer, counsel to the Company, shall
deliver to the Parent its opinion dated the Effective Date and delivered
immediately prior to the Effective Time, substantially in the form and
substance of Exhibit H attached hereto.
e. Consents. Except to the extent such consents are not required at the
Effective Date: (A) the Parent shall have received the consents or
exemptions, or made the filings, as the case may be, which are referred to
in Section 3.2(g) (Government and Other Consents, etc.) hereof other than
as a result of a failure by the Parent to use commercially reasonable efforts
to obtain such consents or exemptions or make such filings; (B) all
notification and report forms required to be filed on behalf of the parties to
this Agreement with the Federal Trade Commission and the Department of
Justice under the HSR Act and rules thereunder shall have been filed, and
the waiting period required to expire under the HSR Act and rules
thereunder, including any extension thereof, shall have expired or early
termination of the waiting period shall have been granted; (C) the Company
shall have received the consents or exemptions, or made the filings, as the
case may be, which are referred to in Section 3.2(f) (Government and Other
Consents, etc.) and shall have received such consents, if any, as may be
required with respect to the Pharmaceutical Group as provided in the Plan of
Reorganization.
f. Rule 145. The Company shall have delivered to the Parent an opinion of
Rivkin, Radler & Kremer, in form and substance satisfactory to the Parent,
specifying the persons who in the judgment of such counsel, based on a
reasonable investigation, may be deemed to be Affiliates.
g. Effectiveness. The Registration Statement shall have become effective under
the 1933 Act and shall not be the subject of any stop order or proceeding
seeking a stop order other than as a result of a failure by the Parent to use
commercially reasonable efforts to cause the Registration Statement to
become effective.
h. Reconciliation of the Intercompany Account. The Company shall have delivered
the reconciliation of the Inter-Company Account described in
Section 4.1(g)(ii).
i. TC Stockholders' Agreement. That certain Agreement, dated March 1, 1962, as
amended, by and among the Company and all of the holders of the
Company Common Stock who are parties thereto or who are bound by the
provisions thereof shall have been terminated and shall be of no further
force and effect.
j. UDL-IL Stockholders' Agreement. That certain Agreement Among Stockholders
by and among Michael K. Reicher, Hermann Schloegl, the Company and
UDL-IL, dated February 19, 1982 shall have been terminated and shall be of
no further force and effect.
k. Consummation of Transactions Under Agreement for Business Combination and Plan
of Reorganization. The transactions contemplated by the Agreement for
Business Combination and the Plan of Reorganization required to be
consummated on or before the Effective Date shall have been consummated
in accordance with the terms of the Agreement for Business Combination
and the Plan of Reorganization and all agreements attached to the
Agreement for Business Combination and the Plan of Reorganization as
Exhibits which require execution and delivery shall have been executed and
delivered on the Effective Date prior to the Effective Time, other than as a
result of a failure by the Parent to use commercially reasonable efforts to
consummate such transactions or to execute and deliver, or cause to be
executed and delivered, such agreements. The Plan of Reorganization and
the exhibits attached to each shall not have been amended without the prior
written consent of the Parent except when such consent has been
unreasonably withheld.
l. UDL-IL Minority Stock Interest. The Company shall have acquired the stock of
UDL-IL held by Michael K. Reicher and the Company shall be the owner of
all of the issued and outstanding capital stock of UDL-IL.
m. Exercise of Options. All of the outstanding options to acquire shares of
Company Common Stock shall have been fully exercised or cancelled and
the appropriate number of shares of Company Common Stock shall have
been issued with respect to such exercise.
n. Listing. The Parent Common Stock to be issued in the Merger shall have
been approved for listing on the NYSE upon notice of issuance, other than
as a result of a failure by the Parent to use commercially reasonable efforts
to obtain approval for such listing.
o. Indemnification Agreement. Newco and the Company shall have executed and
delivered the Indemnification Agreement in the form attached as Exhibit 5 to
the Agreement for Business Combination.
p. Financial Statements. The Parent shall have received consolidated and consolidating
balance sheets of the Company and its subsidiaries and of UDL-IL and UDL-FL for
the fiscal year ended October 31, 1995 and the related consolidated and consolidating
statements of operations, stockholders' equity and cash flows for the year then ended,
including footnotes thereto. Such consolidate financial statements of the Company
shall have been audited by KPMG, independent certified public accountants, and such
firm shall have issued thereon an auditor's report without qualification.
q. No Legal Restraints. No temporary restraining order, preliminary or permanent
injunction or other order issued by a court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger
shall be in effect.
r. Reicher Employment Agreement. That certain Employment Agreement, dated
February 19, 1982, by and between Michael K. Reicher and UDL-IL shall
have been terminated and be of no further force and effect.
s. Outstanding Shares of Special Preferred Stock. No shares of the Special Preferred
Stock of the Company shall be issued or outstanding.
6. ADDITIONAL TERMS OF ABANDONMENT.
6.1 Terms of Abandonment. In addition to the provisions of Article 5 hereof, the
Merger may be abandoned and this Agreement may be terminated on or before 5:01
p.m., eastern standard time, on February 28, 1996:
a. Mutual Agreement. By mutual agreement of the Boards of Directors of the
Parent, the Subsidiary and the Company pursuant to resolutions adopted by
such Boards, notwithstanding any prior adoption of this Agreement or
approval of the Merger by the respective stockholders of the Subsidiary or
the Company.
b. Violation of Order. By either the Parent or the Subsidiary on the one hand, or
the Company, on the other, if consummation of the Merger would violate
any preliminary injunction or restraining order or final, nonappealable order,
decree, injunction, restraining order or judgment of any United States court
or other tribunal of competent jurisdiction.
6.2 Termination of Agreement. The Merger shall be abandoned and this Agreement
shall be automatically terminated at 5:01 p.m., eastern standard time, on
February 28, 1996, or such later date as the Board of Directors of the Parent, the
Subsidiary and the Company may mutually agree pursuant to resolutions adopted by
such Boards.
6.3 Effect of Abandonment or Termination. If the Merger is abandoned and this
Agreement is terminated as provided in Section 6.1 (Terms of Abandonment),
Section 6.2 (Termination of Agreement) or in Article 5 of this Agreement, this
Agreement (except Section 4.1(c)(ii) (Access and Information), Section 4.2(c)(ii)
(Access and Information), Article 7 (Expenses) Section 8.11 (Indemnification by the
Company) and Section 8.12 (Indemnification by the Parent) shall forthwith become
wholly void and of no effect, and none of the parties shall have any liability on
account of any provision hereof which does not expressly survive the termination of
this Agreement on the part of any party hereto or their respective officers or
directors (other than for the payment of expenses pursuant to Section 7.2 or 7.3
hereof). The parties shall continue to be liable for the performance of those
provisions which survive the termination of this Agreement.
7. EXPENSES.
7.1 Costs and Expenses. Except as set forth in Sections 7.2 and 7.3, whether or not
the Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, and, in connection therewith, each of the Parent and the
Company shall pay, with its own funds, any and all property or transfer taxes
imposed on such party, except that expenses incurred in connection with the
typesetting, printing or photocopying and mailing the Prospectus/Proxy Statement to
the holders of Company Preferred Stock and Company Common Stock shall be
shared equally by the Parent and the Company; provided, however, the share of
such expenses to be paid by the Company shall not exceed Ten Thousand Dollars
($10,000).
7.2 Termination Pursuant to Section 5.2 Generally. In the event that the Parent shall
terminate this Agreement pursuant to any provision of Section 5.2 (other than
pursuant to Section 5.2(e) with respect to consents or filings of the Parent, Section
5.2(g) with respect to the effectiveness of the Registration Statement,
Section 5.2(n) with respect to the approval of the listing of the Parent Common
Stock on the NYSE or Section 5.2(q) with respect to legal restraints), then the
Company shall, within three business days following notification (provided such
notification is delivered after February 28, 1996 and on or prior to March 31, 1996)
by the Parent to the Company of the amount of such costs and expenses, reimburse
the Parent for all filing fees incurred by the Parent, all typesetting, printing,
photocopying and mailing expenses of the Prospectus/Proxy Statement and
Registration Statement incurred by the Parent, and for all actual out-of-pocket legal
and accounting fees and expenses incurred by the Parent in connection with the
transactions contemplated by this Agreement.
7.3 Termination Pursuant to Section 5.1 Generally. In the event that the Company shall
terminate this Agreement pursuant to Section 5.1 (other than pursuant to Section
5.1(e) with respect to consents or filings of the Company, Section 5.1(f) with
respect to the effectiveness of the Registration Statement, Section 5.1(g) with
respect to the approval of the listing of the Parent Common Stock on the NYSE or
Section 5.1(i) with respect to legal restraints), then the Parent shall, within three
business days following notification (provided such notification is delivered after
February 28, 1996 and on or prior to March 31, 1996) by the Company to the
Parent of the amount of any such fees or expenses, reimburse the Company for all
filing fees incurred by the Company, all typesetting, printing, photocopying and
mailing expenses of the Prospectus/Proxy Statement incurred by the Company, and
for all actual out-of-pocket legal and accounting fees and expenses incurred by the
Company in connection with the transactions contemplated by this Agreement.
8. MISCELLANEOUS.
8.1 Certification of the Company's Stockholder Votes, etc. Prior to the Effective Date,
the Company shall deliver to the Parent and the Subsidiary a certificate of its
Secretary or Assistant Secretary setting forth (a) the number of shares of its capital
stock outstanding and entitled to vote on the adoption of this Agreement and the
approval of the Merger, (b) the total number of votes eligible to be cast by each
class of such capital stock entitled to vote, and (c) the number of votes cast by
each class of capital stock in favor of or against this Agreement and the approval of
the Merger.
8.2 Certification of the Parent's Stockholder Votes, etc. Prior to the Effective Date, the
Parent shall deliver to the Company and the Subsidiary a certificate of its Secretary
or Assistant Secretary setting forth that the Parent, in its capacity as sole
stockholder of the Subsidiary, has adopted this Agreement and approved the Merger
in accordance with the Delaware General Corporation Law.
8.3 Termination of Covenants, Representations and Warranties. The respective
covenants, representations and warranties of the parties hereto contained in
Articles 3 and 4 hereof and in the Disclosure Schedules, shall expire and be
terminated and extinguished upon the effectiveness of the Merger, and none of the
parties hereto shall thereafter be under any liability whatsoever with respect to such
covenants, representations, and warranties. This Section 8.3 shall have no effect
upon any other obligations hereunder of any of the parties hereto whether to be
performed before or after the effectiveness of the Merger.
8.4 Certain Tax Matters.
a. The Parent hereby represents, warrants to, and covenants with the
Company that until the third anniversary of the Effective Date, the Parent
will not dispose of any capital stock of the Surviving Corporation by sale,
exchange or transfer, distribution to shareholders or otherwise (including,
without limitation, transfers to any subsidiary of the Parent);
b. The Parent hereby represents, warrants to, and covenants with the
Company that until the third anniversary of the Effective Date, the Parent
shall not cause or permit the Surviving Corporation or any member of the
Pharmaceutical Group to:
i. Cease operations;
ii. Make a material disposition of any of its existing assets by means of
a sale, exchange or transfer, distribution to shareholders or
otherwise (including, without limitation, transfers from the Surviving
Corporation to UDL-IL, UDL-FL, AP or PD or transfers from UDL-IL,
UDL-FL, AP or PD to the Surviving Corporation, the Parent or any
subsidiary of the Parent);
iii. Dispose of any capital stock of any member of the Pharmaceutical
Group by sale, exchange or transfer, distribution to shareholders or
otherwise (including, without limitation, transfers from the Surviving
Corporation to the Parent or any subsidiary of the Parent);
iv. Liquidate or merge with any other corporation (including the Parent
or a subsidiary of the Parent); or
v. In the case of the Surviving Corporation only, cease to engage in the
active conduct of a trade or business within the meaning of
Section 355(b((2).
Except as expressly restricted pursuant to the foregoing provisions of this
Section 8.4, the Parent, the Surviving Corporation and the members of the
Pharmaceutical Group shall be free to conduct business and to enter into any
transactions which they deem appropriate.
c. In the event the Parent desires to take any of the actions described in
Section 8.4(a) or in the event the Parent desires to cause or permit the
Surviving Corporation or any member of the Pharmaceutical Group to take
any of the actions described in Section 8.4(b), the Parent shall first deliver
to Newco an opinion of counsel to the Parent, addressed to the Parent and
those persons or entities who were holders of Company Preferred Stock and
Company Common Stock immediately prior to the Effective Time, which
opinion shall be reasonably satisfactory to the Stockholders Representative,
or a favorable ruling letter from the appropriate taxing authority, reasonably
satisfactory to the Stockholders Representative, that such actions would not
adversely affect the tax consequences of the transactions described in the
Plan of Reorganization to the Surviving Corporation or the holders of
Company Preferred Stock or Company Common Stock, or adversely affect
the tax consequences of the Merger to the Surviving Corporation or the
holders of Company Preferred Stock or Company Common Stock. The
Parent has no present intention to take or permit any such action.
d. The Company hereby acknowledges and agrees that neither the Parent nor
the Surviving Corporation shall have any liability to the holders of Company
Preferred Stock or Company Common Stock with respect to the tax
consequences resulting from the transactions described in the Agreement for
Business Combination, the Plan of Reorganization or this Agreement, except
for corporate taxes imposed upon such holders on account of transferee
liability, if any, resulting from the Corporation's distribution to such holders
of the shares of capital stock of Newco under the Plan of Reorganization.
e. The Parent and the Company hereby agree that neither of them, nor MLI,
shall have any right to terminate this Agreement or abandon the Merger on
account of an unfavorable ruling, or preliminary indication of unfavorable
ruling, upon any formal or informal ruling request to the Internal Revenue
Service made by the Company after the date hereof with respect to the
transactions contemplated by the Plan of Reorganization.
8.5 Execution in Counterparts. For the convenience of the parties, this Agreement and
any amendments, supplements, waivers and modifications may be executed in one
or more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
8.6 Waivers and Amendments. Prior to the Effective Date, this Agreement may be
amended, modified and supplemented in writing signed by all the parties hereto and
any failure of any of the parties hereto to comply with any of its obligations,
agreements or conditions as set forth herein may be expressly waived in writing by
the other parties hereto.
8.7 Confidentiality. The Company and the Parent agree that the Confidentiality
Agreement between them dated May 3, 1995 is terminated effective on the date of
this Agreement and shall be of no further force or effect.
8.8 Schedules. The Disclosure Schedules referred to in this Agreement shall not be
attached hereto but shall be in the form executed and delivered to the Parent by the
Company with respect to each member of the Pharmaceutical Group.
8.9 Payments to Dissenting Stockholders. The Surviving Corporation will pay to any
dissenting stockholders of the Company the amount, if any, to which they may be
entitled under the provisions of the Delaware General Corporation Law, such
payment to be made from the sale of shares of Parent Common Stock pursuant to
the terms of an escrow arrangement to be established for such purpose pursuant to
a letter agreement dated the date hereof between the Parent, the Company and the
Stockholders Representative.
8.10 Indemnification by the Company. Whether or not the Merger is consummated
pursuant to the terms of this Agreement, as it may be amended, modified or
supplemented, the Company shall indemnify, defend and hold harmless to the fullest
extent permitted under applicable law the Parent, each person, if any, who controls
the Parent within the meaning of Section 15 of the 1933 Act, each officer, director,
employee, representative or agent of the Parent who now holds, or at any time prior
to the Effective Date has held, such positions, and each and all of them, against any
and all losses, claims, damages, or liabilities, joint or several (and to reimburse each
such indemnified person for any legal or other costs or expenses reasonably incurred
by such indemnified persons in connection with investigating or defending any such
loss, claim, damage or liability, or action in respect thereof, provided the Company
has received an undertaking from each such indemnified person to promptly return
to, or reimburse, the Company for any costs or expenses paid by the Company in
the event that ultimately it shall have been determined by a court of competent
jurisdiction not subject to appeal that the indemnified person is not entitled to be
indemnified under applicable law) to which they, or any of them (or any of their
heirs, successors or assigns) may become subject under the 1933 Act, the
Securities Exchange Act of 1934 or other federal or state statutory law or common
law, caused by, or arising out of, any of the information (but not the information
relating to the Parent, its subsidiaries, affiliates, officers or directors) relating to and
provided in writing by the Company, the Company Subsidiaries, affiliates, officers or
directors included in the Registration Statement and the Prospectus/Proxy
Statement or in any amendment or supplement thereto (which information will be
identified in a memorandum initialled by the parties hereto prior to the filing or
mailing, as the case may be, of the Registration Statement or the Prospectus/Proxy
Material or any such amendment or supplement) being false or misleading in any
material respect, failing to state any facts necessary to make the statements therein
not false or misleading in any material respect, or omitting to state any material fact
required to be stated therein with respect to the Company, its subsidiaries,
affiliates, officers or directors in light of the circumstances under which they were
made.
8.11 Indemnification by the Parent. Whether or not the Merger is consummated pursuant
to the terms of this Agreement, as it may be amended, modified or supplemented,
the Parent shall indemnify, defend and hold harmless to the fullest extent permitted
under applicable law the Company, each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act, each officer, director, employee,
representative or agent of the Company who now holds, or at any time prior to the
Effective Date has held, such positions, and each and all of them, against any and
all losses, claims, damages or liabilities, joint or several (and to reimburse each such
indemnified person for any legal or other costs or expenses reasonably incurred by
such indemnified person in connection with investigating or defending any such
loss, claim, damage or liability, or action in respect thereof, provided the Parent has
received an undertaking from each such indemnified person to promptly return to, or
reimburse, the Parent for any costs or expenses paid by the Parent in the event that
ultimately it shall have been determined by a court of competent jurisdiction not
subject to appeal that the indemnified person is not entitled to be indemnified under
applicable law) to which they, or any of them (or any of their heirs, successors or
assigns) may become subject under the 1933 Act, the Securities Exchange Act of
1934 or other federal or state statutory law or common law, caused by, or arising
out of, any of the information relating to and provided in writing by the Parent, its
subsidiaries, affiliates, officers or directors (but not the information required by
items 17 and 18 of Form S-4) included in the Registration Statement and the
Prospectus/Proxy Statement or in any amendment or supplement thereto (which
information will be identified in a memorandum initialled by the parties thereto prior
to the filing or mailing, as the case may be, of the Registration Statement or the
Prospectus/Proxy Statement or any such amendment or supplement) being false or
misleading in any material respect, failing to state any facts necessary to make the
statements therein not false or misleading in any material respect, or omitting to
state any material fact required to be stated therein with respect to the Parent, its
subsidiaries, affiliates, officers or directors in light of the circumstances under which
they were made.
8.12 Procedure. A party claiming indemnification (the "Indemnified Party") will give
prompt notice to the party liable for indemnification (the "Indemnifying Party") of
any matters hereunder which may give rise to a claim for indemnification as
promptly as practicable after it has actual knowledge of the facts which may give
rise to such claim, and the Indemnified Party will specify in such notice, in
reasonable detail, the relevant facts known to the Indemnified Party relating to such
potential indemnification right. The failure, however, of the Indemnified Party to
give notice within a reasonable time as required under this Section 8.12 will not
affect or otherwise waive the Indemnified Party's rights to be indemnified under, or
to enforce an indemnification of such claim or any other claim pursuant to, the
terms of this Agreement to its full extent, except that the Indemnified Party will not
be permitted to recover from the Indemnifying Party the amount of any additional
loss, liability or damage incurred by the Indemnified Party which would not
reasonably have been incurred had notice been given in accordance with the
provisions of this Section 8.12. Failure by the Indemnified Party to give such notice
will not diminish any rights to indemnity it may have other than under this
Agreement.
If the facts which give rise to any such potential indemnification claim involve any actual or
threatened claim or demand by any third party against the Indemnified Party, the Indemnifying
Party will be entitled (without prejudice to the right of the Indemnified Party at its expense
jointly to defend) to defend such claim (and jointly to prosecute any possible related claim by
the Indemnified Party against any third party) at the Indemnifying Party's expense through
counsel of the Indemnifying Party's own choosing, provided that the Indemnifying Party gives
notice of its intention to do so to the Indemnified Party within fifteen days after receipt of the
notice of claim. In all instances in which the Indemnifying Party chooses to defend claims
against the Indemnified Party as provided hereunder, it is agreed that counsel for the
Indemnifying Party will act as lead counsel even if the Indemnified Party chooses to participate
in said defense. It is further agreed that whenever the Indemnifying Party chooses to defend a
claim and the Indemnified Party chooses not to participate actively in such defense, the
Indemnified Party will nonetheless fully and actively cooperate with and assist the Indemnifying
Party in defending the matter by, among other things, assisting in the procurement of
documentary evidence and witnesses and enforcing rights against third parties.
No matter giving rise to a claim for indemnification under this Agreement will be settled by
the Indemnifying Party without the prior written consent of the Indemnified Party, except when
the settlement thereof involves only the payment of money for which the Indemnified Party is
totally indemnified by the Indemnifying Party by virtue of payment made directly to a third
party by the Indemnifying Party. Promptly following a party's receipt of a firm settlement offer
with respect to any such matter, such party will notify the other party of such offer, setting forth
in such notification the terms of such offer and indicating the notifying party's view as to
whether or not the offer should be accepted. Any acceptance or rejection of a settlement offer
on the part of the other party will be submitted to the notifying party within ten (10) days after
the other party's receipt from the notifying party of the terms of such offer. Failure of the other
party to so advise the notifying party within said ten (10) days will constitute an acceptance of
such settlement offer by the other party.
8.13 Notices. All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly given
upon receipt when delivered by hand against receipt, telecopied (upon confirmation
of receipt thereof) or mailed, certified or registered mail, return receipt requested,
postage prepaid:
To the Company:
TC Manufacturing Co., Inc.
1527 Lyons Street
Evanston, Illinois 60201
Attention: President
Telecopy: (708) 866-8596
with a copy to:
Keith R. Abrams, Esquire
Rivkin, Radler & Kremer
30 North LaSalle Street
Chicago, Illinois 60602-2507
Telecopy Number: (312) 782-3112
To the Parent or the Subsidiary:
Mylan Laboratories Inc.
781 Chestnut Ridge Road
Morgantown, West Virginia 26505
Attention: Roderick P. Jackson,
Senior Vice President
Telecopy: (304) 599-7284
With a copy to:
John R. Previs, Esq.
Buchanan Ingersoll Professional Corporation
Telecopy Number: (412) 562-1041
20th Floor, One Oxford Centre
301 Grant Street
Pittsburgh, Pennsylvania 15219-1410
or to such other address as specified in a notice given in like manner.
8.14 Entire Agreement; No Third-Party Beneficiaries; Rights of Ownership. This
Agreement (including the Agreement for Business Combination, the Plan of
Reorganization, the Distribution Agreement, the Indemnification Agreement and the
documents and the instruments referred to herein and therein) (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof and
thereof, and (b) is not intended to confer upon any person other than the parties
hereto or thereto any rights or remedies hereunder or thereunder.
8.15 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to any applicable conflicts of
law.
8.16 No Remedy in Certain Circumstances. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith or not to take any action required herein, the other party shall not be
entitled to specific performance of such provision or part hereof or to damages for a
breach hereof resulting from such holding or order.
8.17 Closing. After all conditions hereunder have been satisfied (other than those which
have been expressly waived), the closing on the Merger (the "Closing") shall occur
at the offices of Buchanan Ingersoll Professional Corporation, Pittsburgh,
Pennsylvania at which the documents to be delivered on the Effective Date as
described in Article 5 shall be delivered by the respective parties. The Closing shall
be scheduled to occur on the fifth business day following the date called for the
meeting of the Company's stockholders described in Section 1.4 hereof (the
"Scheduled Closing Date"). The Closing shall occur on the Scheduled Closing Date
unless, on such date, any party has a right not to close the Merger and refuses to
close in which event the Closing shall be adjourned from business day to business
day thereafter until the Closing occurs or until 5:01 p.m., eastern standard time, on
February 28, 1996.
[Intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by each of the Constituent
Corporations and the Parent, all on the date first above written.
ATTEST: TC MANUFACTURING CO., INC.
By: /s/ Keith R. Abrams By: /s/ Herbert L. Stern, Jr.
Name: Keith R. Abrams Name: Herbert L. Stern, Jr.
Title: Assistant Secretary Title: Chairman of the Executive Committee of
the Board of Directors
ATTEST: MLI ACQUISITION CORP.
By: /s/ Frank A. DeGeorge By: /s/ Roderick P. Jackson
Name: Frank A. DeGeorge Name: Roderick P. Jackson
Title: Secretary Title: Vice President
ATTEST: MYLAN LABORATORIES INC.
By: /s/ C.B. Todd By: /s/ Roderick P. Jackson
Name: C.B. Todd Name: Roderick P. Jackson
Title: Senior Vice President Title: Senior Vice President
</TABLE>
APPENDIX A
GLOSSARY OF
DEFINED TERMS/SECTION REFERENCES
IN
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TC MANUFACTURING CO., INC.
AND
MLI ACQUISITION CORP.
AND
MYLAN LABORATORIES INC.
DEFINED TERM SECTION REFERENCE
1933 Act Section 2.1(f)(iv)
Adjusted Company Common Stock Consideration Section 2.1(f)(i)(I)
Adjusted Exchange Ratio Section 2.1(f)(i)(I)
Adjusted Shares of Parent
Company Shares Section 2.1(f)(i)(K)
Affiliate Section 2.1(f)(iv)
Affiliates Section 2.1(f)(iv)
Agreement for Business Combination Recital 1
AP Section 3.1(a)(i)
Average Market Price of
Parent Common Stock Section 2.1(a)
Blue Sky Section 3.1(f) and 3.2(g)
Closing Section 8.17
COBRA Section 3.1(m)(vi)
Code Recital 8
Common Stock Excess Shares Section 2.1(d)(ii)
Common Stock Exchange Ratio Section 2.1(b)
Common Stock Trust Section 2.1(d)(iii)
Company 1st Paragraph, Page 1
Company Cash Section 2.1(f)(i)(A)
Company Common Stock Recital 4
Company Common Stock Consideration Section 2.1(b)
Company Preferred Stock Recital 4
Company Subsidiaries Section 3.1(a)(i)
Company Subsidiary Section 3.1(a)(i)
Constituent Corporations 1st Paragraph, Page 1
Disclosure Schedules Section 3.1(c)(i)
Effective Date Section 1.5
Effective Time Section 1.5
ERISA Section 3.1(m)(i)
Exchange Agent Section 2.1(e)(i)
Exchange Fund Section 2.1(e)(i)
FDA Section 3.1(l)
Governmental Entity Section 3.1(f)
HSR Act Section 3.1(f)
HSW Section 3.1(a)(i)
Indemnified Party Section 8.12
Indemnifying Party Section 8.12
Independent Accountant Section 2.1(f)(iii)
Intercompany Indebtedness Section 2.1(f)(i)(C)
Interim Company Financial Statements Section 3.1(b)(i)
Interim UDL Financial Statements Section 3.1(b)(ii)
Irrevocable Proxies Recital 9
Joint Certification Section 2.1(f)(i)
Line of Credit Indebtedness Section 2.1(f)(i)(E)
Member of the Pharmaceutical Group 3.1(c)(i)
Merger "NOW THEREFORE" paragraph after
Recital 9
Net Adjustment Amount Section 2.1(f)(i)(H)
Newco Recital 2(c)
NYSE Section 2.1(d)(ii)
Other Assets Section 2.1(f)(i)(B)
Other Liabilities Section 2.1(f)(i)(G)
Outstanding Shares of Company
Common Stock Section 2.1(b)
Parent 1st Paragraph, Page 1
Parent Common Stock Section 2.1(a)
Parent Representative Section 2.1(f)(i)
PD Section 3.1(a)(i)
Pharmaceutical Group Section 3.1(c)(i)
Pharmaceutical Group Permits Section 3.1(h)
Plan of Reorganization Recital 2
Preferred Stock Excess Shares Section 2.1(d)(ii)
Preferred Stock Exchange Ratio Section 2.1(a)
Preferred Stock Trust Section 2.1(d)(iii)
Prospectus/Proxy Statement Section 1.4
Registration Statement Section 4.4(a)
Reicher Indebtedness Section 2.1(f)(i)(F)
Scheduled Closing Date Section 8.17
SEC Section 1.4
Senior Note Indebtedness Section 2.1(f)(i)(D)
State Drug Regulatory Authorities Section 3.1(f)
Stockholders Representative Section 2.1(f)(i)
Subsidiary 1st Paragraph, Page 1
Surviving Corporation Recital 3
Takeover Proposal Section 4.1(f)
Tapecoat-DE Section 3.1(a)(i)
Tapecoat, Inc. Section 3.1(a)(i)
Tapecoat Limited Section 3.1(a)(i)
UDL-FL Section 3.1(a)(i)
UDL-IL Recital 2(b) and Section 3.1(a)(i)
ANNEX C
Terms for Appraisal Rights Trust Agreement
October 10, 1995
TC Manufacturing Co., Inc.
1527 Lyons Street
Evanston, IL 60201-3590
Mr. Herbert L. Stern, Jr. and Robert Feitler
Rivkin, Radler & Kremer
30 North LaSalle Street
Suite 4300
Chicago, Il 60602-2507
Re: Trust for Dissenting Stockholders
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Gentlemen:
This letter is intended to outline the procedures to be followed in the event that any of
the existing stockholders of TC Manufacturing Co., Inc. ("TC") elect to dissent from the plan
for the conversion of their TC stockholdings (the "Conversion Plan") to shares of Mylan
Laboratories Inc. Stock (the "Parent Common Stock") as set forth in the Plan of Reorganization
adopted by TC on October 10, 1995 (the "Plan of Reorganization") and in the Agreement and
Plan of Merger by and among TC, MLI Acquisition Corp. And Mylan Laboratories Inc.
("Parent") entered into October 10, 1995 (the "Merger Agreement"). Capitalized terms used in
this letter without definition shall have the same meanings given them in the Merger
Agreement.
Because the amounts due dissenting TC stockholders will not be ascertainable upon the
Effective Date of the contemplated merger, the precise number of required shares of Parent
Common Stock cannot be determined and delivered to existing stockholders of TC who do not
dissent from the adoption of the Merger Agreement pursuant to the Conversion Plan (the
"Participating Stockholders"). In view of the foregoing, if any TC stockholders elect to dissent
from the Conversion Plan and such stockholders shall have perfected their rights as dissenting
stockholders in accordance with 262 of the Delaware General Corporation Law (the "DGCL")
and shall not have had their shares of TC and Parent shall create an agreement of trust (the
"Trust Agreement") which shall govern the procedures by which shares of Parent Common
Stock issued to the Participating Stockholders shall be deposited with the Trustee (as hereinafter
defined) and held pending (a) settlement of the Dissenters' rights with respect to their TC
stockholdings or (b) a formal determination of the value due to each of the Dissenters pursuant
to 262 of the DGCL (the "Dissenter's Allocation"). The basic terms to be included in such Trust
Agreement shall be as follows:
1. Herbert L. Stern, Jr. and Robert Feitler shall be designated as the representative
of the participating Stockholders (the "Stockholders Representative") pursuant to
the authorization set forth in the Limited Power of Attorney as to be revised to
conform with the provisions of this Letter Agreement and to be delivered to the
Stockholders Representative by the Participating Stockholders holding more than
one percent(1%) of the issued and outstanding common stock of TC as
determined immediately before the Effective Time;
2. Parent shall deliver a number of shares of Parent Common Stock, issued to the
Participating Stockholders, to a trustee mutually agreed upon by TC and Parent
(The "Trustee") equal to 150% of that number of shares of Parent Common Stock
to which the Dissenters would have otherwise been entitled pursuant to the
Conversion Plan set forth in the Merger Agreement had the Dissenters not
exercised their dissenters rights (the "Trust Shares"). Thereafter, the Parent shall
be obligated to deliver to the Exchange Agent under the Merger Agreement only that
number of shares of Parent Common Stock as is equal to the difference
between (a) the total number of shares of Parent Common Stock deliverable to
the Exchange Agent under the Merger Agreement without regard to any trust for
the benefit of the Dissenters; and (b) the number of Trust Shares;
3. The trustee shall hold the Trust Shares pending notice from the Stockholders
Representative of an agreed settlement of a Dissenter's Allocation or formal
determination of a Dissenter's Allocation pursuant to 262 of the Delaware
DGCL;
4. Upon receipt of notice of the agreed settlement of formal determination of a
Dissenter's Allocation, the Trustee shall sell that number of Trust Shares as may
be required to realize sufficient cash proceeds to pay in full the Dissenter's
Allocation;
5. While holding Trust Shares, the Trustee shall vote such shares as directed by the
Stockholders Representative;
6. Parent shall pay of deliver all dividends and/or distributions with respect to the
Trust Shares to the Trustee to be held and distributed for the benefit of the
Participating Stockholders;
7. Stockholders Representative shall be responsible for representing TC and the
Participating Stockholders in any and all negotiations, settlements and appraisal
proceedings related to the determination of the Dissenter's Allocation, and all
costs incurred in connection with such representation, negotiation, settlement and
appraisal proceedings including, but not limited to, any costs incurred by
Dissenters which the court rendering the determination of the Dissenter's
Allocation may award to the Dissenters shall be charged to and payable from the
proceeds realized on the sale of Trust Shares;
8. In the event the aggregate proceeds realized on the sale of Trust Shares plus
dividends and/or distributions received in connection with such shares from and
after the Effective Date (the "Trust Fund")proves insufficient to fully satisfy the
Dissenter's Allocation, the trust expenses and the expenses incurred by the
Stockholders Representative, the Stockholders Representative shall cause any
amounts required in excess of the Trust Fund to be paid to the Dissenters, the
Trustee or the persons, firms or entities providing services to the Stockholders
Representative, as the case may be. Stockholders Representative shall allocate
all such excess payments among the Participating Stockholders and collect such
excess payments from the Participating Stockholders all as set forth in the
Indemnification and Contribution Agreement as revised to conform with the
provisions of this Letter Agreement to be delivered to the Stockholders
Representative by the Participating Stockholders;
9. If the aggregate value to the Trust Fund proves to be greater than the amounts
necessary to fully satisfy the Dissenter's Allocation, the trust expenses and the
expenses incurred by the Stockholders Representative, the Trustee shall--
a. Compute the number of Trust Shares deemed to be remaining in the trust
after assuming that all sales of Trust Shares by the Trustee were made at
a selling price of $19.89 per share;
b. deliver the lesser of the number of shares computed under subparagraph
(a) of this paragraph 9 of the remaining Trust Shares held by the Trustee,
To the Stockholders Representative for distribution pro rata among the
Participating Stockholders;
c. deliver all cash dividends collected by the Trustee to the Stockholders
Representative for distribution pro rata among the Participating
Stockholders; and
d. Deliver to the Parent any remaining Trust Shares held by the Trustee.
10. The Trust Agreement shall contain the requisite provisions as required to comport
with the safe harbor guidelines for taxpayers seeking favorable reorganization
rulings with respect to escrow arrangements as set forth in Revenue Procedure
84-42 as promulgated by the Internal Revenue Service.
11. Any amounts as may be reflected as a liability to TC in connection with the
payment and satisfaction of the Dissenter's Allocation and expenses incurred
incident or related thereto shall not be included as Other Liabilities for purposed
of determining the Net Adjustment Amount and the Adjusted Exchange Ratio but
shall be payable from the proceeds of sale of the Trust Shares and the
contributions, if any, made by the Participating Stockholders in accordance with
paragraph 8 of this letter agreement.
Please indicate your acceptance of these terms by signing this letter where indicated
below.
Very Truly yours,
/s/ Roderick P. Jackson
Roderick P. Jackson
Senior Vice President
AGREED TO AND ACCEPTED BY;
TC MANUFACTURING CO., INC.
By:
Name: Herbert L. Stern, Jr.
Title: Chairman of the Executive Committee
Of the Board of Directors
Herbert L. Stern, Jr
Please indicate your acceptance of these terms by signing this letter where indicated
below
Very truly yours
MYLAN LABORATORIES INC.
By:
Roderick P. Jackson, Senior Vice President
AGREED TO AND ACCEPTED BY:
TC MANUFACTURING CO., INC.
By: /s/ Herbert L. Stern, Jr.
Herbert L. Stern, Jr., Chairman of
the Executive Committee of the
Board of Directors
/s/ Herbert L. Stern, Jr.
Herbert L. Stern, Jr.
As Stockholders Representatives
/s/ Robert Feitler
Robert Feitler
</TABLE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
In accordance with the PBCL, Mylan's By-Laws provide
that a director of Mylan shall not be personally liable for
monetary damages for any action taken, or any failure to take any
action, unless the director has breached or failed to perform the
duties required under Pennsylvania law and the breach or failure
to perform constitutes self-dealing, willful misconduct or
recklessness.
As permitted by PBCL, Mylan's By-Laws provide that
directors and officers of Mylan are indemnified under certain
circumstances for expenses, judgments, fines or settlements
incurred in connection with suits and other legal proceedings. The
PBCL allows indemnification in cases where the person "acted in
good faith and in a manner he reasonably believed to be in, or not
opposed to the best interests of the corporation and, with respect
to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful."
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following is a list of
Exhibits filed as part of this Registration Statement.
Exhibit No. Reference
2(a) Agreement and Plan of Merger Filed herein
dated October 10, 1995, by and
among Mylan, MLI Acquisition
Corp. and TC (attached as Annex B
to the Proxy
Statement/Prospectus included in this
Registration Statement)
2(b) Agreement for Business Filed herein
Combination
2(c) Plan of Reorganization Filed herein
2(d) Indemnification Agreement Filed herein
3(a) Amended and Restated Articles
Incorporation, of Mylan Incorporated herin by
reference to Exhibit 3(a) to
Mylan's Form 10-Q,
for the quarter
ended June 30, 1992.
3(b) By-Laws, as amended, of Mylan Incorporated herin by
reference to Exhibit 3(b) to
Mylan's Form 10-Q,
for the quarter
ended June 30, 1992.
5 Opinion of Buchanan Ingersoll Filed herein
regarding the legality of the
securities being registered
10(a) Irrevocable Proxies Filed herein
23(a) Consent of Deloitte & Touche LLP Filed herewith
23(b) Consent of KPMG Peat Marwick LLP Filed herewith
23(d) Consent of Buchanan Ingersoll Filed herein
Professional Corporation
(included in their Opinion filed
herewith in Exhibit 5)
24 Power of Attorney (appearing on Filed herein
signature page)
99.1 TC Letter to Stockholders Filed herein
99.2 TC Notice of Special Meeting of Filed herein
Stockholders
99.3 TC Form of Proxy for Common Stock Filed herein
99.4 TC Form of Proxy for Preferred Stock Filed herein
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes
that, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such Securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(b) 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.
(c) The Registrant undertakes that every
prospectus (i) that is filed pursuant to paragraph (b) immediately
preceding, or (ii) that purports to meet the requirements of
Section 10(a) (3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed
as 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, 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.
(d) Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit 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 Securities Act and will be governed by
the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes
to respond to requests for information that is incorporated by
reference into the Proxy Statement/Prospectus pursuant to Items 4,
10(b), 11 or 13 of this Form, within one business day of receipt
of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of
responding to the request.
(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.
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pittsburgh, on __________________,
1995.
MYLAN LABORATORIES INC. (REGISTRANT)
By:__/s/ Milan Puskar_________________________
Name: Milan Puskar
Title: Chairman and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS that each person whose
signature appears below constitutes and appoints Milan Puskar and
Roderick P. Jackson, and each of them, such person's true and
lawful attorneys-in-fact and agents, with full power of
substitution and revocation, for such person and in such person's
name, place and stead, in any and all capacities to sign any and
all amendments (including post-effective amendments to this
Registration Statement) and to file the same with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneysin-
fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as such person
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or
his substitute or substitutes, may lawfully do or cause to be done
by virtue thereof.
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons in
the capacities indicated on ______________, 1995.
Signatures Title
------------- ------
/s/ Milan Puskar
------------------------------------ Chairman, Chief
Milan Puskar (As Chief Executive Officer,
Executive and Financial President, Director
Officer)
/s/ C.B. Todd
- --------------------------------------- Senior Vice President
C.B.Todd and Director
/s/ Dana G. Barnett
-------------------------------------- Executive Vice President
Dana G. Barnett and Director
/s/ Robert W. Smiley
-------------------------------------- Secretary and Director
Robert W. Smiley
/s/ Laurence S. DeLynn
--------------------------------------
Laurence S. DeLynn Director
/s/ Richard A. Graciano
- ---------------------------------------
Richard A. Graciano Director
/s/ John c. Gaisford, M.D.
- --------------------------------------
John C. Gaisford, M.D. Director
/s/ Frank a. DeGeorge
- ---------------------------------------
Frank A. DeGeorge (as Chief Director of Corporate Finance
Accounting Officer)
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Exhibit 2(b)
AGREEMENT FOR BUSINESS COMBINATION
PARTIES: Mylan Laboratories Inc., a Pennsylvania corporation having its
principal place of business at 781 Chestnut Ridge Road, Morgantown,
West Virginia 26505 ("Mylan")
and
TC Manufacturing Co., Inc., a Delaware corporation having its
principal place of business at 1527 Lyons Street, Evanston, Illinois
60201 ("TC")
DATE: October 10, 1995
PREAMBLE: Mylan is engaged through one or more of its operating subsidiaries in
the development, manufacture, packaging, marketing and sale of
generic pharmaceutical products, primarily sold in bulk into the retail
and institutional marketplaces.
TC is engaged through one or more of its operating subsidiaries, namely
UDL Laboratories, Inc., an Illinois corporation ("UDL-Illinois"), UDL Laboratories, Inc.,
a Florida corporation ("UDL-Florida"), AndaPharma Corp., a Virginia corporation
("AndaPharma") and Pharmadyne Corp., a Virginia corporation ("Pharmadyne"), in the
development, manufacture, packaging, marketing and sale of generic pharmaceutical
products, primarily sold in unit dose configurations into the institutional marketplace (the
"Pharmaceutical Business"). TC is also engaged through two unincorporated divisions,
namely its Tapecoat and Pak-Sher divisions, in businesses which are disparate and wholly
unrelated to TC's pharmaceutical operations. The Tapecoat Division is engaged in the
manufacture, marketing and sale of specialty corrosion protection products (the "Coating
Business") and the Pak-Sher Division is engaged in the manufacture, marketing and sale of
flexible packaging products and systems (the "Packaging Business"). The Pharmaceutical
Business, the Coating Business and the Packaging Business are hereinafter sometimes
referred to collectively as "the Businesses" or individually as a "Business".
Each party desires to avail itself of the pharmaceutical know-how,
business and assets of the other, so as to benefit business wise from the considerable synergies
believed to exist.
To this end, the parties propose to orchestrate a tax-free merger (the
"Merger"), between TC and an acquisition subsidiary established by Mylan, with TC as the
surviving entity. In the Merger, all of the outstanding shares of common and preferred stock
of TC (other than shares held of record by dissenting stockholders who properly elect to
exercise their appraisal rights) will be exchanged for and converted into newly issued shares
of Mylan common stock.
As a pre-condition to the Merger, Mylan requires that TC divest itself
of its Coating Business and its Packaging Business so that at the time of the Merger, the
assets and liabilities of TC will relate solely to, and represent 100% of, its Pharmaceutical
Business. Mylan further desires that the employees of the Pharmaceutical Business own
solely Mylan Common Stock in lieu of their present ownership interest in the Coating and
Packaging Business and TC similarly desires that such employees relinquish their ownership
in the Coating and Packaging Businesses in exchange for a greater ownership interest in the
Pharmaceutical Business.
TC proposes to divest itself of the Coating Business and the Packaging
Business in several steps. First, TC will cause Andapharma Corp. and Pharmadyne Corp.
to become subsidiaries of UDL-Illinois. Second, TC will transfer the assets and liabilities
relating to its Coating and Packaging Businesses to a newly established subsidiary to be
known as "TC Manufacturing Co., Inc.", an Illinois corporation ("NEWCO"). Immediately
thereafter, TC will effect a split-off of its shares of common stock, $1.00 par value ("TC
Common Stock"), whereby such shares are exchanged and converted such that in addition
to their continuing ownership interest in such shares certain holders will receive additional
shares of TC Common Stock and the remaining holders will receive only shares of the
common stock of NEWCO (the "Split-off").
Additionally, in anticipation and furtherance of the Split-off and
Merger, TC will: (a) accelerate the vesting period for, and permit the immediate exercise of,
all outstanding options to purchase shares of TC Common Stock; and (b) undertake to
acquire the outstanding minority interests in UDL-Illinois, so that at the time of the Merger,
TC will own 100% of the issued and outstanding shares of capital stock of UDL-Illinois.
Both the Split-off and the Merger are intended to qualify as tax-free
reorganizations under Sections 355 and 354, and all other pertinent provisions, of the
Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder
(the "Code").
CONSIDER- The premises and the mutual agreements and covenants herein
ATION: contained.
TERMS OF The parties hereto agree to prepare, execute and deliver the following
AGREEMENT: documents and to take the following actions in furtherance of the Split-
off and Merger and the transactions contemplated thereby and hereby.
1. Plan of Reorganization. TC will undertake a reorganization of its corporate
structure which will separate its Coating Business and Packaging Business from its
Pharmaceutical Business and provide for the direct ownership of the Coating Business and
Packaging Business by TC stockholders. Such reorganization will be effected generally as
follows:
(a) TC will cause HSW Investment Co. ("HSW"), an Illinois corporation
whose capital stock is wholly-owned by TC and which in turn owns all of the
outstanding capital stock of AndaPharma Corp. and Pharmadyne Corp., to adopt,
in accordance with applicable corporate law, a Plan of Complete Liquidation. Such
Plan of Complete Liquidation will provide for the distribution to TC,
contemporaneously with the adoption of such Plan of Complete Liquidation, of
HSW's investment in and ownership of the capital stock of AndaPharma Corp. and
Pharmadyne Corp. and the intercompany indebtedness due to HSW from
AndaPharma Corp. and Pharmadyne Corp. Immediately following said distribution,
TC will contribute all of the shares of capital stock of AndaPharma Corp. and
Pharmadyne Corp. to UDL-Illinois and UDL-Illinois will assume and agree to pay the
entire balance of any intercompany indebtedness then due to TC from each of
AndaPharma Corp. and Pharmadyne Corp. As of August 31, 1995, the outstanding
amount of such intercompany indebtedness was approximately $287,000.00. The
balance of the assets of HSW, if any, subject to liabilities, will be distributed by HSW
to NEWCO after the effective time of the Merger.
(b) TC will transfer to TC Manufacturing Co., Inc., a new subsidiary of
TC to be organized under the Business Corporation Act of the State of Illinois
("NEWCO"), all of the assets relating to the Coating Business and the Packaging
Business including, without limitation, TC's stock ownership interest in any
subsidiary corporations, other than UDL-Illinois, UDL-Florida, AndaPharma and
Pharmadyne, held by TC at the time of such transfer in consideration, among other
things, of the issuance to TC by NEWCO of shares of its capital stock and the
assumption by NEWCO of all liabilities relating to the Coating Business and
Packaging Business.
(c) Immediately thereafter, TC will effect the Split-off of its shares of
common stock, $1.00 per share par value ("TC Common Stock"). As part of the
Split-off, (i) holders of shares of TC Common Stock who are actively employed on a
full or part-time basis in the Pharmaceutical Business will receive additional shares
of TC Common Stock; and (ii) holders of shares of TC Common Stock who are not
actively employed on a full or part-time basis in the Pharmaceutical Business will, in
addition to retaining their continuing ownership interest in such shares, receive shares
of the Class A Voting Common Stock, no par value, and Class B Non-Voting
Common Stock, no par value, of NEWCO (together, "NEWCO Common Stock").
Employee stockholders of the Pharmaceutical Business will not receive shares of
NEWCO Common Stock in the Split-off. The number of additional shares of TC
Common Stock to be issued to employee stockholders of the Pharmaceutical Business
will be determined in accordance with a formula which accounts for the values of the
Coating and Packaging Businesses (as determined by independent appraisal) which
are not being distributed to such employee stockholders and the value of the
additional shares of TC Common Stock being issued to such employee stockholders
in exchange therefore. The distribution formula, and the remaining terms and
conditions of the Split-off, will be as set forth in a Plan of Reorganization
substantially in the form attached hereto as Exhibit 1 (the "Plan of Reorganization").
(d) By virtue of the non-pro-rata exchange of shares, employees of the
Coating Business and Packaging Business will each end up with a greater ownership
interest in, and therefore a stronger performance incentive with respect to, their
employer NEWCO. Similarly, employees of the Pharmaceutical Business will each
end up with a greater ownership interest in, and therefore a stronger performance
incentive with respect to, their employer TC.
(e) Notwithstanding the non-pro-rata nature of the Split-off, the aggregate
value of the shares held by each stockholder of TC immediately prior to the Split-off
will equal the aggregate value of the shares of TC and NEWCO held by such
stockholder immediately after the Split-off.
2. Restructuring of Other Interests in TC. In connection with the Split-off and
in anticipation of the Merger, TC will undertake the following further actions affecting the
outstanding interests in TC Common Stock:
(a) Option holders. As of the date of this Agreement, there are 216,308
outstanding options to purchase TC Common Stock ("TC Options"). The TC Options
have been issued to key employees of TC and its various Businesses pursuant to TC's
1991 Incentive Stock Option Plan and TC's 1994 Incentive Stock Option Plan and to
directors of TC pursuant to TC's 1995 Non-Employee Directors Stock Option Plan.
In accordance with the terms of each such plan, the Board of Directors
of TC has determined that it would be equitable and in the best interests of TC to
afford holders of TC Options the opportunity to exercise their TC Options prior to
the effective date of the Split-off, whether or not then vested and exercisable. Option
holders who elect to exercise will thereby be in a position to receive either additional
shares of TC Common Stock (as to employees of the Pharmaceutical Business) or
shares of NEWCO Common Stock (as to employees of the Coating or Packaging
Businesses) to be issued in connection with the Split-off.
The acceleration of vesting and the opportunity for early exercise will
be effected as follows: Within thirty (30) days following adoption of the Plan of
Reorganization by the Board of Directors of TC, holders of TC Options will be
advised that the vesting period for TC Options then outstanding will be accelerated
so as to become immediately exercisable and that they will have a continuing right to
exercise their Options until the date on which is held the meeting of TC stockholders
to approve the Merger. All TC Options which remain unexercised as of the date of
such stockholders meeting will be canceled and each stock option plan will terminate
as of such date.
(b) Reicher Shares. As of the date of this Agreement, UDL-Illinois has
issued and outstanding fifty (50) shares of common stock, no par value ("UDL
Common Stock"). Three (3) shares (6% of the total issued and outstanding shares)
of UDL Common Stock are held of record by Michael K. Reicher ("Reicher"),
President of UDL-Illinois. The remaining forty-seven (47) shares are held of record
by TC.
As a precondition to the Merger, Mylan requires that TC own one
hundred percent (100%) of the issued and outstanding shares of UDL-Illinois
Common Stock. Accordingly, TC will acquire for cash Reicher's 6% interest in UDL-Illinois
for an amount equal to Two Million Eight Hundred and Fifty Thousand and
NO/100 Dollars ($2,850,000.00). The purchase consideration to be received by
Reicher shall be payable following consummation of the Merger pursuant to the terms
of a promissory note to be delivered by TC to Reicher. The full terms and conditions
of TC's purchase of Reicher's 6% interest in UDL-Illinois will be as set forth in a
Stock Purchase Agreement to be entered into between TC and Reicher in substantially
the form attached hereto as Exhibit 2.
3. Agreement and Plan of Merger. In anticipation of the Merger, Mylan has
organized MLI Acquisition Corp., a Delaware corporation ("Subsidiary"), whose capital
stock is wholly owned by Mylan. In the Merger, Subsidiary will be merged with and into
TC, and (i) all issued and outstanding shares of TC Preferred Stock and all issued and
outstanding shares of TC Common Stock will be canceled and converted into shares of the
Common Stock, $0.50 par value, of Mylan ("Mylan Common Stock"), and (ii) all outstanding
capital stock of Subsidiary will remain outstanding. The Merger will be effected in
accordance with applicable Delaware law pursuant to an Agreement and Plan of Merger in
substantially the form attached hereto as Exhibit 3 (the "Merger Agreement").
Holders of outstanding shares of TC Preferred Stock and TC Common Stock
will be asked to adopt the Merger Agreement and approve the Merger at a special meeting
of stockholders called for such purpose. In calling the special stockholders meeting, TC will
deliver to each stockholder of record entitled to vote thereat a notice of the meeting and
proposed agenda. Such notice will be accompanied by a proxy and disclosure statement
which meets all applicable federal and state securities law requirements and explains the
Merger in detail sufficient to allow the stockholders to act thereon. Without limiting the
generality of the preceding sentence, such statement will incorporate by reference and be
accompanied by a prospectus covering the shares of Mylan Common Stock to be issued in
exchange for shares of TC Preferred Stock and TC Common Stock in the Merger. Such
prospectus will be prepared by Mylan in accordance with applicable federal and state
securities law requirements and filed with the U.S. Securities and Exchange Commission
("SEC") as part of a Registration Statement on Form S-4. At the time of distribution of the
proxy and prospectus to TC stockholders, such Registration Statement will have been
declared effective by the SEC. Mylan will also make all other filings and registrations
required by applicable state securities laws with respect to issuance of the Mylan Common
Stock and make application to, and seek authorization of, The New York Stock Exchange
("NYSE"), for listing of the Mylan Common Stock to be issued pursuant to the Merger in
accordance with Paragraph 703 of The New York Stock Exchange Listed Company Manual.
Such authorization will become effective on the effective date of the Merger, upon notice of
issuance given to the NYSE. The special meeting of stockholders will be held no later than
thirty (30) days after the date on which Mylan's Registration Statement is declared effective
by the SEC.
4. Treatment of Indebtedness and Liabilities.
(a) As a precondition to the Merger, TC requires that Mylan permit TC to
maintain outstanding: (i) its indebtedness (both principal and interest) to the
Metropolitan Life Insurance Company ("Metropolitan"), including any penalty which
might be payable upon a subsequent mandatory or other prepayment of such
indebtedness, the amount of which will be calculated as if TC had made such
prepayment on the effective date of the Merger; (ii) its indebtedness (both principal
and interest) under TC's outstanding line of credit with the LaSalle National Bank
("LaSalle"); and (iii) such other indebtedness and liabilities as may exist on the books
and records of TC as of the effective date of the Merger after giving effect to TC's
acquisition of Reicher's interest in UDL-Illinois, the assumption of liabilities by
NEWCO in conjunction with the Split-off and the payment by TC of all expenses
payable by it in conjunction with the transactions contemplated by the Split-off and
Merger.
(b) The amount of the indebtedness to remain outstanding may or may not
exceed the amount due and owing to TC on account of UDL-Illinois' intercompany
indebtedness to TC (including any intercompany indebtedness attributable to
AndaPharma Corp. and Pharmadyne Corp.). For purposes of this paragraph, such
amount will be estimated subject to subsequent definitive determination pursuant to
paragraph (d) of this Section 4.
(c) On or before the effective date of the Split-off, TC will modify the
repayment terms of the UDL-Illinois intercompany indebtedness to TC so as to
provide that not less than ninety-five percent (95%) of such intercompany
indebtedness will mature no sooner than ten (10) years after the date of such
modification. The payment obligations of UDL-Illinois, as so modified, will be
evidenced in a secured promissory note to be delivered by UDL-Illinois to TC as of
the date of such modification, which secured promissory note will be substantially in
the form attached hereto as Exhibit 4(c).
(d) Following the effective date of the Merger, the Stockholders
Representative (as defined in Section 10(a) hereof) and a representative of Mylan will
jointly review the books and records of TC in order to determine definitively, as of
the effective date of the Merger but after giving effect to the Split-off, the amount of
assets and liabilities reflected on the books and records of TC on a stand-alone basis
(that is, without consolidating any of the assets or liabilities of any subsidiary of TC).
The number of shares of Mylan Common Stock to be delivered to former holders of
TC Common Stock in exchange for their shares of TC Common Stock will then be
adjusted upward to reflect the amount of any excess of assets over liabilities or
downward to reflect the amount of any excess of liabilities over assets. A pro-forma
balance sheet for TC, which TC and Mylan agree demonstrate the type and amount
of assets and liabilities expected to remain at TC on a stand-alone basis as of the
effective date of the Merger but after giving effect to the Split-off, is set forth in
Exhibit 4(d) hereto.
5. Indemnification. As part of the Split-off, NEWCO will agree to assume and
be responsible for the liabilities relating to TC's ownership and operation of the Coating
Business and the Packaging Business prior to the Split-off and TC agrees to remain
responsible for the liabilities relating to TC's ownership and operation of the Pharmaceutical
Business prior to the Split-off. In order to further protect TC and NEWCO from claims or
causes of action which relate to or are derived from such actual or potential liabilities,
NEWCO will execute for the benefit of TC and Mylan and TC will execute for the benefit
of NEWCO and NEWCO's stockholders an Indemnification Agreement in substantially the
form attached hereto as Exhibit 5. Such Indemnification Agreement will be attached as an
exhibit to that certain Distribution Agreement (the "Distribution Agreement") which itself
is an exhibit to the Plan of Reorganization.
6. Tax Impact of the Transactions. Each party has satisfied itself, given all
relevant facts and circumstances, that the Split-off meets the statutory requirements of
Sections 355(a) and 355(c) of the Code for treatment as a tax-free transaction. Each party
also has satisfied itself, given all relevant facts and circumstances, that the Merger meets the
statutory requirements of Sections 368(a)(1)(B) and 354 of the Code for treatment as a tax-free
reorganization. Each party will bear its own risks of the Split-off and Merger with
respect to the tax-free nature of such transactions, which is to say that the stockholders of
TC immediately prior to the Split-off and Merger, as the case may be, will be responsible for
the payment of any tax, penalties or interest which may be assessed against them with respect
to the Split-off or Merger, and TC will, notwithstanding the Merger, remain responsible for
any tax, penalties or interest which may be assessed against TC with respect to the Split-off
and the Merger.
In so satisfying themselves, the parties will cooperate in preparing and
submitting to the U.S. Internal Revenue Service (the "Service") a formal request for a private
letter ruling confirming the tax-free nature of the transactions contemplated by the Split-off
and Merger. In the event that the Service should ever challenge the tax-free treatment of
either the Split-off or the Merger, each party will undertake to defend against such challenge
and to cooperate with the other in such defense. A favorable ruling from the Service,
however, will not be a pre-condition to the Split-off or to the Merger.
In support of the tax-free nature of the Split-off, (i) as provided in Section 8.4
of the Merger Agreement, Mylan will covenant and agree for the benefit of TC's former
stockholders that it will not effect a sale or disposition of substantially all of the business or
assets of TC or the Pharmaceutical Business for a period of three (3) years following the
effective date of the Split-off; and (ii) as provided in Section 3.2 of the Distribution
Agreement, NEWCO will covenant and agree for the benefit of TC and Mylan that it will
not effect a sale or disposition of substantially all of the business or assets of either the
Coating Business or the Packaging Business for a period of three (3) years following the
effective date of the Split-off. Additionally, each holder of one percent (1%) or more of the
issued and outstanding shares of TC Common Stock as of the effective date of the Split-off
or the Merger, as the case may be, will enter into an indemnification and contribution
agreement whereby such stockholder agrees as to the terms and conditions upon which a
challenge to the tax-free nature of the Split-off or Merger will be defended and further agrees
to bear his or her proportionate share of any expenses of defense incurred. Each such
stockholder will pay his or her own tax, interest and penalty. Such TC Stockholder
Indemnification and Contribution Agreement will be in substantially the form attached
hereto as Exhibit 6.
7. Trading Restrictions. Although the offering of shares of Mylan Common
Stock made to TC stockholders in connection with the Merger will be registered pursuant to
the Securities Act of 1933, Rule 145 promulgated under such Act imposes certain restrictions
on the right of "affiliates" of TC to transfer their interests in any shares so received. In
order to ensure compliance with Rule 145, each director, officer and holder of five (5%)
percent or more of the issued and outstanding shares of TC Common Stock as of the effective
date of the Merger will execute and deliver to Mylan and to the Stockholders Representative
(for the benefit of all of the former stockholders of TC) a letter agreeing to abide by the
restrictions on transfer imposed by Rule 145, which letter will be in substantially the form
attached hereto as Exhibit 7.1
Additionally, in order to ensure the ongoing continuity of stockholder
ownership of TC requisite to support the tax-free nature of the Split-off and Merger, each
holder of one (1%) percent or more of the issued and outstanding shares of TC Common
Stock as of the effective date of the Merger will agree to further limit his or her right to
transfer the shares of NEWCO Common Stock received in the Split-off and his or her right
to transfer the Mylan Common Stock received in the Merger for a period of three (3) years
following the effective date of the Split-off and Merger, respectively. These restrictions on
transfer will be as described in a letter to be executed and delivered by each such stockholder
to Mylan and to the Stockholders Representative (for the benefit of all of the former
stockholders of TC), which letter will be in substantially the form attached hereto as Exhibit
7.2.
8. Additional Approvals and Consents. In effecting the Split-off and Merger, the
following additional approvals and consents will be sought:
(a) Lender Consents. Promptly following execution of this Agreement, TC
will advise Metropolitan and LaSalle as to the proposed Split-off and Merger. In so
doing, TC will request their consent to the transactions contemplated by the Split-off.
Additionally, TC will advise Metropolitan and LaSalle of the imminent change of
control to be brought about by the Merger and confirm its commitment, in
accordance with the terms of the 10 1/2% Senior Promissory Notes due July 31, 2001
(the "Notes") held by Metropolitan and the line of credit extended by LaSalle, to
notify Metropolitan and LaSalle when the change of control has occurred and to then
offer to prepay the obligations outstanding under the Notes and said line of credit.
TC also will request a statement from Metropolitan as to any prepayment penalty
which would be assessed against TC should Metropolitan elect to require prepayment
of the Notes immediately following the change of control. The amount of such
prepayment penalty will be deemed a liability of TC upon consummation of the
Merger (whether or not such penalty in fact is subsequently incurred) so as to be
accounted for within the adjustment, as described in Section 4(d) above, to the
number of shares of Mylan Common Stock to be delivered to former holders of TC
Common Stock in exchange for their shares of TC Common Stock. TC will also ask
LaSalle to allow TC, upon the consummation of the Merger, to retain its line of credit
and to substitute any indebtedness thereunder which relates to either the Coating
Business or the Packaging Business with indebtedness under a new line of credit to be
extended to NEWCO. It will not, however, be a pre-condition to TC's obligation to
consummate the transactions contemplated by the Split-off and the Merger that TC
is successful in obtaining the foregoing lender consents.
(b) Anti-trust Approvals. The transactions contemplated by the Merger are
subject to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976. Accordingly, TC and Herbert L. Stern, Jr., on the one hand, and Mylan on
the other will complete and submit for review the notifications required under such
Act. Such notifications will be submitted within thirty (30) days of the execution of
this Agreement. It will be a pre-condition to the Merger that, as of the effective date
thereof, neither party will have received notice from either the U.S. Department of
Justice or the Federal Trade Commission objecting to the transactions contemplated
by the Merger and any applicable waiting period, or government mandated extension
thereof, for such notice will have expired.
(c) Other Approvals and Consents. Except for such approvals and consents
required by statute, ordinance or regulation in order to effect the transactions
contemplated by the Split-off and the Merger and such lenders approvals and consents
as will be sought pursuant to subparagraph (a) of this Section 8, no other approvals
or consents will be sought by either TC or Mylan and it will not be a pre-condition to
either party's obligation to consummate the transactions contemplated by the Split-off
and the Merger that such party is successful in obtaining such other approvals or
consents.
9. Announcement. The parties will jointly issue a public release announcing the
execution of this Agreement and the transactions contemplated herein, which
announcement will be in substantially the form attached hereto as Exhibit 9.
10. Miscellaneous.
(a) Stockholders Representative. In connection with certain actions relating
to the Split-off and Merger but which are to occur after the effective dates thereof,
each stockholder of TC will be asked to designate Herbert L. Stern, Jr. and Robert
Feitler to act singly or together as a representative of and attorney-in-fact for such
stockholder (each, the "Stockholders Representative"). In designating the
Stockholders Representative, each stockholder will be required to deliver a
Stockholder Power of Attorney in substantially the form attached hereto as Exhibit
10(a).
(b) Notices. All notices, requests, demands and other communications
required or permitted under this Agreement will be in writing and will be deemed to
have been duly given upon receipt when delivered by hand against receipt, telecopied
(upon confirmation of receipt thereof) or mailed, certified or registered mail, return
receipt requested, postage prepaid:
To TC: TC Manufacturing Co., Inc. 1527 Lyons Street
Evanston, Illinois 60201
Attention: President
Telecopy: (708) 866-8596
with a copy to: Keith R. Abrams, Esq.
Rivkin, Radler & Kremer
30 North LaSalle Street, Suite 4300
Chicago, Illinois 60602-2507
Telecopy No: (312) 782-3112
To Mylan: Mylan Laboratories Inc.
781 Chestnut Ridge Road
Morgantown, West Virginia 26505
Attention: Roderick P. Jackson
Telecopy: (304) 599-7284
with a copy to: John R. Previs, Esq.
Buchanan Ingersoll P.C.
One Oxford Centre
20th Floor
301 Grant Street
Pittsburgh, Pennsylvania 15219
Telecopy No: (412) 562-1041
or to such other address as specified in a notice given in like manner.
(c) Entire Agreement and Construction. This Agreement (including the
agreements, documents, exhibits and instruments referred to herein or in any such
agreement, document, exhibit or instrument) (i) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and thereof, and (ii) is not
intended to confer upon any person other than the parties hereto or thereto any rights
or remedies hereunder or thereunder. In the event that any term, condition or other
provision of this Agreement will conflict with or be inconsistent with the terms,
conditions or provisions of any agreement, document, exhibit or instrument attached
hereto or contemplated hereby, said agreement, document, exhibit or instrument will
be deemed to control the interpretation hereof. The terms, conditions and provisions
of this Agreement and each of the Exhibits hereto, may not be changed, modified or
amended in any manner except with the prior written consent of both parties hereto,
provided, however, that as to any Exhibit in which Mylan is not party, Mylan will not
unreasonably withhold its consent.
(d) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware without regard to any applicable
conflicts of law provisions. Each of the parties hereto expressly submits to the
exclusive jurisdiction of the state and federal courts located in Delaware and
irrevocably waives any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding brought in any such court and hereby further
irrevocably waives any claims that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. Each of the Agreements
attached hereto as Exhibits contains provisions with respect to governing law,
jurisdiction and venue and such provisions (and not this Section 10(c)), will govern
with respect to each such agreement.
(e) Effective Dates and Closing. The closing of the Split-off and Merger
(the "Closing") will occur at the offices of Buchanan Ingersoll Professional
Corporation, Pittsburgh, Pennsylvania, at which the documents to be delivered on the
effective dates of the Split-off and Merger as described in this Agreement (including
the agreements, documents, exhibits and instruments referred to herein or in any such
agreement, document, exhibit or instrument) will be delivered by the respective
parties. The Closing will be scheduled to occur on the fifth business day following the
date called for the meeting of the stockholders of TC to adopt the Merger Agreement
and to approve the Merger (the "Scheduled Closing Date"). The Closing will occur
on the Scheduled Closing Date unless, on such date, any party has a right not to close
the Merger and refuses to close, in which event the Closing will be adjourned from
business day to business day thereafter until the Closing occurs or until 5:01 p.m.,
eastern standard time, on February 28, 1996.
(f) Execution in Counterparts. This Agreement may be executed in one or
more counterparts, all of which will be considered one and the same agreement, and
will become a binding agreement when one or more counterparts have been signed by
each party and delivered to the other party.
(g) Termination. This Agreement, and the respective covenants,
representations and warranties of the parties hereto contained in this Agreement, shall
expire and be terminated and extinguished upon the effectiveness of the Merger, and
neither of the parties hereto will thereafter be under any liability whatsoever with
respect to such covenants, representations and warranties.
(h) Costs and Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the undersigned, being a properly authorized
representative of party for which it signs, has executed and delivered this Agreement as of
the date first written above.
TC MANUFACTURING CO., INC.,
a Delaware corporation
___________________________________
By: Herbert L. Stern, Jr.
Attest: Its: Chairman of the Executive
Committee
of the Board of Directors
___________________________
By: Keith R. Abrams
Its: Assistant Secretary
MYLAN LABORATORIES INC.,
a Pennsylvania corporation
___________________________________ By:
Roderick P. Jackson
Attest: Its: Senior Vice President
___________________________
By:
Its:
<PAGE>
TC MANUFACTURING CO., INC.
AGREEMENT FOR BUSINESS COMBINATION
Index of Exhibits
Exhibit Description Exhibit Number
Form of Plan of Reorganization [NOTE: The Distribution Agreement 1
will be an Exhibit to the Plan of Reorganization.]
Form of Reicher Stock Purchase Agreement 2
Form of Agreement and Plan of Merger 3
Pro-forma Effective Date Balance Sheet for TC on a Stand-alone Basis 4(d)
Form of Indemnification Agreement 5
Form of TC Stockholder Indemnification and Contribution Agreement 6
Form of Rule 145 Affiliate Agreement 7.1
Continuity of Interest Letter Agreement 7.2
Form of Announcement 9
Form of Stockholder Power of Attorney 10(a)
</TABLE>
<TABLE>
<S> <C>
Exhibit 2(c)
PLAN OF REORGANIZATION
----------------------------------------
PLAN OF REORGANIZATION of TC MANUFACTURING CO., INC., a Delaware
corporation (the "Corporation"), and its operating divisions and subsidiaries.
B A C K G R O U N D:
A. Current Structure of the Corporation
--------------------------------------------
The Corporation, which was incorporated in 1962 as the successor-in-interest to The
Tapecoat Company, an Illinois general partnership organized in 1941, is engaged through one or
more operating divisions and subsidiaries in the following business operations:
i) the manufacture, marketing and sale of specialty corrosion protection products (the
"Coating Business");
ii) the manufacture, marketing and sale of flexible packaging products and systems
(the "Packaging Business"); and
iii) the development, manufacture, packaging, marketing and sale of generic
pharmaceutical products (the "Pharmaceutical Business").
The Coating Business and the Packaging Business are collectively herein referred to as the
"NEWCO Businesses".
The Coating Business is and for more than the past five years has been conducted through
(i) an unincorporated division which does business under the name "The Tapecoat Company"
from principal offices and manufacturing facilities in Evanston, Illinois; and (ii) Tapecoat
Canada, Inc., an Ontario, Canada corporation having principal offices in Mississauga, Ontario,
Canada, a wholly-owned subsidiary of The Tapecoat Company of Canada, Limited, itself an
Ontario, Canada corporation and wholly-owned subsidiary of the Corporation.
The Packaging Business is and for more than the past five years has been conducted
through an unincorporated division which does business under the name "Pak-Sher Co." from
principal offices and manufacturing facilities in Kilgore, Texas.
The Pharmaceutical Business is and for more than the past five years has been conducted,
through: (i) UDL Laboratories, Inc., an Illinois corporation having principal offices and
manufacturing and distribution facilities in Rockford, Illinois ("UDL-Illinois"); and (ii) UDL
Laboratories, Inc., a Florida corporation having principal offices and research and development,
manufacturing and distribution facilities in Pinellas County, Florida ("UDL-Florida").
UDL-Florida is a wholly-owned subsidiary of UDL-Illinois (UDL-Illinois and UDL-Florida are
sometimes hereinafter collectively referred to as "UDL").
The Pharmaceutical Business also currently is being conducted through HSW Investment
Co., an Illinois corporation ("HSW"). HSW was formerly known as Engineered Coated
Products,
Inc. and, prior to the sale of its business and assets in 1989, was engaged in and a part of the
Coating Business. The current sole function of HSW is to hold the capital stock of two
wholly-owned, special purpose pharmaceutical research subsidiaries, Andapharma Corp., a
Virginia
corporation formed in April, 1994 ("Andapharma") and Pharmadyne Corp., a Virginia
corporation formed in March, 1995 ("Pharmadyne").
The Corporation also owns and controls all of the issued and outstanding capital stock of
The Tapecoat Company, Inc., a dormant Delaware corporation ("The Tapecoat Company"), the
existence and good standing of which is maintained solely for name-holding purposes.
B. Background to the Proposed Reorganization.
------------------------------------------------------
Roderick, a Pennsylvania corporation, is engaged in the development, manufacture,
packaging, marketing and sale of generic pharmaceuticals ("Roderick") and is a major supplier
of such products to the Corporation's Pharmaceutical Business.
Both Roderick and the Corporation have determined that there would be substantial
benefits and synergies from a combination of the parties' pharmaceutical operations.
Roderick therefore has expressed an interest in acquiring all, but not less than all, of the
Corporation's Pharmaceutical Business through a merger involving an exchange of stock
(hereinafter referred to as the "Merger"). The Board of Directors of the Corporation has
determined it to be fair and in the best interests of the Corporation to undertake a merger
involving an exchange of stock for the amount offered, in the belief that the Merger can be
effected so as not to result in a taxable event for either the Corporation or its stockholders.
C. Considerations in Structuring the Merger.
--------------------------------------------------
i. Roderick's Interest in Acquiring All of the Pharmaceutical Business.
----------------------------------------------------------------------------------
At the present time, the Corporation owns only 94% of UDL-Illinois. The remaining 6%
interest, which is currently owned by Michael K. Reicher, UDL-Illinois' President and Chief
Operating Officer, will have to be acquired by the Corporation prior to the proposed Merger. Mr.
Reicher is willing to facilitate the business combination by selling his interest in UDL-Illinois to
the Corporation, but only for cash. The Corporation does not have sufficient available cash with
which to effect such purchase and will therefore have to issue to Mr. Reicher its promissory note
in a principal amount of the purchase price for his shares.
ii. The Corporation's Need to Avoid Required Repayment of its Indebtedness.
The Corporation has (i) a long-term loan from the Metropolitan Life Insurance Company
("Metropolitan") with an outstanding principal balance of $7.9 million, which loan is evidenced
by the Corporation's 10 1/2% Senior Promissory Notes due July 31, 2001 (the "Senior Notes");
and (ii) a line of credit (the "Line of Credit") with the LaSalle National Bank ("LaSalle"), which
is used from time to time to finance the Corporation's short-term working capital requirements.
A merger involving an exchange by the Corporation of its shares of stock in UDL-Illinois
would constitute a default under both the Senior Notes and Line of Credit, permitting
Metropolitan Life and LaSalle to accelerate the indebtedness and require repayment of the
obligations in full. Additionally, the Senior Notes impose a yield maintenance penalty on their
early repayment, which penalty is based upon the difference between prevailing interest rates and
the 10 1/2% interest rate applicable to the Senior Notes. It is estimated that, using present
interest
rates and maturities, the amount of such penalty will approximate $1,000,000. The calculation
of said penalty is set forth in Exhibit A hereto.
If repayment of the Senior Notes and Line of Credit were required due to the
Corporation's disposition of its shares of UDL-Illinois, the Corporation would not have on hand
or available from alternative financing sources sufficient cash with which to pay such
obligations. Since the proceeds provided by the Senior Notes have been used largely by the
Corporation to fund the operations of UDL, and because such operations are the principal source
of cash flow required to service the obligations of the Corporation under the Senior Notes, the
Board of Directors of the Corporation expects that Metropolitan and LaSalle would accelerate
and require repayment.
If the Merger were structured in such a way that the Senior Notes and Line of Credit
remained in place, the Corporation would not be required to repay such obligations. The
Corporation also could avoid any penalty on early repayment. Such a merger would involve an
exchange of Roderick shares for the outstanding shares of stock in the Corporation rather than for
the outstanding shares of stock in UDL-Illinois.
As a "change of control" is prohibited by the terms of Senior Notes and Line of Credit,
the exchange of stock in the Corporation nevertheless could trigger a required repayment of such
obligations. Following a change of control, the Corporation must notify the lender of the facts
and circumstances incident to the change of control and offer to prepay the loan upon the
acceptance of such offer by the lender. In connection with any required prepayment of the
Senior Notes, the Corporation would incur and be required to pay the yield maintenance penalty
described above. Given, however, the substantial financial resources of Roderick and, therefore,
the enhanced credit worthiness of the loans, Metropolitan and LaSalle may elect not to accept the
Corporation's offer of prepayment.
Should Metropolitan and LaSalle nevertheless elect to require prepayment of the Senior
Notes and Line of Credit, the Corporation, as then already a subsidiary of Roderick, would be
in a position to procure the necessary funds from Roderick or a third-party lender.
iii. Roderick's Lack of Interest in the Unrelated Businesses.
--------------------------------------------------------------------
Absent any further action, a merger involving an exchange of the Corporation's stock for
Roderick shares would result in Roderick also acquiring the NEWCO Businesses. Roderick has
stated that it does not wish to acquire the NEWCO Businesses because (a) the NEWCO
Businesses, their respective modus operandi and the respective inherent risks and enterprise
values, are disparate from and unrelated to either the Corporation's or Roderick's pharmaceutical
operations and (b) Roderick does not wish to succeed to any potential liabilities incident to the
NEWCO Businesses. In order to effect the Merger, the Corporation therefore first will effect a
divestiture of the NEWCO Businesses in the form of a split-off of the NEWCO Businesses (the
"Split-off").
iv. Enhancement of Ownership by Key Employees and Managers.
---------------------------------------------------------------------------
In effecting the divestiture of the Coating Business and the Packaging Business, Roderick
desires that key employees and managers of the Pharmaceutical Business forego any ongoing
ownership interest in the NEWCO Businesses for an enhanced ownership interest in the
Pharmaceutical Business.
The Board of Directors of the Corporation concurs, believing it to be fair to all
stockholders and in the best interests of the NEWCO Businesses that the employees and
managers of the Pharmaceutical Business not be allowed a continuing ownership interest in the
NEWCO Businesses. Such an exchange would have the additional benefit to the Coating
Business and the Packaging Business of enhancing the ownership interest of their key employees
and managers in such businesses and would represent a first step in better focusing and
rewarding key employees and managers based on the profit and performance of the business in
which they are employed.
Prior to effecting any divestiture of the Coating Business and the Packaging Business, and
in fairness to and in furtherance of enhancing ownership interests of key employees and
managers of the Corporation, such employees will be permitted to and asked to exercise any or
all stock options issued and outstanding and held by them pursuant to the Corporation's
employee incentive stock option plans, whether or not such options otherwise would then be
vested or exercisable. Such employees and managers would thereby acquire additional shares of
Corporation Common Stock and more fully participate in the transactions contemplated by the
Split-off and the Merger. Any options not then exercised would be forfeited.
D. Structure of the Split-off.
------------------------------
The Split-off therefore will be effected in such a way as to be non-pro-rata as among the
Corporation's stockholders.
To effect the Split-off, the Corporation will first cause HSW to adopt a Complete Plan of
Liquidation, through which its interests in the capital stock of AndaPharma and Pharmadyne will
be distributed to the Corporation. The Corporation will then contribute such shares of stock to
UDL-Illinois. UDL-Illinois will assume any intercompany indebtedness owed to the
Corporation by AndaPharma or Pharmadyne by virtue of the liquidation of HSW.
Immediately thereafter, the Corporation will transfer to TC Manufacturing Co., Inc.
("NEWCO"), a newly organized Illinois corporation established by the Corporation for the
purpose of conducting the NEWCO Businesses, all of the Corporation's assets which relate to the
Coating Business and the Packaging Business including, without limitation, the Corporation's
stock ownership interest in any subsidiary corporations, other than UDL-Illinois, UDL-Florida,
AndaPharma and Pharmadyne, held by the Corporation at the time of such transfer and in
consideration thereof, among other things, NEWCO will issue shares of its capital stock to the
Corporation and will assume all of the liabilities relating to such assets and the NEWCO
Businesses. NEWCO will not assume the Corporation's liabilities under the Senior Notes and
the Line of Credit or those liabilities which relate solely to the Pharmaceutical Business.
Immediately thereafter, and in conjunction therewith, (a) all holders of common stock of
the Corporation (including holders of shares issued by reason of the exercise of employee stock
options) who are employees of the Pharmaceutical Business will receive additional shares of the
common stock of the Corporation; and (b) all holders of common stock of the Corporation
(including holders of shares issued by reason of the exercise of employee stock options) who are
not employees of the Pharmaceutical Business will receive shares of the voting and non-voting
common stock of NEWCO. Such distribution will be non-pro-rata on the basis set forth in this
Plan so as to enhance ownership of the Corporation among key employees and managers of the
Pharmaceutical Business and to enhance ownership of NEWCO among key employee and
managers of the Coating Business and the Packaging Business.
E. Post Reorganization Actions.
-----------------------------------
Immediately after giving effect to the Split-off, it is contemplated that the Corporation will
effect the Merger with a wholly-owned acquisition subsidiary of Roderick. The Corporation
would be the surviving entity and, through its wholly-owned subsidiaries, would continue to
operate the Pharmaceutical Business on a basis wholly independent from that of the Coating
Business and the Packaging Business but in a manner otherwise not dissimilar to that in which it
was previously operated.
After giving effect to the Split-off, it is contemplated that NEWCO will operate the
Coating Business and the Packaging Business on a basis wholly independent from that of the
Corporation but in a manner otherwise not dissimilar to that in which they were previously
operated by the Corporation.
In doing so, it will be necessary for NEWCO to adopt new employee benefit plans so as
to continue or continue and enhance the complement of compensation and benefit packages
presently offered by the Corporation to its employees. As part of this Plan, therefore, NEWCO
will minimally establish a profit sharing plan with a Section 401(k) pre-tax savings feature and
establish a group health plan which are substantially similar to the plans currently maintained by
the Corporation and adopt a NEWCO incentive stock option plan and employee bonus plan.
It will also be necessary for NEWCO to adopt a shareholders agreement restricting the
ownership and transfer of its stock so as to ensure ongoing harmonious management and
ownership of the corporation.
F. Intended Tax Treatment of Reorganization.
----------------------------------------------------
The transactions contemplated by this Plan are intended to effect a tax-free reorganization
under Section 355, and all other pertinent provisions, of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the "Code"). The Board of Directors,
however, has determined it to be in the best interests of the Corporation and its stockholders that
this Plan be implemented whether or not the Corporation seeks or successfully receives a
favorable ruling from the Internal Revenues Service as to the tax-free nature of the transactions
contemplated hereby.
ARTICLE I
Present Capital Structure of the Corporation
-----------------------------------------------------
As of the date hereof, the authorized capital stock of the Corporation consists of (i) 14,000
shares of Preferred Stock, par value $100.00 ("Preferred Stock"), of which 4,243 shares are
presently issued and outstanding; (ii) 10,000 shares of Special Preferred Stock, no par value, of
which no shares are presently issued or outstanding; and (iii) 7,000,000 shares of Common
Stock, $1.00 par value ("Corporation Common Stock"), of which 5,340,992 shares are presently
issued and outstanding and an additional 69,452 shares held in the treasury of the Corporation.
Additionally, as of the date hereof, the Corporation has issued and outstanding, pursuant to
various employee incentive stock option plans and a non-employee directors stock option plan,
stock options ("Options") which, when fully vested, are exercisable, in the aggregate, for the
purchase of 216,308 shares of Corporation Common Stock.
Preferred and common stockholders of record as of the date hereof, together with the
number of shares of Preferred Stock or Corporation Common Stock held of record on said date
by each such stockholder, are set forth in Exhibit 1.1-A hereto. Option holders of record as of
the date hereof, together with the grant date, expiration date, exercise price and the number of
shares of Corporation Common Stock into which each of such Options is exercisable, are set
forth in Exhibit 1.1-B hereto.
ARTICLE II
Capital Structure After Giving Effect to the Plan
-----------------------------------------------------------
2.1 Post-Reorganization Capital Structure of the Corporation. The Certificate of
Incorporation and By-laws of the Corporation, as in effect immediately prior to the Effective
Time, will from and after the Effective Time be and continue to be the Certificate of
Incorporation
and By-laws of the Corporation until amended as provided therein. The directors and officers of
the Corporation will be as set forth in Exhibit 2.1 and will continue to be the directors and
officers
of the Corporation until their successors will have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the Corporation's
Certificate
of Incorporation and By-laws.
2.2. Organization and Capitalization of NEWCO. On or before the Effective Time, the
Corporation will organize a new corporation under the laws of the State of Illinois to be named
"TC Manufacturing Co., Inc." ("NEWCO"). The initial authorized capital of NEWCO will
consist of (a) 10,000,000 shares of Class A Voting Common Stock, no par value (the "NEWCO
Voting Common Stock"), of which 100 shares will be issued and outstanding and held by the
Corporation in its name; and (b) 10,000,000 shares of Class B Non-Voting Common Stock, no
par value (the "NEWCO Non-Voting Common Stock"), none of which will be issued or
outstanding at the time of the organization of NEWCO.
Each outstanding share of NEWCO Voting Common Stock and NEWCO Non-Voting
Common Stock will have such rights and preferences as are set forth in the form of Articles of
Incorporation attached hereto as Exhibit 2.2-A.
NEWCO will have such other corporate attributes and powers as are set forth in the form
of Articles of Incorporation and By-laws attached hereto as Exhibits 2.2-A and 2.2-B until
amended as provided therein. The directors and officers of NEWCO will be as set forth in
Exhibit 2.2-C and will continue to be the directors and officers of said corporation until their
successors will have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with said corporation's Articles of Incorporation and
By-laws.
ARTICLE III
----------------
Transfer of Assets and Assumption of Liabilities
-----------------------------------------------------------
3.1. Liquidation of HSW and Subsequent Contributions to UDL-Illinois. Subject to the
terms and conditions of this Plan, the Corporation as sole stockholder of HSW will cause HSW
to adopt, in accordance with applicable corporate law, a Plan of Complete Liquidation in
substantially the form attached hereto as Exhibit 3.1-A. Such Plan of Complete Liquidation will
provide for the distribution to the Corporation, contemporaneously with the adoption of such
Plan of Complete Liquidation, of HSW's investment in and ownership of the capital stock of
AndaPharma and Pharmadyne and the intercompany indebtedness due to HSW from
AndaPharma and Pharmadyne. Immediately following said distribution, the Corporation will
contribute all of the shares of capital stock of AndaPharma and Pharmadyne to UDL-Illinois,
such that on the Effective Time and before giving effect to the transfer and assumption
contemplated by Section 3.2 below, AndaPharma and Pharmadyne each will be a wholly-owned
subsidiary of UDL-Illinois. UDL-Illinois will assume any intercompany indebtedness owed to
the Corporation by AndaPharma or Pharmadyne by virtue of the liquidation of HSW. The terms
and conditions of such assumption will be set forth in an assumption agreement to be delivered
to the Corporation by UDL-Illinois. Said UDL-Illinois Assumption Agreement will be in
substantially the form attached hereto as Exhibit 3.1-B. The balance of the assets of HSW, if any,
subject to liabilities, will be distributed by HSW to NEWCO after the Effective Time.
3.2 Transfer to NEWCO of Assets Relating to the Coating Business and Packaging
Businesses and Assumption of Related Liabilities. Subject to the terms and conditions of this
Plan, on the Effective Time the Corporation will contribute, sell, assign, transfer, deliver and set
over to NEWCO, without warranty and otherwise on a quit-claim basis, all of the properties,
assets, goodwill and business of every kind, nature and description, both real and personal,
tangible and intangible, of the Coating Business and the Packaging Business, including without
limitation the Corporation's stock ownership interest in The Tapecoat Company, Inc., The
Tapecoat Company of Canada, Limited, and HSW and all of its right, title and interest in and to
the corporate name and tradenames "TC Manufacturing Co., Inc.", "The Tapecoat Company",
and "Pak-Sher Company" (hereinafter referred to as the "NEWCO Assets"), all as are further
described in that certain distribution agreement to be entered into between the Corporation and
NEWCO (hereinafter referred to as the "Distribution Agreement"). The Distribution Agreement
will be in substantially the form attached hereto as Exhibit 3.2. In consideration of such transfer,
NEWCO will (a) issue to the Corporation one-hundred (100) shares of NEWCO Voting
Common Stock, (b) assume and agree to pay, perform and discharge all debts, liabilities,
contracts, duties and obligations of the Corporation, whether accrued, matured or unmatured,
known or unknown, fixed or contingent, to the extent that such debts, liabilities and duties arise
from or relate to the NEWCO Assets or the Coating Business or the Packaging Business,
including without limitation the debts, liabilities and duties which arise from or relate to HSW
and derive from its former association with the Coating Business (hereinafter referred to as the
"NEWCO Liabilities"), and (c) assume the Corporation's obligations and liabilities under
employee benefit plans and arrangements with respect to the Corporation's sponsorship and
administration thereof, all as are further described in said Distribution Agreement. The
Corporation and NEWCO will further execute and deliver such bills of sale, assignment and
assumption agreements and such other documents, instruments or agreements, and take such
further action, as will be required to effect the purpose and intent of the foregoing.
3.3 Payment and Proration of Liabilities and Accrued Expenses. The Corporation will
equitably apportion all consolidated liabilities and accruals among the Coating Business, the
Packaging Business and the Pharmaceutical Business as of the Effective Time. Accordingly, as
of the Effective Time, all liabilities and accruals of the Corporation and its subsidiaries for (i)
employee bonus plan payments; (ii) profit-sharing contributions; (iii) federal, state, local and
other applicable taxes; and (iv) insurance premiums, will be equitably apportioned and allocated
between NEWCO and the Corporation based upon the income and expenses properly attributable
to each of the Coating Business, the Packaging Business and the Pharmaceutical Business in
accordance with the methodology used to create such liabilities and accruals, consistent with past
practices. With respect to any taxes which may be assessed or owing for the current tax period
from the beginning of such period through the Effective Time, NEWCO will pay the Corporation
its pro-rata portion of such taxes on or before the date of filing of the Corporation's income tax
returns for such period; provided, however, that NEWCO will not be liable to the Corporation
for any amount greater than the actual tax liability less any credits for tax prepayments
attributable to the NEWCO Businesses and the Corporation will not be liable to NEWCO for any
amount greater than the actual tax liability less any credits for tax prepayments attributable to the
Pharmaceutical Business. All corporate charges will be allocated between NEWCO and the
Corporation on a basis consistent with past practices and, as to federal tax obligations, consistent
with one of the acceptable methods of tax allocation enumerated in the Code or the regulations
promulgated thereunder.
3.4 Effective Time Balance Sheets and Adjustments. As of the Effective Time and after
giving effect to the transfer and assumption of the NEWCO Assets and NEWCO Liabilities, the
consolidating pro forma balance sheets of the Corporation and NEWCO will appear substantially
as set forth in Exhibits 3.4-A and 3.4-B hereto, adjusted as necessary to reflect changes resulting
from ordinary business operations during the period from and after the date on which each pro
forma balance sheet was prepared through the Effective Time.
<PAGE>
ARTICLE IV
----------------
Acceleration and Exercise of Employee Options
----------------------------------------------------------
Not more than thirty (30) days after the date of this Plan, each holder of an outstanding
Option issued pursuant to (i) the TC Manufacturing Co., Inc. 1991 Incentive Stock Option Plan,
(ii) the TC Manufacturing Co., Inc. 1994 Incentive Stock Option Plan and (iii) the TC
Manufacturing Co., Inc. Non-Employee Directors Stock Option Plan will, in accordance with
Section 6.2 of each such plan, be notified of his or her right to exercise such options to the extent
then exercisable. Additionally, pursuant to authorization of the Board of Directors of the
Corporation, and the Compensation Committee thereof, such options as may not yet be
exercisable with respect to all shares covered thereby will, as of the date of such notice and
through and including the date on which is held the meeting of Corporation stockholders to
approve the Merger, be accelerated so as to be immediately exercisable in full. All outstanding
options will, to the extent not exercised on or before the date of such stockholders meeting,
terminate as of such date, and each stock option plan will terminate as of such date.
ARTICLE V
---------------
Distribution of Shares
---------------------------
5.1 Distribution of Corporation Common Stock. On the Effective Time and
immediately following the transfer of assets and assumption of liabilities pursuant to Article III
of this Plan but prior to consummation of the transactions contemplated by the Merger, the
holders of shares of Corporation Common Stock then issued and outstanding will be distributed
shares of Corporation Common Stock or Newco Common Stock as follows:
(a) Stockholders Who Are Employees of the Pharmaceutical Business. Each
holder of shares of Corporation Common Stock then issued and outstanding who is an
Employee of the Pharmaceutical Business will (i) retain his or her shares of Corporation
Common Stock and (ii) be distributed that number of additional shares of Corporation
Common Stock as reflects a value equivalent to the value of the NEWCO Businesses (as
determined by independent appraisal) multiplied by the percentage, as calculated
immediately prior to the distribution, of all of the issued and outstanding shares of
Corporation Common Stock which is represented by the shares of Corporation Common
Stock held by such person.
(b) Stockholders Who Are Not Employees of the Pharmaceutical Business.
Each holder of share of Corporation Common Stock then issued and outstanding who is
not an Employee of the Pharmaceutical Business will (i) retain his, her or its shares of
Corporation Common Stock and (ii) be distributed one share of NEWCO Voting Common
Stock and one share of NEWCO Non-Voting Common Stock of NEWCO for each share
of Corporation Common Stock held by such person or entity immediately prior to the
distribution.
For the purposes of this Section 5.1, a person will be deemed to be an "Employee of the
Pharmaceutical Business" if such person is, as of the Effective Time, actively employed on a full
or part-time basis by such Business. The identity of each person who, as of the date hereof,
holds shares of or options exercisable for shares of Corporation Common Stock and is presently
(or with respect to each person who is employed in the Corporation's corporate office and who
from and after the Effective Time will be) an Employee of the Pharmaceutical Business is set
forth in Exhibit 5.1-A hereto.
A pro forma demonstration application of the distribution formula of Section 5.1(a) is set forth
in Exhibit 5.1-B.
5.2 Cancellation of Shares Owned by the Corporation. On the Effective Time and after
giving effect to the distribution of shares provided for in Section 5.1 above, all shares of
Corporation Common Stock held in the treasury by the Corporation and all shares of NEWCO
Voting Common Stock held of record by the Corporation will be canceled and retired and no
exchange or distribution will be made in respect thereof.
5.3 Issuance of Certificates and Related Matters.
(a) Stockholders Who Are Employees of the Pharmaceutical Business. On or
promptly after the Effective Time, each holder of a certificate or certificates representing
outstanding shares of Corporation Common Stock who is an Employee of the
Pharmaceutical Business will (a) be issued a certificate or certificates representing the
number of additional whole shares of Corporation Common Stock to which such holder
will be entitled after giving effect to the distribution of shares pursuant to Section 5.1(a)
above; and (b) be paid cash (without interest thereon) in lieu of any fractional shares into
which, as a result of mechanical rounding, the Corporation Common Stock theretofore
represented by the certificate or certificates so surrendered will have been converted. The
Board of Directors of the Corporation will establish the amount of cash payment to be so
made based upon their best judgement of the fair value per share of the Corporation
Common Stock to be issued. After the Effective Time and until the Corporation Common
Stock is issued pursuant to Section 5.1(a), each certificate held of record by a person who
is an Employee of the Pharmaceutical Business which theretofore represented outstanding
shares of Corporation Common Stock will be deemed for all corporate purposes to
evidence ownership of the number of full shares of Corporation Common Stock to which
such record holder will be entitled after giving effect to the issuance of shares pursuant to
Section 5.1(a) above.
(b) Stockholders Who Are Not Employees of the Pharmaceutical Business. On
or promptly after the Effective Time, each holder of a certificate or certificates
representing outstanding shares of Corporation Common Stock who is not an Employee
of the Pharmaceutical Business will be issued a certificate or certificates representing the
number of shares of NEWCO Voting Common Stock and NEWCO Non-Voting Common
Stock to which such holder will be entitled after giving effect to the distribution of shares
pursuant to Section 5.1(b) above.
(c) Issuances in the Names of Other Persons.If any issuance of shares pursuant to Section
5.1 above is to be made to a person other than the person in whose name such shares are
registered on the books and records of the Corporation, it will be a condition of such issuance
that a proper letter of transmittal be provided by the person requesting such issuance, which
letter will instruct the Corporation to issue the certificate or certificates representing shares
issued pursuant to Section 5.1 above in the name of another person. Any person requesting
such issuance will either (i) pay to the Corporation any transfer, stamp or other tax required
by reason of the issuance of shares to such other person; or (ii) establish to the satisfaction of
the Corporation that such tax has been paid or is not payable. No such transfer may occur if
(x) such transfer would be in violation of the restrictions on transfer contained in the
Corporation's existing Shareholders Agreement, as amended, or (y) there is no applicable
exemption from the registration requirements of Federal and state securities laws.
ARTICLE VI
-----------------
Post-Reorganization Actions
-----------------------------------
6.1 Further Actions by the Corporation. As soon as practicable after giving effect to
this Plan, the Corporation will consummate the transactions contemplated by the Merger.
Additionally, at any time, or from time to time, after the Effective Time, without the payment of
any further consideration, the Corporation will execute and deliver all such proper deeds,
assignments, conveyances, and other instruments of transfer and to take or cause to be taken all
such further or other action as NEWCO may deem necessary or desirable in order to vest,
perfect, or confirm in NEWCO title to and possession of all of the properties, rights, privileges,
powers, franchises, immunities and interests in and to the NEWCO Assets.
6.2 Further Actions by NEWCO. As of the Effective Time, or as soon thereafter as
practicable, NEWCO will adopt and assume or place in effect with respect to its employees: (i)
such employee benefit plans and arrangements as will serve to continue or to continue and
enhance the benefits afforded such employees by the Corporation prior to the transactions
contemplated by this Plan; and (ii) a shareholders agreement restricting the ownership and
transfer of its stock so as to ensure ongoing harmonious management and ownership of NEWCO.
<PAGE>
Accordingly, NEWCO will at a minimum:
(a) adopt an employee incentive stock option plan;
(b) adopt corporate and divisional bonus plans;
(c) establish a profit sharing plan with a Section 401(k) pre-tax savings feature
and related trust and arrange with the cooperation of the Corporation for the NEWCO
profit sharing plan to receive from the TC Manufacturing Co., Inc. 401(k) Profit Sharing
Plan and Trust (the "TC Profit Sharing Plan") cash and other assets comprising the
account balances in the TC Profit Sharing Plan of participants therein who became
employees of NEWCO, so as to avoid distribution from the TC Profit Sharing Plan to such
participants;
(d) establish a group medical plan and other employee benefit plans of general
applicability which are substantially similar to the plans currently maintained by the
Corporation for its employees; and
(e) a shareholders agreement.
Such agreements and actions as require specific approval of the shareholders of NEWCO,
such as the adoption of certain benefit plans and arrangements, the employee stock option plan
and the shareholders agreement referred to in this Section 6.2, will be presented to such
shareholders for approval no later than one-hundred eighty (180) days after the Effective Time.
6.3 Withdrawal of Qualifications to do Business. As of the Effective Time or as soon
thereafter as practicable, NEWCO will prepare or cause to be prepared for execution by the
Corporation such applications as are necessary to request the withdrawal of the Corporation's
qualifications to do business in the States of Texas and Illinois, which states represent all of the
jurisdictions outside of the State of Delaware in which the Corporation presently is so qualified.
NEWCO will file all such applications on behalf of and in the name of the Corporation and in
connection therewith pay all fees and taxes required to effect, and deliver to the Corporation
evidence of the successful completion of, such withdrawals. The Corporation will fully
cooperate
with NEWCO in its efforts to effect such withdrawals and will execute and deliver such
applications or other documents as may be required to be executed by or in the name of the
Corporation.
6.4 Continuing Obligations of the Corporation to NEWCO. The Corporation will
indemnify, and agree to defend and hold NEWCO harmless for, from, against and in respect of
and will on demand reimburse NEWCO for:
(a) any and all loss, liability or damage suffered or incurred by NEWCO by
reason of any assessment by the Internal Revenue Service or any state, local or other
taxing authority, of any additional taxes against said entity for transactions, events or
omissions occurring on or prior to the Effective Time which relate to the Pharmaceutical
Business or its properties, operations and activities, revenues, expenses or income;
(b) any and all loss, liability or damage suffered or incurred by NEWCO by
reason of any transactions, events or omissions occurring before, on or after the Effective
Time which relate to the Pharmaceutical Business or its properties, operations and
activities, including without limitation any damages, fines, penalties, losses, liabilities or
damages suffered or incurred by NEWCO (or imposed upon NEWCO by any party or
person including without limitation a governmental entity) arising out of or as a result of
or in connection with any environmental contamination, pollution, claim, condition or
circumstance relating to the existence, use, discontinued use or clean-up of any real
property owned or leased by the Corporation (including without limitation all costs
incident to the exposure of any person or property to any such environmental
contamination, pollution, condition or circumstance) in so far as the foregoing stems from
the operation or ownership of the Pharmaceutical Business by the Corporation through its
subsidiaries, or the shipment by or on behalf of the Pharmaceutical Business of any
hazardous material for further management, and all settlements, costs and expenses
relating to abatement, remediation, removal and clean-up incident to any of the foregoing;
and
(c) any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses, including without limitation reasonable court costs,
attorneys' and accountants' fees, and advisory, engineering or other expenses incident to
any of the matters described in paragraphs (a) and (b) above.
6.5 Continuing Obligations of NEWCO to the Corporation. NEWCO will indemnify
and agree to defend and hold harmless the Corporation from, against and in respect of and will
on demand reimburse the Corporation for:
(a) any and all loss, liability or damage suffered or incurred by the Corporation
by reason of any assessment by the Internal Revenue Service or any state, local or other
taxing authority of any additional taxes against the Corporation for transactions, events or
omissions occurring on or prior to the Effective Time which relate to the Coating Business
or the Packaging Business or its or their properties, operations and activities, revenues,
expenses or income;
(b) any and all loss, liability or damage suffered or incurred by the Corporation
by reason of any transactions, events or omissions occurring before, on or after the
Effective Time which relate to the Coating Business or the Packaging Business or its or
their properties, operations and activities, including without limitation the NEWCO
Liabilities and any damages, fines, penalties, losses, liabilities or damages suffered or
incurred by the Corporation (or imposed upon the Corporation by any party or person
including without limitation a governmental entity) arising out of or as a result of or in
connection with any environmental contamination, pollution, claim, condition or
circumstance relating to the existence, use, discontinued use or clean-up of any real
property owned or leased by NEWCO or the Corporation (including without limitation all
costs incident to the exposure of any person or property to any such environmental
contamination, pollution, condition or circumstance) in so far as the foregoing stems from
the Corporation's operation or ownership of the Coating Business or the Packaging
Business, or the shipment by or on behalf of the Coating Business or the Packaging
Business of any hazardous material for further management, and all settlements, costs and
expenses relating to abatement, remediation, removal and clean-up incident to any of the
foregoing; and
(c) any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses, including without limitation reasonable court costs,
attorneys' and accountants' fees, and advisory, engineering or other expenses incident to
any of the matters described in paragraphs (a) and (b) above.
6.6 Notice, Defense and Settlement Offers. A party claiming indemnification (the
"Indemnified Party") will give prompt notice to the party liable for indemnification (the
"Indemnifying Party") of any matters hereunder which may give rise to a claim for
indemnification as promptly as practicable after it has actual knowledge of the facts which may
give rise to such claim, and the Indemnified Party will specify in such notice all relevant facts
known to the Indemnified Party relating to such potential indemnification right. The failure,
however, of the Indemnified Party to give notice within a reasonable time as required under this
Section 6.6 will not affect or otherwise waive the Indemnified Party's rights to be indemnified
under or to enforce an indemnification of such claim or any other claim pursuant to the terms of
this Plan to its full extent, except that the Indemnified Party will not be permitted to recover from
the Indemnifying Party the amount of any additional loss, liability or damage incurred by the
Indemnified Party which would not reasonably have been incurred had notice been given in
accordance with the provisions of this Section 6.6. Failure by the Indemnified Party to give such
notice will not diminish any rights to indemnity it may have other than under this Plan.
If the facts which give rise to any such potential indemnification claim involve any actual
or threatened claim or demand by any third party against the Indemnified Party, the
Indemnifying Party will be entitled (without prejudice to the right of the Indemnified Party at its
expense jointly to defend) to defend such claim (and jointly to prosecute any possible related
claim by the Indemnified Party against any third party) at the Indemnifying Party's expense
through counsel of the Indemnifying Party's own choosing, provided that the Indemnifying Party
gives notice of its intention to do so to the Indemnified Party within fifteen days after receipt of
the notice of claim. In all instances in which the Indemnifying Party chooses to defend claims
against the Indemnified Party as provided hereunder, it will be agreed that counsel for the
Indemnifying Party will act as lead counsel even if the Indemnified Party chooses to participate
in said defense. It will be further agreed that whenever the Indemnifying Party chooses to defend
a claim and the Indemnified Party chooses not to participate actively in such defense, the
Indemnified Party will nonetheless fully and actively cooperate with and assist the Indemnifying
Party in defending the matter by, among other things, assisting in the procurement of
documentary evidence and witnesses and enforcing rights against third parties.
No matter giving rise to a claim for indemnification under this Plan will be settled by the
Indemnifying Party without the prior written consent of the Indemnified Party, except when the
settlement thereof involves only the payment of money for which the Indemnified Party is totally
indemnified by the Indemnifying Party by virtue of payment made directly to a third-party by the
Indemnifying Party. Promptly following a party's receipt of a firm settlement offer with respect
to any such matter, such party will notify the other party of such offer, setting forth in such
notification the terms of such offer and indicating the notifying party's view as to whether or not
the offer should be accepted. Any acceptance or rejection of a settlement offer on the part of the
other party will be submitted to the notifying party within ten (10) days after the other party's
receipt from the notifying party of the terms of such offer. Failure of the other party to so advise
the notifying party within said ten (10) days will constitute an acceptance of such settlement
offer
by the other party.
6.7 Limitation on Indemnity.
------------------------------
(a) Notwithstanding any other provision of this Plan, all rights to indemnification under
Section 6.4 or Section 6.5 will terminate and be of no further force and effect as to any claim
when the assertion of such claim by any third party against Newco or the Corporation, as the case
may be, is barred by the applicable statute of limitations. No extension of any applicable statute
of limitations will be granted by the Indemnified Party without the prior written consent of the
Indemnifying Party and the Indemnifying Party will not be liable to the Indemnified Party for
any claim asserted during a time period extending an applicable statute of limitations unless such
consent has been so obtained.
(b) Any indemnification claim made will be deemed to be timely made within the
applicable time limit set forth in this Section 6.7 if a matter will have become known which may
give rise to a right for indemnification hereunder and the Indemnified Party, prior to or within
thirty (30) days following the expiration of such time limit, will have given notice thereof to the
Indemnifying Party in accordance with this Plan, in which event the Indemnified Party's right to
indemnification and the indemnification provisions of this Plan with respect to such matter will
continue until such matter is fully and finally resolved.
(c) The Indemnifying Party will not indemnify any claim which was brought within
a time period extending an applicable statute of limitation, where such extension was granted by
the Indemnified Party without the written consent of the Indemnifying Party.
6.8 Release of Other Claims. Except as specifically provided in this Plan, in the
Exhibits hereto, or in any of the agreements, documents or instruments used to effect the
transactions contemplated by the Merger, each of the Corporation and NEWCO, for itself and its
respective affiliates, successors and assigns, will release each other party from and against any
and all claims, demands or causes of action of any nature whatsoever arising from any
transaction, event, omission, or source whatsoever occurring prior to the Effective Time. The
foregoing release will become effective as of the Effective Time.
ARTICLE VII
------------------
Representations, Warranties and Covenants of the Corporation
----------------------------------------------------------------------------
7.1 Certain Representations and Warranties. In order to effect the reorganization
contemplated by this Plan on a tax-free basis, and in addition to such other representations and
warranties as are set forth in this Plan, the Corporation expressly represents and warrants as
follows:
(a) that as of the Effective Time, the total adjusted basis and the fair market
value of the NEWCO Assets equal or exceed the sum of the NEWCO Liabilities;
(b) that the NEWCO Liabilities were incurred in the ordinary course of the
Coating Business or the Packaging Business and are associated with the NEWCO Assets;
and
(c) that the Corporation neither accumulated its accounts receivable nor made
extraordinary payment of its accounts payable in anticipation of the transactions
contemplated by Article V of this Plan.
The foregoing representations and warranties will not survive consummation of the
transactions contemplated by this Plan.
7.2 Certain Covenants. In order to effect the reorganization contemplated by this Plan
on a tax-free basis, and in addition to such other covenants as are set forth in this Plan, the
Corporation covenants as follows:
(a) that, except for intercorporate debt created as a result of any continuing
transactions between the Corporation and NEWCO as described in subparagraph (c)
below, no intercorporate debt will exist between the Corporation and NEWCO subsequent
to the Effective Time;
(b) that the investment tax credit previously computed with respect to any
Section 38 property transferred to NEWCO will be adjusted in the year of transfer to
reflect an early disposition of the property pursuant to Section 47(a)(1) and (5) of the
Code; and
(c) that payments made in connection with all continuing transactions between
the Corporation and NEWCO will be for fair market value based on terms and conditions
arrived at by the parties bargaining at arm's length.
The foregoing covenants will survive consummation of the transactions contemplated by
this Plan and will continue to be binding upon the Corporation notwithstanding such
consummation.
ARTICLE VIII
-------------------
Conditions to Reorganization
------------------------------------
8.1 Consummation of Merger. The obligation of the Corporation to effect the
transactions contemplated by this Plan is conditioned upon the consummation immediately
thereafter of the transactions contemplated by the Merger. The Board of Directors of the
Corporation approves the reorganization contemplated by this Plan based upon its belief that
such reorganization, when effected in conjunction with the Merger, will not result in a taxable
event for either the Corporation or its stockholders. While it is the desire of the Board of
Directors that the Corporation apply for and procure a favorable ruling from the Internal Revenue
Service as to the tax-free nature of the reorganization, neither the application for nor the
procurement of such a favorable ruling is a pre-condition to the consummation of the Plan and
failure to apply for or procure such a ruling on or before the Effective Time will not be deemed
conclusive evidence that the transactions contemplated by this Plan cannot reasonably be
expected to qualify as a tax-free corporate reorganization under Sections 355 and 354 of the
Code.
8.2 Confirmation of Fair Value. The obligation of the Corporation to effect the
transactions contemplated by this Plan is conditioned upon a finding by the Board of Directors of
the Corporation that the fair market value of the shares and interests held by each of the
Corporation's stockholders immediately prior to giving effect to such transactions is substantially
equal to the fair market value of the shares and interests which will be held by such stockholder
after giving effect to such transactions. The Board of Directors has made such a finding and
therefore approves the reorganization contemplated by this Plan on the terms and conditions set
forth.
8.3 Third Party Consents. Except for such approvals and consents as are required by
statute, ordinance or regulation in order to effect the transactions contemplated by this Plan, no
approvals of any third party will be sought by the Corporation as a pre-condition to the
obligation
of the Corporation to effect such transactions.
ARTICLE IX
-----------------
Effective Time
-------------------
As used in this Plan, the term "Effective Time" will be the effective time of the Split-off,
which Split-off will be consummated so as to occur immediately before consummation of the
Merger, as determined in accordance with an agreement and plan of merger setting forth the
terms and conditions of the Merger. The Effective Time, however, will be no sooner than thirty
(30) days after holders of Options have been advised pursuant to Article IV of the acceleration of
the Options (and of the holders' immediate right to exercise such Options) and no sooner than
two (2) days after the stockholders of the Corporation have approved the Merger. In no event
will the Effective Time be later than February 28, 1996, unless extended to such later date by
action of the Board of Directors.
ARTICLE X
----------------
Termination and Abandonment of Plan and Amendments
---------------------------------------------------------------------
This Plan, and the transactions contemplated hereby, may be terminated at any time on or
prior to the Effective Time by action of the Board of Directors of the Corporation if, and only if,
as of the Effective Time the Corporation will then have the right under the agreement and plan
of merger setting forth the terms and conditions of the Merger to terminate such agreement and
elect not to proceed with the Merger. This Plan may be amended by the Board of Directors of
the Corporation at any time prior to the Effective Time, provided that any such amendment will
not (i) alter or change the amount, kind or rights of the securities to be received in exchange for
or upon conversion of the Corporation's Common Stock; (ii) alter or change any term of the
charter documents of the Corporation or NEWCO as contemplated by this Plan; or (iii) alter or
change any of the terms of the Plan if such alteration or change would adversely affect the
holders of any class or series of Corporation's capital stock.
ARTICLE XI
-----------------
Fees and Expenses
-----------------------
The Corporation will be responsible for the payment of its expenses (including without
limitation the fees and expenses of its attorneys, accountants and financial advisors) incurred in
connection with the preparation and execution of this Plan and the consummation of the
transactions contemplated hereby. Any stockholders seeing fit to retain his or her own
professional advisors in connection with his or her evaluation of the Plan will be responsible for
the payment of the fees and expenses of such professionals.
This Plan is adopted as of October 10, 1995.<PAGE>
PLAN OF REORGANIZATION OF
TC MANUFACTURING CO., INC. ("Corporation")
LIST OF EXHIBITS
Exhibit Description Section Reference
- --------- -------------- ----------------------
A Calculation of Yield Maintenance Preamble C.ii
Penalty
1.1-A Preferred/Common Stockholders: Article I
Number of Shares Held of Record
1.1.-B Option Holders - Grant Date, Article I
Expiration Date, Exercise Price and
Number of Shares
2.1 Directors and Officers of the Article II, Section 2.1
Corporation
2.2-A Articles of Incorporation of NEWCO Article II, Section 2.2
2.2-B By Laws of NEWCO Article II, Section 2.2
2.2-C Directors and Officers of NEWCO Article II, Section 2.2.
3.1-A Form of Plan of Complete Article III, Section 3.1
Liquidation for HSW Investment Co.
3.1-B Form of UDL-Illinois Assumption Article III, Section 3.1
Agreement
3.2 Form of Distribution Agreement Article III, Section 3.2
between the Corporation and
NEWCO
3.4-A Pro Forma Consolidating Balance Article III, Section 3.4
Sheet for the Corporation
3.4-B Pro Forma Consolidating Balance Article III, Section 3.4
Sheet for NEWCO
Exhibit Description Section Reference
- --------- -------------- ----------------------
5.1-A Shareholder/Option Holder List of Article V, Section 5.1(b)
Pharmaceutical Business Employees
5.1-B Pro Forma Demonstration Application Article V, Section 5.1(b)
of Distribution Formula
</TABLE>
<TABLE>
<S> <C>
EXHIBIT 2.10 TO DISTRIBUTION AGREEMENT
INDEMNIFICATION AGREEMENT
This Indemnification Agreement made this _____ day of ______________,
199__ by and between TC MANUFACTURING CO., INC., an Illinois corporation
("Newco"), and TC MANUFACTURING CO., INC., a Delaware corporation to be known as
Roderick Corporation ("TC-DEL").
BACKGROUND
WHEREAS, TC-DEL has operated for many years two separate lines of
business as divisions of TC-DEL and through its wholly owned subsidiaries, The Tapecoat
Company, Inc., a Delaware corporation ("Tapecoat-DE"), The Tapecoat Company Canada,
Limited, an Ontario, Canada corporation ("Tapecoat Ltd."), Tapecoat Canada, Inc., an
Ontario, Canada corporation ("Tapecoat, Inc.") and HSW Investment Co., an Illinois
corporation ("HSW"); namely, the manufacture, marketing and sale of specialty corrosion
protection products through the Tapecoat Division (the "Coating Business") and the
manufacture, marketing and sale of flexible packaging products and systems through the
Pak-Sher Division (the "Packaging Business"); and
WHEREAS, TC-DEL, through its direct and indirect wholly owned
subsidiaries, UDL Laboratories, Inc., an Illinois corporation ("UDL-IL"), UDL Laboratories,
Inc., a Florida corporation ("UDL-FL"), AndaPharma Corp., a Virginia corporation ("AP"),
and Pharmadyne Corp., a Virginia corporation ("PD"), has operated for many years a line of
business involving the development, manufacture, packaging, marketing and sale of generic
pharmaceutical products (the "Pharmaceutical Business"); and
WHEREAS, TC-DEL has contributed all of the assets and certain of the
liabilities of the Coating Business and the Packaging Business to Newco and distributed capital
stock of Newco to certain holders of the common stock of TC-DEL pursuant to a Plan of
Reorganization dated October 10, 1995 (the "Plan of Reorganization"); and
WHEREAS, pursuant to the Plan of Reorganization, Newco has assumed, and
undertaken to satisfy in full, the liabilities of TC-DEL arising out of or relating to the Newco
Assets (as hereinafter defined), the Coating Business and the Packaging Business; and
WHEREAS, prior to the consummation of the transactions described in the Plan
of Reorganization, the aggregate assets of the Coating Business, the Packaging Business and
the Newco Subsidiaries (as hereinafter defined) were available to TC-DEL for the satisfaction
of the liabilities being assumed by Newco; and
WHEREAS, after the consummation of the transactions described in the Plan of
Reorganization, all of the assets of the Pharmaceutical Subsidiaries (as hereinafter defined) are
available to TC-DEL and the Pharmaceutical Subsidiaries for the satisfaction, in full, of the
liabilities arising out of or relating to the Pharmaceutical Business; and
WHEREAS, TC-DEL, Mylan Laboratories Inc., a Pennsylvania corporation
("Mylan"), and MLI Acquisition Corp., a Delaware corporation and wholly owned subsidiary
of Mylan ("MLI"), are parties to an Agreement and Plan of Merger dated October 10, 1995
pursuant to which MLI will be merged with and into TC-DEL with TC-DEL being the
surviving corporation of the merger and will be known as Roderick Corporation upon and
after such merger (the "Merger Agreement"); and
WHEREAS, as a condition to the consummation of the transactions under the
Plan of Reorganization, Newco has agreed to indemnify and hold harmless TC-DEL and
Mylan from and against all of the liabilities assumed by Newco under the Plan of
Reorganization such that TC-DEL and Mylan will have the benefit of the aggregate assets of
the Coating Business, the Packaging Business and the Newco Subsidiaries available for the
satisfaction of such liabilities in the same manner as existed prior to the consummation of the
transactions described in the Plan of Reorganization; and
WHEREAS, as a condition to the consummation of the transactions under the
Plan of Reorganization, TC-DEL has agreed to indemnify and hold harmless Newco and the
holders of the capital stock of Newco on the date hereof after giving effect to the
consummation of the transactions under the Plan of Reorganization (the "Newco
Shareholders") from and against all of the liabilities of the Pharmaceutical Business such that
Newco and the Newco Shareholders will have the benefit of the aggregate assets of the
Pharmaceutical Subsidiaries available for the satisfaction of such liabilities in the same manner
as existed prior to the consummation of the transactions described in the Plan of
Reorganization; and
WHEREAS, Newco and TC-DEL intend that this Agreement serve to allocate
among Newco, the Newco Subsidiaries, TC-DEL and the Pharmaceutical Subsidiaries all of
the liabilities incurred or to be incurred on account of the past, present and future operations
of the business of the Coating Business and Packaging Business, on one the hand, and the
Pharmaceutical Business, on the other hand; and
WHEREAS, as an inducement to consummate the transactions described in the
Plan of Reorganization, the parties have agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Newco
and TC-DEL, intending to be legally bound, hereby represent, warrant, covenant and agree as
follows:
A. DEFINITIONS.
1. Definitions. As used in this Agreement, the following terms have the
following meanings:
(a) "Coating Business Balance Sheet" shall mean the balance sheet of
the Tapecoat Division of Newco prepared in accordance with GAAP as of the date of this
Agreement after giving effect to the transactions contemplated by the Plan of Reorganization
and the Merger Agreement, a pro forma of which is attached hereto as Exhibit A-1.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
(c) "Corrective Action Work" shall mean: (i) all removal, remedial and
other response activities required to be done by the Environmental Laws or any order or
directive issued pursuant to the Environmental Laws to respond to the release or threatened
release of Hazardous Materials; and (ii) all activities undertaken to correct violations of any
Environmental Laws.
(d) "Environmental Condition" shall mean any condition on, in, under,
or otherwise associated with, or emanating from, real or personal property which is affecting
or could affect human health and the environmental or natural resources as a result of a release
or threatened release of any Hazardous Material, the existence of which subjects a generator of
any Hazardous Material located on, or an owner, operator or occupant of, such property to
any liability, loss, damage, cost or expense under any Environmental Law.
(e) "Environmental Laws" shall mean any federal, state, local or foreign
laws (including the common law), statutes, ordinances, codes, rules or regulations, permits or
permit conditions, consent or administrative orders, agreements or understandings (whether
previously existing, now existing or hereafter enacted, promulgated, issued or entered into)
which pertain to the protection of human health or the environment or worker safety,
including, without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act, as each of the foregoing
may be amended from time to time, and any judicial or administrative interpretation of such
laws, statutes, ordinances, codes, rules, regulations or orders, permits or permit conditions,
consent or administrative orders, agreements or understandings, including, without limitation,
any judicial or administrative orders or judgments.
(f) "GAAP" shall mean generally accepted accounting principles applied
on a consistent basis with prior periods.
(g) "General Liabilities" shall mean any and all items of indebtedness or
obligation owed to any party whether such indebtedness or obligation is, as of the date of this
Agreement, accrued, matured or unmatured, known or unknown, fixed or contingent, created
under statutes or laws presently existing or hereafter enacted or promulgated but, in the case of
any items of indebtedness or obligation which are unmatured, unknown or contingent as of the
date of this Agreement or created under statutes or laws hereafter enacted or promulgated,
when such items become matured, known, fixed or created, such items shall be deemed to
have been in existence as of the date of this Agreement.
(h) "Hazardous Materials" shall mean any hazardous or toxic materials,
wastes or substances which are defined, determined or identified as such in any Environmental
Laws or any material, waste or substance the manufacture, generation, use, storage,
transportation, disposal or other management of which is regulated by the Environmental
Laws.
(i) "New Newco Subsidiary" shall be defined in Section F.1.(b).
(j) "Newco Assets" shall mean all of the properties, assets, rights,
goodwill and business of every kind, nature and description, both real and personal, tangible,
intangible or mixed, of the Coating Business and the Packaging Business owned or held from
time to time by Newco and the Newco Subsidiaries, including, without limitation, the stock
ownership of Newco in the Newco Subsidiaries.
(k) "Newco Balance Sheet" shall mean the balance sheet of Newco
prepared in accordance with GAAP as of the date of this Agreement after giving effect to the
transactions contemplated by the Plan of Reorganization and the Merger Agreement, a pro
forma of which is attached hereto as Exhibit A-2.
(l) "Newco Businesses" shall mean the Coating Business and the
Packaging Business, collectively.
(m) "Newco Environmental Claim" shall be defined in Section C.1
hereof.
(n) "Newco Environmental Liabilities" shall be defined in
Section B.2.(a)(iv).
(o) "Newco General Liabilities" shall mean the General Liabilities
incurred in connection with, or arising out of, or relating to the operation of the business of
Newco, the Coating Business, the Packaging Business and the Newco Subsidiaries, whether
past, present or future, including, without limitation, the indebtedness and obligations assumed
by Newco pursuant to the Plan of Reorganization (including, without limitation, any damages
incurred by any third party (other than Metropolitan Life Insurance Company and LaSalle
National Bank) whose consent to the transactions contemplated by the Plan of Reorganization
is not being sought pursuant to Section 8.3 of the Plan of Reorganization and any healthcare
costs incurred through the date of this Agreement on account of employees of the Coating
Business, the Packaging Business and the Newco Subsidiaries which are not covered by
insurance); provided, however, such term shall not include any items of indebtedness or
obligation reflected in the TC-DEL Balance Sheet.
(p) "Newco Liabilities" shall mean the Newco Environmental
Liabilities, the Newco General Liabilities, the Newco Securities Laws Liabilities and the
Newco Tax Liabilities, collectively.
(q) "Newco Obligations" shall mean the indemnification obligations and
all other obligations of Newco described in this Agreement.
(r) "Newco Property" shall mean any real property owned, leased or
occupied by TC-DEL, Newco, Tapecoat-DE, Tapecoat Ltd., Tapecoat, Inc. or HSW from and
after the date of its incorporation through the date of this Agreement.
(s) "Newco Securities Laws Liabilities" shall be defined in
Section B.2.(c).
(t) "Newco Subsidiary" or "Newco Subsidiaries" shall mean Tapecoat-DE, Tapecoat
Ltd., Tapecoat, Inc., and HSW.
(u) "Newco Tax Liabilities" shall be defined in Section B.2.(b).
(v) "Packaging Business Balance Sheet" shall mean the balance sheet of
the Pak-Sher Division of Newco prepared in accordance with GAAP as of the date of this
Agreement after giving effect to the transactions contemplated by the Plan of Reorganization
and the Merger Agreement, a pro forma of which is attached hereto as Exhibit A-3.
(w) "Pharmaceutical Environmental Claim" shall be defined in Section
C.2.(a) hereof.
(x) "Pharmaceutical Environmental Liabilities" shall be defined in
Section B.4.(a).
(y) "Pharmaceutical General Liabilities" shall mean the General
Liabilities incurred in connection with, or arising out of, or relating to the operation of the
Pharmaceutical Business whether past, present or future.
(z) "Pharmaceutical Liabilities" shall mean the Pharmaceutical
Environmental Liabilities, the Pharmaceutical General Liabilities, the Pharmaceutical
Securities Laws Liabilities, the Pharmaceutical Tax Liabilities and the TC-DEL
Reorganization Tax Liabilities, collectively.
(aa) "Pharmaceutical Obligations" shall mean the indemnification
obligations and all other obligations of TC-DEL described in this Agreement.
(ab) "Pharmaceutical Property" shall mean those parcels of real
property owned, leased or occupied by any of UD-IL, UDL-FL, AP and PD after the date of
its incorporation through the date of this Agreement.
(ac) "Pharmaceutical Securities Laws Liabilities" shall be defined in
Section B.4.(d).
(ad) "Pharmaceutical Subsidiary" or "Pharmaceutical Subsidiaries" shall
mean, individually or collectively as the case may be, UDL-IL, which, in turn, owns all of the
issued and outstanding capital stock of UDL-FL, AP, and PD.
(ae) "Pharmaceutical Tax Liabilities" shall be defined in Section
B.4.(b).
(af) "Pre-Closing Period" and "Pre-Closing Periods" shall be defined in
Section C.4.(a).
(ag) "TC-DEL Balance Sheet" shall mean the balance sheet of TC-DEL
prepared in accordance with GAAP as of the date of this Agreement after giving effect to the
transactions contemplated by the Plan of Reorganization and the Merger Agreement, a pro
forma of which is attached hereto as Exhibit A-4.
(ah) "TC-DEL Reorganization Tax Liabilities" shall be defined in
Section B.4.(c).
B. INDEMNIFICATION.
1. General Intent and Agreement of the Parties. Newco and TC-DEL
hereby acknowledge and agree that:
(a) The intent and agreement of the parties hereto is that payment or
performance of all of the Newco Liabilities and the Newco Obligations shall be the
responsibility of Newco and the Newco Subsidiaries, as the case may be, and that payment or
performance of the Pharmaceutical Liabilities and the Pharmaceutical Obligations shall be the
responsibility of TC-DEL and the Pharmaceutical Subsidiaries, as the case may be;
(b) The parties have had extensive discussions and negotiations with
respect to known or suspected Newco Environmental Liabilities and have agreed to allocate to
Newco and the Newco Subsidiaries all of the Newco Environmental Liabilities, whether
known, unknown or suspected, related to or arising out of the conduct of the business of the
Coating Business, the Packaging Business and the Newco Subsidiaries in the past or present
and to have Newco and the Newco Subsidiaries be responsible for compliance with applicable
Environmental Laws and the discharge of all obligations arising thereunder in the future;
(c) The parties acknowledge and agree that the Pharmaceutical
Environmental Liabilities, whether known, unknown or suspected, related to or arising out of
the conduct of the business of the Pharmaceutical Business and the Pharmaceutical Subsidiaries
in the past or present are the responsibility of the Pharmaceutical Subsidiaries, that the
Pharmaceutical Subsidiaries are to be responsible for compliance with applicable
Environmental Laws and the discharge of all obligations arising thereunder in the future and
that TC-DEL is to be responsible for causing the Pharmaceutical Subsidiaries to perform such
obligations; and
(d) The intent of the parties to this Agreement is that,
notwithstanding any legal precedent which may provide for a narrow interpretation of
indemnification obligations generally, the indemnification obligations set forth in this
Agreement shall be given the broadest possible interpretation so that the underlying business
and economic bargain as negotiated and agreed to by the parties with respect to the
transactions described in the Plan of Reorganization and the Merger Agreement can be given
effect.
2. Indemnification of TC-DEL by Newco. Newco hereby covenants and
agrees that it shall defend, indemnify and hold TC-DEL and the Pharmaceutical Subsidiaries,
and each of them, harmless from and against any and all claims, liabilities, damages, losses,
deficiencies and expenses (including reasonable attorneys' fees and expenses and reasonable
costs of suit, including, but not limited to, expert witness fees, consultants' fees and other
defense costs, travel expenses and discovery costs for such matters as transcripts,
photocopying, subpoenas and telecopies) arising out of:
(a) any and all claims for personal injury (including death), property
loss, judgments, fines, penalties, removal costs, remedial costs, response costs, natural
resource damages, contribution and all other liabilities of any kind whatsoever, whether known
or unknown, vested or contingent, at law or in equity or otherwise, which are in any way
asserted against or incurred by TC-DEL, any of the Pharmaceutical Subsidiaries and Mylan,
or any of them, incident to, or arising directly or indirectly from:
(i) the failure on or prior to the date of this Agreement of
TC-DEL, as former owner of the Newco Businesses, or any Newco
Subsidiary to: (A) comply with the requirements of any Environmental
Laws as such relate to the conduct of the Newco Businesses; and
(B) take any Corrective Action Work with respect to such non-compliance;
(ii) the shipment on or prior to the date of this Agreement by
or on behalf of the Newco Businesses or any Newco Subsidiary of any
Hazardous Material for further management, including, without
limitation, shipment for storage, treatment, recycling or disposal;
(iii) any Environmental Condition present on, in, under,
emanating from or resulting from the use of, the Newco Property,
whether known or unknown and whether or not attributable to the acts
or omissions of the Newco Businesses or any Newco Subsidiary;
provided, however, Newco shall have no obligation of indemnity with
respect to Environmental Conditions on the Pharmaceutical Property
which are or have been caused by or relate to acts or omissions by TC-DEL, the
Pharmaceutical Subsidiaries or others whether occurring prior
to, on or after the date of this Agreement; and
(iv) any Corrective Action Work necessary to be taken by
Newco, any Newco Subsidiary, TC-DEL or any governmental authority
in response to the release or threatened release of Hazardous Materials
in, on, under or adjacent to the Newco Property; provided, however,
Newco shall have no obligation of indemnity with respect to Corrective
Action Work necessary to respond to the release of Hazardous Materials
in, on, under or adjacent to the Pharmaceutical Property which is
necessitated by or related to acts or omissions by TC-DEL, the
Pharmaceutical Subsidiaries or others whether occurring prior to, on or
after the date of this Agreement
(the matters described in subsections (i) through (iv) above are hereinafter collectively referred
to as the "Newco Environmental Liabilities");
(b) any and all claims for the payment of taxes (with respect to state
or local taxes, net of federal tax benefits), interest or penalties (to the extent not reflected as a
liability on the TC-DEL Balance Sheet), made by any federal, state or local governmental
authority with respect to any taxes of any kind or description which are owed by or assessed
against TC-DEL, Newco or any of the Newco Subsidiaries (whether or not part of a
consolidated tax return) for all tax years or periods through the Effective Date (as defined in
the Merger Agreement); provided, however, Newco shall have no obligation of indemnity
with respect to taxes, interest or penalties which relate to the conduct of the Pharmaceutical
Business whether relating to periods prior to and/or after the date of this Agreement
(collectively, the "Newco Tax Liabilities");
(c) any untrue statement or alleged untrue statement of a material
fact contained in the information described in Items 17 and 18 of Form S-4 promulgated by the
Securities and Exchange Commission as presented in the Registration Statement on Form S-4
and made part of the prospectus/proxy statement distributed to the shareholders of TC-DEL as
contemplated by the Merger Agreement or caused by an omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements therein
not misleading (collectively, the "Newco Securities Laws Liabilities") but only insofar as any
such statement or omission was made in reliance upon, and in conformity with, information
furnished by TC-DEL in writing prior to the date of this Agreement and specifically for use in
the preparation of such Registration Statement;
(d) any and all claims with respect to any of the Newco General
Liabilities; and
(e) the successful enforcement (in whole or in part) of this
Agreement by TC-DEL.
3. Indemnification of Mylan by Newco. Newco hereby covenants and
agrees that it shall indemnify and hold Mylan harmless from and against the loss of the
economic value of the bargained-for consideration represented by Newco's indemnification of
TC-DEL under this Agreement and any and all other claims, liabilities, damages, losses,
deficiencies and expense (including reasonable attorneys' fees and expenses and reasonable
costs of suit, including, but not limited to, expert witness fees, consultants' fees and other
defense costs, travel expenses and discovery costs for such matters as transcripts,
photocopying, subpoenas and telecopies) arising out of:
(a) a determination by a court of competent jurisdiction that the
indemnification obligations of Newco in favor of TC-DEL with respect to the Newco
Environmental Liabilities are unenforceable in whole or in part; and
(b) the successful enforcement (in whole or in part) of this
Agreement by Mylan.
4. Indemnification of Newco by TC-DEL.
TC-DEL hereby covenants and agrees that it shall defend, indemnify and hold
Newco and the Newco Subsidiaries, and each of them, harmless from and against any and all
claims, liabilities, damages, losses, deficiencies and expenses (including reasonable attorneys'
fees and expenses and costs of suit, including, but not limited to, expert witness fees,
consultants' fees and other defense costs, travel expenses and discovery costs for such matters
as transcripts, photocopying, subpoenas and telecopies) arising out of:
(a) any and all claims for personal injury (including death), property
loss, judgments, fines, penalties, removal costs, remedial costs, response costs, natural
resource damages, contribution and all other liabilities of any kind whatsoever , whether
known or unknown, vested or contingent, at law or in equity or otherwise, which are in any
way asserted against or incurred by Newco, the Newco Subsidiaries, and the Newco
Shareholders, or any of them, incident to, or arising directly or indirectly from:
(i) the failure on or prior to the date of this Agreement
of the Pharmaceutical Business or any Pharmaceutical Subsidiary to:
(A) comply with the requirements of any Environmental Laws as such
relate to the conduct of the Pharmaceutical Business; and (B) take any
Corrective Action Work with respect to such non-compliance;
(ii) the shipment on or prior to the date of this Agreement
by or on behalf of the Pharmaceutical Business or any Pharmaceutical
Subsidiary of any Hazardous Material for further management,
including, without limitation, shipment for storage, treatment, recycling
or disposal;
(iii) any Environmental Condition present on, in, under,
emanating from or resulting from the use of, the Pharmaceutical
Property, whether known or unknown and whether or not attributable to
the acts or omissions of the Pharmaceutical Business or any
Pharmaceutical Subsidiary; provided, however, TC-DEL shall have no
obligation of indemnity with respect to Environmental Conditions on the
Newco Property which are or have been caused by or relate to acts or
omissions by Newco, the Newco Subsidiaries or others whether
occurring prior to, on or after the date of this Agreement; and
(iv) any Corrective Action Work necessary to be taken by
TC-DEL, any Pharmaceutical Subsidiary, Newco or any governmental
authority in response to the release or threatened release of Hazardous
Materials in, on, under or adjacent to the Pharmaceutical Property;
provided, however, TC-DEL shall have no obligation of indemnity with
respect to Corrective Action Work necessary to respond to the release of
Hazardous Materials in, on, under or adjacent to the Newco Property
which is necessitated by or related to acts or omissions by Newco, the
Newco Subsidiaries or others whether occurring prior to, on or after the
date of this Agreement
(the matters described in subsections (i) through (iv) above are hereinafter collectively referred
to as the "Pharmaceutical Environmental Liabilities");
(b) any and all claims for the payment of taxes (with respect to state or
local taxes, net of federal tax benefits), interest or penalties made by any federal, state or local
governmental authority with respect to any taxes of any kind or description which are owed by
or assessed against TC-DEL or any of the Pharmaceutical Subsidiaries (whether or not part of
a consolidated tax return) for all tax years or periods through the Effective Date (as defined in
the Merger Agreement); provided, however, TC-DEL shall have no obligation of indemnity
with respect to taxes, interest and penalties which relate to conduct of the Newco Businesses
whether relating to periods prior to and/or after the date of this Agreement (collectively, the
"Pharmaceutical Tax Liabilities");
(c) any and all claims for the payment of taxes, interest and penalties
made by any federal, state or local governmental authority with respect to federal, state or
local income taxes payable by TC-DEL or any member of the TC-DEL consolidated group or
its transferees solely on account of the distribution of the shares of Newco to the distributee
stockholders of TC-DEL pursuant to the Plan of Reorganization (the "TC-DEL Reorganization
Tax Liabilities");
(d) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement on Form S-4 as contemplated by the Merger
Agreement or caused by an omission or alleged omission of state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading (the
"Pharmaceutical Securities Law Liabilities"); provided, however, TC-DEL shall have no
obligation of indemnity with respect to Newco Securities Laws Liabilities;
(e) any and all claims with respect to any of the Pharmaceutical General
Liabilities; and
(f) the successful enforcement (in whole or in part) of this Agreement
by Newco.
5. Indemnification of Newco Shareholders by TC-DEL. TC-DEL hereby
covenants and agrees that it shall indemnify and hold the Newco Shareholders harmless from
and against the loss of the economic value of the bargained-for consideration represented by
TC-DEL's indemnification of Newco under this Agreement and any and all other claims,
liabilities, damages, losses, deficiencies and expense (including reasonable attorneys' fees and
expenses and costs of suit, including, but not limited to, expert witness fees, consultants' fees
and other defense costs, travel expenses and discovery costs for such matters as transcripts,
photocopying, subpoenas and telecopies) arising out of:
(a) a determination by a court of competent jurisdiction that the
indemnification obligations of TC-DEL in favor of Newco with respect to the Pharmaceutical
Environmental Liabilities are unenforceable in whole or in part; and
(b) the successful enforcement (in whole or in part) of this
Agreement by Newco.
C. INDEMNIFICATION PROCEDURES.
1. Indemnification Procedures Governing Newco's Obligation to Indemnify
for Newco Environmental Liabilities. (a) Promptly after the receipt by TC-DEL or Mylan of
written notice of any demand, claim or the commencement of any action, suit or proceeding in
respect of any Newco Environmental Liabilities (hereinafter a "Newco Environmental
Claim"), TC-DEL shall notify Newco thereof in writing; provided, however, the failure of
TC-DEL to give such notice shall not relieve Newco of any liability which it may have
hereunder except that TC-DEL shall not be permitted to recover from Newco the amount of
any additional loss, liability or damage incurred by TC-DEL which would not reasonably have
been incurred had such notice been given in accordance with the provisions of this subsection
(a).
(b) Subject to TC-DEL's right to control certain Environmental
Claims for which Newco is obligated to indemnify TC-DEL, which matters are described
below in Section C.1.(c) hereof, Newco shall have the right to: (i) control the defense or
settlement of any Newco Environmental Claim; and (ii) control and conduct all Corrective
Action Work necessary or appropriate to respond to any Newco Environmental Claim;
provided, however, that at all times when any Newco Environmental Claim is outstanding and
unsatisfied the following conditions are satisfied:
(A) no Newco Event of Default under this Agreement has
occurred and is continuing; provided, however, that with respect to the
Newco Event of Default described in Section E.1.(b), a Newco Event of
Default shall be deemed to have occurred for purposes of this subsection
(A) on account of any failure by Newco to keep, observe or perform any
of its obligations described in Section E.1.(b);
(B) The Newco Assets shall not be impaired and TC-DEL (and
its agents, servants, employees and contractors) shall not be subject to
any criminal or other penalties, costs or expenses, by reason of Newco's
decision to contest a Newco Environmental Claim or conduct such
Corrective Action Work or any delays in connection therewith;
(C) Newco shall have notified TC-DEL within ten (10) days
after initiating a contest of a Newco Environmental Claim or
commencing such Corrective Action Work and thereafter provides TC-DEL with
monthly progress reports on the status of the contest or
Corrective Action Work;
(D) all contests of a Newco Environmental Claim are timely
commenced and prosecuted diligently and all such Corrective Action
Work is diligently performed in accordance with applicable
Environmental Laws; and
(E) with respect to such Corrective Action Work, it is
commenced after the earlier to occur of: (i) the issuance by an
applicable judicial or administrative authority of an order directing such
Corrective Action Work to be done, which order has not been
successfully superseded; or (ii) a final determination by such authority
that any contest of such order has been unsuccessful.
(c) Newco shall not have the right to control the defense or
settlement of any Newco Environmental Claim or to control and conduct Corrective Action
Work necessary or appropriate to respond to any Newco Environmental Claim with respect to
which it is obligated to indemnify TC-DEL and Mylan that is asserted solely against TC-DEL.
With respect to such Newco Environmental Claims, TC-DEL shall have, at the cost and
expense of Newco, the right to: (x) control the defense or settlement thereof; and (y) control
and conduct all Corrective Action Work necessary or appropriate to respond thereto.
(d) The party not entitled to control a Newco Environmental Claim
shall have the right (but not the obligation) to: (i) be represented by counsel of its own
choosing at its own expense with whom counsel for the party controlling the Newco
Environmental Claim shall confer in connection with the defense or settlement thereof;
(ii) access to all records of the party controlling the Newco Environmental Claim that are
relevant thereto and not otherwise subject to a claim of privilege under the law of the
jurisdiction in which the Newco Environmental Claim is pending; and (iii) to conduct its own
investigations and studies relating to the Newco Environmental Claim and to comment upon
any Corrective Action Work proposed to be done by the party controlling the Newco
Environmental Claim prior to such Corrective Action Work being commenced.
(e) It is expressly understood and agreed that failure by the party
not entitled to control a Newco Environmental Claim to object to any actions by the party
entitled to control a Newco Environmental Claim shall not be construed to be an approval by
the non-controlling party of such actions.
2. Indemnification Procedures Governing TC-DEL's Obligation to
Indemnify Newco for Pharmaceutical Environmental Liabilities.
(a) Promptly after the receipt by Newco, the Newco Subsidiaries or
the Newco Shareholders of written notice of any demand, claim, or the commencement of any
action, suit or proceeding in respect of any Pharmaceutical Environmental Liabilities
(hereinafter a "Pharmaceutical Environmental Claim"), Newco shall notify TC-DEL thereof in
writing; provided however, the failure of Newco to give such notice shall not relieve TC-DEL
of any liability it may have hereunder, except that Newco shall not be permitted to recover
from TC-DEL the amount of any additional loss, liability or damage incurred by Newco which
would not reasonably have been incurred had notice been given in accordance with this
subsection (a).
(b) Subject to Newco's right to control certain Pharmaceutical
Environmental Claims for which TC-DEL is obligated to indemnify Newco, which matters are
described below in Section C.2(c) hereof, TC-DEL shall have the right to: (i) control the
defense or settlement of any Pharmaceutical Environmental Claim; and (ii) control and conduct
all Corrective Action Work necessary or appropriate to respond to any Pharmaceutical
Environmental Claim; provided, however, no TC-DEL Event of Default has occurred and is
continuing. For purposes of this Section C.2.(b), a TC-DEL Event of Default shall be deemed
to have occurred on account of any failure by TC-DEL to keep, observe or perform any of its
obligations described in Section E.3.(b).
(c) TC-DEL shall not have the right to control the defense or
settlement of any Pharmaceutical Environmental Claim or to control and conduct Corrective
Action Work necessary or appropriate to respond to any Pharmaceutical Environmental Claim
with respect to which it is obligated to indemnify Newco, the Newco Subsidiaries or the
Newco Shareholders that is asserted solely against Newco, the Newco Subsidiaries or the
Newco Shareholders. With respect to such Pharmaceutical Environmental Claims, Newco, the
Newco Subsidiaries or the Newco Shareholders shall have, at the cost and expense of TC-DEL,
the right to: (x) control the defense or settlement thereof; and (y) control and conduct all
Corrective Action Work necessary or appropriate to respond thereto.
(d) The party not entitled to control a Pharmaceutical Environmental
Claim shall have the right (but not the obligation) to: (i) be represented by counsel of its own
choosing at its own expense with whom counsel for the party controlling the Pharmaceutical
Environmental Claim shall confer in connection with the defense or settlement thereof; (ii)
access to all records of the party controlling the Pharmaceutical Environmental Claim that are
relevant and not otherwise subject to a claim of privilege under the law of the jurisdiction in
which the Pharmaceutical Environmental Claim is pending; and (iii) to conduct its own
investigations and studies relating to the Pharmaceutical Environmental Claim and to comment
upon any Corrective Action Work proposed to be done by the party controlling the
Pharmaceutical Environmental Claim prior to such Corrective Action Work being commenced.
(e) It is expressly understood and agreed that failure by the party not
entitled to control a Pharmaceutical Environmental Claim to object to any actions by the party
entitled to control a Pharmaceutical Environmental Claim shall not be construed to be an
approval by the non-controlling party of such actions.
3. Dispute Resolution Under Environmental Indemnification Procedures.
(a) In the event TC-DEL desires to control a Newco Environmental
Claim by reason of the failure by Newco to satisfy any one or more of the conditions set forth
in subsections C.1(b)(A) through (E), TC-DEL shall apply to the service affiliate of Arthur
Andersen LLP or, if unavailable, the service affiliate of another "big six" accounting firm
mutually acceptable to Newco and TC-DEL (the "Independent Arbitrator") for a determination
as to whether such failure has occurred and, if so, whether such failure will materially
prejudice the interests of TC-DEL. TC-DEL shall simultaneously deliver a copy of such
application to Newco in the manner provided for notices under this Agreement.
(b) In the event Newco desires to control a Pharmaceutical
Environmental Claim by reason of the fact that a TC-DEL Event of Default (as qualified by
Section C.2.(b)) has occurred and is continuing, Newco shall apply to the Independent
Arbitrator for a determination as to whether such a TC-DEL Event of Default has occurred
and, if so, whether such TC-DEL Event of Default will materially prejudice the interests of
Newco. Newco shall simultaneously deliver a copy of such application to TC-DEL in the
manner provided for notices under this Agreement.
(c) In either such event, TC-DEL and Newco each shall be entitled
to present to the Independent Arbitrator such affidavits, position papers or other written
documents or agreements as such party deems appropriate within twenty (20) days of filing of
the application with the Independent Arbitrator.
(d) Within forty (40) days after the filing of the application, the
Independent Arbitrator shall render the determination requested in such application. The
determination shall be final and binding on both TC-DEL and Newco and there shall be no
rights of appeal therefrom.
(e) In the event the Independent Arbitrator shall determine that the
failure alleged in the application has occurred and that such failure will materially prejudice
the interests of the applicant, the applicant shall have right to control the Newco
Environmental Claim in the case where TC-DEL is the applicant or the Pharmaceutical
Environmental Claim in the case where Newco is the applicant. As a condition of the exercise
of such right of control, the applicant shall agree to extend its indemnification of the other
party under Section B to include as one of the applicable General Liabilities any and all claims
arising out of the applicant's acts or omissions in connection with its control of Environmental
Claim to the extent that such acts or omissions are determined by a court of competent
jurisdiction, after the exhaustion of all appeals, to have been wilful or wanton or negligent.
(f) The party in whose favor the determination is issued shall be
entitled to be reimbursed by the other party within ten (10) days of the date of issuance of the
determination for all reasonable costs and expenses incurred by such party in connection with
such application, including, without limitation, reasonable attorneys' fees and expenses and the
fees and expenses of the Independent Arbitrator.
(g) The provisions of Section F.15 shall not be applicable to the
dispute resolution procedures provided for in this Section C.3.
4. Indemnification Procedures by Newco with respect to the Governing
Newco's Obligation to Indemnify for Newco Tax Liabilities.
(a) (i) As soon as practicable after the consummation of the
transactions under the Merger Agreement, Newco shall prepare and TC-DEL shall file
all appropriate federal, state and other tax returns with
respect to, on a consolidated or any other basis, the operations of TC-DEL, the Newco
Subsidiaries and the Pharmaceutical Subsidiaries
through the Effective Date and the consummation of the transactions
under the Plan of Reorganization and Merger Agreement (individually, a
"Pre-Closing Period" and collectively, the "Pre-Closing Periods"). Such
tax returns shall be prepared by Newco showing TC-DEL or one or
more of the Newco Subsidiaries or the Pharmaceutical Subsidiaries as
the taxpayer therein in a manner, and with positions taken, which are
consistent with the manner of preparation and positions taken by TC-DEL (on behalf of
the Newco Subsidiaries and the Pharmaceutical
Subsidiaries) in corresponding tax returns for prior periods. After the
preparation of such tax returns but at least thirty (30) days prior to the
due date for filing such tax returns, Newco shall deliver to Mylan a
complete copy of each such tax return for review and approval. Mylan
shall have the right to recommend changes in such tax returns to the
extent that such changes affect the tax treatment of any item relating to
the Pharmaceutical Business. In the event Newco and Mylan are unable
to reach mutual agreement with respect to such proposed changes, the
unresolved issues shall be submitted to the Independent Accountant
pursuant to Section C.2(e) hereof. The permanent books and records
(financial and accounting) of TC-DEL, the Newco Subsidiaries and the
Pharmaceutical Subsidiaries shall be maintained, and the federal, state
and other income tax returns of the consolidated group of which TC-DEL is the
common parent shall be filed, in such a way that the
operations of TC-DEL, the Newco Subsidiaries and the Pharmaceutical
Subsidiaries through the Effective Date shall be reflected in such books
and records and on such returns.
(ii) TC-DEL shall pay or cause to be paid all taxes (whether due
upon filing of tax returns or application for extension of the due date of
filing), interest and penalties due with respect to federal, state or other
tax returns, including, but not limited to, those described in
Section C.2(a)(i) above, with respect to, on a consolidated or any other
basis, the operations of TC-DEL, the Newco Subsidiaries and the
Pharmaceutical Subsidiaries for all Pre-Closing Periods.
Contemporaneous with the payment by TC-DEL of taxes, interest or
penalties pursuant to the immediately preceding sentence, Newco shall
remit to TC-DEL an amount in cash equal to any taxes, interest and
penalties properly attributable to the Newco Businesses which are not
reflected as a liability in the TC-DEL Balance Sheet. The parties
acknowledge and agree that all of the tax returns covering Pre-Closing
Periods are listed and described on Exhibit B attached hereto and that all
taxing jurisdictions listed on Exhibit B allow the filing of a short taxable
period return for the period ending on the Effective Date.
(iii) In connection with the preparation of all returns provided
for herein, Newco shall consult with TC-DEL with regard to the tax
treatment of any matter affecting or relating to TC-DEL, UDL-IL,
UDL-FL, AP or PD, and TC-DEL shall make available to Newco the
books, records, and personnel of the consolidated group of which
Tapecoat-DE, Tapecoat Ltd., Tapecoat, Inc. and HSW formerly were
members for the purpose of gathering information necessary or helpful
in the preparation of such returns. TC-DEL and Newco shall cooperate
fully with one another in the preparation of such returns.
(iv) TC-DEL and Newco shall cooperate fully with one another
in connection with any audit examinations of TC-DEL, the Newco
Subsidiaries or the Pharmaceutical Subsidiaries by any governmental
taxing authority with respect to Pre-Closing Periods, including but not
limited to the furnishing or making available of records, books of
account or other materials of TC-DEL, the Newco Subsidiaries and the
Pharmaceutical Subsidiaries necessary or helpful for the defense against
the assertions of any taxing authority as to any consolidated or combined
income tax returns for the Pre-Closing Periods.
(v) Newco and its duly appointed representatives shall have the
sole right to negotiate, resolve, settle or contest any asserted tax
deficiencies involving Pre-Closing Periods; provided, however, that no
settlement of any tax liability concerning any Pre-Closing Periods which
would adversely affect TC-DEL, UDL-IL, UDL-FL, AP or PD in any
taxable period ending after the Effective Date in any manner or to any
extent (including, but not limited to, the imposition of income tax
deficiencies, the reduction of asset basis or cost adjustments and the
reduction of loss or credit carry forwards) shall be agreed to by Newco
or any of the Newco Subsidiaries without the prior written consent of
TC-DEL (which consent shall not be unreasonably withheld, and which
shall not be necessary to the extent that Newco has indemnified Mylan,
TC-DEL, UDL-IL, UDL-FL, AP and PD and held them harmless, on
an after-tax basis, against the effects of any such settlement).
(vi) TC-DEL shall have the right to retain any refund or credit
of taxes for any Pre-Closing Period which is reflected as an asset in the
TC-DEL Balance Sheet. Newco shall have the right to any refund or
credit of taxes for any Pre-Closing Periods which is not reflected as an
asset in the TC-DEL Balance Sheet, and TC-DEL, to the extent it
receives any such refund or credit, shall pay to Newco the amount of
such refund or credit within fifteen (15) days of receipt of such refund or
credit. TC-DEL shall remit to Newco an amount in cash equal to the
difference between the amount of any item of tax reflected as a liability
in the TC-DEL Balance Sheet and the actual amount of such tax item
reported in the applicable tax refund within fifteen (15) days after the
filing of such tax return. TC-DEL and its duly appointed representatives
shall have the sole right to negotiate, resolve, settle or contest any
asserted tax deficiencies involving TC-DEL for periods after the
Effective Date.
(b) (i) If a claim shall be made by any taxing authority that, if
successful, would result in the indemnification of TC-DEL or Mylan
hereunder, TC-DEL shall promptly notify Newco in writing of such
fact. In the event that such notice of any claim is not given to Newco
within a sufficient period of time or in reasonable detail to apprise
Newco of the nature of the claim (in each instance taking into account
the facts and circumstances with respect to such claim), TC-DEL shall
not be permitted to recover from Newco the amount of any additional
loss, liability or damage incurred by TC-DEL which would not
reasonably have been incurred had such notice been given in accordance
with this subsection (b)(i).
(ii) Newco shall take such action in connection with contesting
such claim as TC-DEL shall reasonably request in writing from time to
time, provided that within 30 days (or such earlier date that any payment
of taxes is due by TC-DEL) after the notice described in (b)(i) above has
been delivered by TC-DEL to Newco, TC-DEL furnishes Newco with
an opinion of the tax counsel or tax advisor to TC-DEL to the effect that
there is a reasonable basis to contest such claim. With respect to
contests relating to any Pre-Closing Periods and for which TC-DEL filed
or caused to be filed a tax return, Newco shall control all proceedings
taken in connection with such contest, provided that where the results of
such contest would have an adverse impact on TC-DEL's ability to
obtain the tax benefit of any item of deduction, loss or credit, or require
it to recognize any additional income in any period subsequent to the
date of this Agreement, Newco shall reasonably consult with TC-DEL in
connection with such contest. Subject to the foregoing, Newco, at its
sole option and without liability to TC-DEL for such action, may pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at its sole option, either pay the tax claimed and sue for a refund where
applicable law permits such refund suits or contest the claim in any
permissible manner, and TC-DEL will cooperate in a reasonable manner
with Newco in such appeals, proceedings, hearings and conferences.
Newco will reimburse TC-DEL for any reasonable out-of-pocket costs
incurred by it while pursuing actions at the request of Newco and TC-DEL will
reimburse Newco for any such costs incurred by it while
pursuing actions at the request if TC-DEL. If the costs are incurred in
relation to a dispute covering both periods through the date of this
Agreement and periods thereafter, Newco and TC-DEL will agree on a
reasonable basis for allocating the costs.
(c) Neither TC-DEL nor Mylan shall settle or otherwise compromise
or extend the statute of limitations applicable to any Newco Tax Liabilities for any Pre-Closing
Period without the prior written consent of Newco.
(d) In the event of any controversy or dispute between Newco and
TC-DEL arising out of or relating to the preparation and filing of any tax return described in
this Section C.4 (including, without limitation, the positions taken or accounting methods used
in such tax returns) or the examination by any taxing authority of any tax return for any
Pre-Closing Period (including any decision to pursue or forego the prosecution of, or the
settlement of, any audit or assessment by any such taxing authority) which is not resolved by
the mutual agreement of Newco and TC-DEL, either party may give notice to the other of its
desire to engage Arthur Andersen LLP or, if unavailable, another "big six" accounting firm
mutually acceptable to Newco and TC-DEL (the "Independent Accountant") to resolve the
dispute within 30 days after such engagement. The Independent Accountant's determination
shall be final and binding on the parties. The fees and disbursements of the Independent
Accountant shall be divided equitably between Newco and TC-DEL based upon a
determination made by the Independent Accountant.
(e) The provisions of Section F.15 shall not be applicable to the
dispute resolution procedures provided for in this Section C.4.
5. General Indemnification Procedures.
(a) The provisions of this Section C.5 supplement the provisions of
Sections C.1 through C.4 above. To the extent that the provisions of this Section C.5 are
inconsistent with, or conflict with, the provisions of Sections C.1 through C.4, the provisions
of Sections C.1 through C.4 shall govern and be controlling.
(b) A party claiming indemnification (the "Indemnified Party") will
give prompt notice to the party liable for indemnification (the "Indemnifying Party") of any
matters hereunder which may give rise to a claim for indemnification as promptly as
practicable after it has actual knowledge of the facts which may give rise to such claim, and
the Indemnified Party will specify in such notice, in reasonable detail, the relevant facts known
to the Indemnified Party relating to such potential indemnification right. The failure,
however, of the Indemnified Party to give notice within a reasonable time as required under
this Section 5 will not affect or otherwise waive the Indemnified Party's rights to be
indemnified under, or to enforce an indemnification of such claim or any other claim pursuant
to, the terms of this Agreement to its full extent, except that the Indemnified Party will not be
permitted to recover from the Indemnifying Party the amount of any additional loss, liability
or damage incurred by the Indemnified Party which would not reasonably have been incurred
had notice been given in accordance with the provisions of this Section 5. Failure by the
Indemnified Party to give such notice will not diminish any rights to indemnity it may have
other than under this Agreement.
(c) If the facts which give rise to any such potential indemnification
claim involve any actual or threatened claim or demand by any third party against the
Indemnified Party, the Indemnifying Party will be entitled (without prejudice to the right of the
Indemnified Party at its expense jointly to defend) to defend such claim (and jointly to
prosecute any possible related claim by the Indemnified Party against any third party) at the
Indemnifying Party's expense through counsel of the Indemnifying Party's own choosing,
provided that the Indemnifying Party gives notice of its intention to do so to the Indemnified
Party within fifteen days after receipt of the notice of claim. In all instances in which the
Indemnifying Party chooses to defend claims against the Indemnified Party as provided
hereunder, it is agreed that counsel for the Indemnifying Party will act as lead counsel even if
the Indemnified Party chooses to participate in said defense. It is further agreed that whenever
the Indemnifying Party chooses to defend a claim and the Indemnified Party chooses not to
participate actively in such defense, the Indemnified Party will nonetheless fully and actively
cooperate with and assist the Indemnifying Party in defending the matter by, among other
things, assisting in the procurement of documentary evidence and witnesses and enforcing
rights against third parties.
(d) No matter giving rise to a claim for indemnification under this
Agreement will be settled by the Indemnifying Party without the prior written consent of the
Indemnified Party, except when the settlement thereof involves only the payment of money for
which the Indemnified Party is totally indemnified by the Indemnifying Party by virtue of
payment made directly to a third party by the Indemnifying Party. Promptly following a
party's receipt of a firm settlement offer with respect to any such matter, such party will notify
the other party of such offer, setting forth in such notification the terms of such offer and
indicating the notifying party's view as to whether or not the offer should be accepted. Any
acceptance or rejection of a settlement offer on the part of the other party will be submitted to
the notifying party within ten (10) days after the other party's receipt from the notifying party
of the terms of such offer. Failure of the other party to so advise the notifying party within
said ten (10) days will constitute an acceptance of such settlement offer by the other party.
D. COVENANTS.
1. Covenants with Respect to Newco Environmental Matters. Newco
covenants and agrees with TC-DEL that it shall during the term of this Agreement:
(a) ensure that the Newco Assets and all of the operations of Newco
and the Newco Subsidiaries are in material compliance with all Environmental Laws;
(b) not place or cause to be placed on, in, under or near the Newco
Assets any Hazardous Materials, except as authorized by the Environmental Laws;
(c) maintain a system to assure and monitor substantial compliance
with all Environmental Laws, which system shall include periodic reviews of such compliance;
(d) in the event there occurs after the date hereof a release of a
Hazardous Material on, in, under or near the Newco Assets or the assets of any of the Newco
Subsidiaries in a quantity sufficient to require reporting to an applicable governmental
authority pursuant to any Environmental Law, advise TC-DEL in writing within five (5) days
of such release and take all actions necessary to comply with the Environmental Laws. The
information to be provided to TC-DEL hereunder is intended solely to enable TC-DEL to
protect its interest in the Newco Assets and is not intended to create nor shall the same create
any obligation upon TC-DEL with respect to such release;
(e) in the event Newco receives any written notice of any Newco
Environmental Claim, advise TC-DEL in writing within five (5) days of such notice and
proceed in accordance with its obligation, if any, to indemnify TC-DEL with respect to such
Newco Environmental Claim under the terms of this Agreement; and
(f) in the event Newco receives any written notice that it is
considered a party potentially responsible for any Environmental Condition or is obligated to
engage in Corrective Action Work as a result of acts or omissions of any of Newco or the
Newco Subsidiaries or any third party which occurs after the date of this Agreement, advise
TC-DEL in writing within ten (10) days of such notice and thereafter take all actions necessary
to comply with the Environmental Laws applicable to potentially responsible parties or
applicable to a party alleged to be obligated to engage in Corrective Action Work and provide
TC-DEL with monthly progress reports on the status of such matter.
2. General Covenants of Newco. Newco covenants and agrees with TC-DEL that:
(a) Newco will not make any distribution, direct or indirect, of any
of its assets or property in respect of its capital stock if, after giving effect to such distribution,
the Stockholders' equity as reflected on the balance sheet of Newco as of the date of such
distribution would be less than the Stockholders' equity reflected on the Newco Balance Sheet;
provided, however, that notwithstanding the foregoing provisions of this subsection (a),
Newco may (i) pay to its officers, directors, employees and consultants such salaries, bonuses
and fees as are in the ordinary course consistent with past practice, (ii) repurchase its capital
stock which is held by employees upon the termination or retirement of such employees which
repurchases after the date hereof, in the aggregate, with respect to employees of the Coating
Business may not exceed Five Hundred Thousand Dollars ($500,000) and with respect to the
employees of the Packaging Business may not exceed Two Hundred Thousand Dollars
($200,000); (iii) repurchase its capital stock held by the successors in interest to a deceased
shareholder (iv) purchase its capital stock pursuant to the exercise by Newco of a bona fide
right of first refusal under any shareholders agreement among the shareholders of Newco
which generally restricts transfers of the capital stock of Newco, the amount of which
purchases, in the aggregate, may not exceed Seven Hundred Thousand Dollars ($700,000) less
the amount of repurchases made pursuant to subsection (a)(ii) above and (v) make any
distribution otherwise permitted under this subsection (a) but made in the form of a loan or
advance. Newco will not make any loan or advance of any kind, whether in cash or in kind,
to any of its shareholders except as loan or advance which would be permitted as a distribution
under this subsection (a).
(b) Newco will, at all times after the date hereof, conduct the
business of: (i) the Coating Business under the tradename "The Tapecoat Company" (with or
without the designation of "a division of TC Manufacturing Co., Inc."), and (ii) the Packaging
Business under the tradename "Pak-Sher Company" (with or without the designation of "a
division of TC Manufacturing Co., Inc.") and, in each case, under no other business name or
tradename.
(c) Newco and Newco Subsidiaries will comply with all acts, rules,
regulations and
orders of any legislative, administrative or judicial body or official applicable to the Newco
Assets or any part thereof or to the operation of the business of the Newco Subsidiaries;
provided that Newco may contest any acts, rules, regulations, orders and directions of such
bodies or officials in any reasonable manner.
(d) Newco and the Newco Subsidiaries will pay promptly when due
all taxes and assessments upon or with respect to the Newco Assets; provided that Newco may
contest any such taxes or assessments in any reasonable manner.
(e) Newco and the Newco Subsidiaries will maintain the Newco
Assets in good order, condition, appearance and repair. All risk of loss or destruction of, or
damage to, the Newco Assets shall be borne by Newco and the Newco Subsidiaries. Until this
Agreement expires or is terminated, the Newco Assets will be insured by Newco the Newco
Subsidiaries against loss or damage by fire and such other insurable hazards as such assets are
commonly insured (including fire, extended coverage, property damage, workers'
compensation, public liability and business interruption insurance) and against other risks
(including errors and omissions) in such amounts as similar properties and assets are insured
by prudent companies in similar circumstances carrying on similar businesses, and with
reputable and financially sound insurers, all as reasonably determined by Newco in accordance
with the past practice of the Businesses and the Newco Subsidiaries.
(f) Newco will furnish TC-DEL with copies of all of the financial
reports (including, without limitation, audited annual financial statements) provided to its
shareholders on the dates of delivery to such shareholders or, at the latest, within ninety (90)
days of the end of each such reporting period covered thereby.
3. Insurance. Upon the request of TC-DEL, Newco shall deliver to Mylan
copies of, or certificates of the issuing companies with respect to, all policies of insurance
owned by Newco and the Newco Subsidiaries covering or in any manner relating to the Newco
Assets.
E. EVENTS OF DEFAULT; REMEDIES.
1. Newco Events of Default. The occurrence of any of the following
events or conditions shall, at the option of TC-DEL without notice or demand, constitute a
"Newco Event of Default" hereunder:
(a) failure by Newco to pay, when due, any of the Newco
Obligations requiring payment of money which failure is not cured within ten (10) days after
notice of such failure from TC-DEL;
(b) a material failure by Newco to keep, observe or perform any
provision of this Agreement or any of the Newco Obligations (other than Newco Obligations
requiring the payment of money) required to be kept, observed or performed by it which is not
cured within thirty (30) days after notice of such failure from TC-DEL; provided, however,
that if such breach or failure to perform is incapable of cure within the aforesaid thirty (30)
day period and Newco, diligently and in good faith, is attempting to cure such breach or
failure, such breach or failure shall not constitute a "Newco Event of Default" during the
period in which Newco is so attempting to cure such breach or failure;
(c) attachment or seizure of or levy upon any Newco Assets having a
value in excess of Fifty Thousand Dollars ($50,000) by any party which is not stayed or
bonded within ten (10) days;
(d) institution of any proceedings by or against Newco or any of the
Newco Subsidiaries under any bankruptcy or insolvency laws; or on assignment for the benefit
of creditors by any of Newco or the Newco Subsidiaries; the appointment of a receiver for
Newco or any of the Newco Subsidiaries; or the filing of a tax lien notice against Newco or
any of the Newco Subsidiaries by any taxing authority; provided, however, that in the event of
any such involuntary proceedings, appointment of a receiver or the filing of a tax lien against
any of Newco or the Newco Subsidiaries, such entity shall have a period of sixty (60) days
following the institution of such proceedings, appointment or filing within which to cause them
to be dismissed, stayed or released failing which a "Newco Event of Default" shall have
occurred; and
(e) loss, theft, damage, destruction or forfeiture of any material
portion of the Newco Assets which is not covered by insurance as required by the terms of this
Agreement.
2. TC-DEL Remedies. In the event of the occurrence of any Newco Event
of Default, TC-DEL shall at any time thereafter have the right, with or without notice to
Newco or the Newco Subsidiaries, to exercise any and all rights and remedies available to it at
law or in equity.
3. TC-DEL Events of Default. The occurrence of any of the following
events or conditions shall, at the option of Newco without notice or demand, constitute a
"TC-DEL Event of Default" hereunder:
(a) failure by TC-DEL to pay, when due, any of the TC-DEL
Obligations requiring payment of money which failure is not cured within ten (10) days after
notice of such failure by Newco;
(b) a material failure by TC-DEL to keep, observe or perform any
provision of this Agreement or any of the TC-DEL Obligations (other than TC-DEL
Obligations requiring the payment of money) required to be kept, observed or performed by it
which is not cured within thirty (30) days after notice of such failure from Newco; provided,
however, that if such breach or failure to perform is incapable of cure within the aforesaid
thirty (30) day period and TC-DEL, diligently and in good faith, is attempting to cure such
breach or failure, such breach or failure shall not constitute a "TC-DEL Event of Default"
during the period in which TC-DEL is so attempting to cure such breach or failure;
(c) attachment or seizure of or levy upon any assets of TC-DEL
having a value in excess of Fifty Thousand Dollars ($50,000) by any party which is not stayed
or bonded within ten (10) days;
(d) institution of any proceedings by or against TC-DEL or any of
the Pharmaceutical Subsidiaries under any bankruptcy or insolvency laws; or on assignment
for the benefit of creditors by any of TC-DEL or the Pharmaceutical Subsidiaries; the
appointment of a receiver for TC-DEL or any of the Pharmaceutical Subsidiaries; or the filing
of a tax lien notice against TC-DEL or any of the Pharmaceutical Subsidiaries by any taxing
authority; provided, however, that in the event of any such involuntary proceedings,
appointment of a receiver or the filing of a tax lien against any of TC-DEL or the
Pharmaceutical Subsidiaries, such entity shall have a period of sixty (60) days following the
institution of such proceedings, appointment or filing within which to cause them to be
dismissed, stayed or released failing which a "TC-DEL Event of Default" shall have occurred;
and
(e) loss, theft, damage, destruction or forfeiture of any material
portion of the assets of TC-DEL which is not covered by insurance as required by the terms of
this Agreement.
4. Newco Remedies. In the event of the occurrence of any TC-DEL Event
of Default, Newco shall at any time thereafter have the right, with or without notice to TC-DEL
or the Pharmaceutical Subsidiaries, to exercise any and all rights and remedies available
to it at law or in equity.
F. MISCELLANEOUS.
1. Transfers of Newco Assets and Stock of Newco.
(a) Newco hereby represents, warrants to, and agrees with TC-DEL
that until the third anniversary of the Effective Date, it shall not,
and shall not permit any of its existing subsidiaries to:
(i) cease operations;
(ii) make a material disposition of any of its existing assets
by means of a sale, exchange or transfer, distribution to
shareholders or otherwise (including, without limitation,
transfers from Newco to Tapecoat-DE, Tapecoat Ltd.,
Tapecoat, Inc. or HSW or transfers from Tapecoat-DE,
Tapecoat Ltd., Tapecoat, Inc. or HSW to Newco or any
subsidiary of Newco);
(iii) dispose of any capital stock of any of its existing
subsidiaries by sale, exchange or transfer, distribution to
shareholders or otherwise (including, without limitation,
transfers from Newco to its shareholders or any
subsidiary of Newco); or
(iv) liquidate or merge with any other corporation (including
Newco or a subsidiary of Newco).
(b) In the event Newco desires to take any of the actions described in
Section F.1.(a) or in the event Newco desires to cause or permit any of its existing subsidiaries
to take any of the actions described in Section F.1.(a), Newco shall first deliver to TC-DEL an
opinion of counsel to Newco, addressed to Newco and TC-DEL which opinion shall be
reasonably satisfactory to the TC-DEL, or a favorable ruling letter from the appropriate taxing
authority, reasonably satisfactory to TC-DEL, that such actions would not adversely affect the
tax consequences of the transactions described in the Plan of Reorganization to TC-DEL or
adversely affect the tax consequences of the Merger to TC-DEL. Newco has no present
intention to take or permit any such action.
(c) Except as provided in the immediately following sentence, during
the term of this Agreement Newco shall not sell, transfer or otherwise dispose of the stock of
any of the Newco Subsidiaries. At any time after the third anniversary of the Effective Date,
Newco shall have the right to sell, transfer or otherwise dispose of the stock of any of the
Newco Subsidiaries (the "Transferred Newco Subsidiary") without the consent of TC-DEL on
the condition that the Transferred Newco Subsidiary delivers to TC-DEL a joinder and
undertaking agreement in form and substance reasonably satisfactory to TC-DEL pursuant to
which the Transferred Newco Subsidiary agrees to join in this Agreement as if it had been an
original party hereto and undertakes to perform all of the obligations of Newco hereunder
along with a notice address for the Transferred Newco Subsidiary.
(d) Except as provided in the immediately following sentences,
during the term of this Agreement Newco shall not transfer all or substantially all of the assets
of the Coating Business or Packaging Business, or both, to any individual, corporation or
other entity. At any time after the third anniversary of the Effective Date, Newco shall have
the right to sell all or substantially all of its assets in a single transaction or series of related
transactions which are bona fide and arm's-length in nature, including, by way of example, a
management buy-out, an employee stock ownership plan or a combination of both (whether by
sale, merger, reorganization or otherwise). In addition, at any time after the third anniversary
of the Effective Date, Newco shall have the right to transfer the assets of the Coating Business
or the Packaging Business, or both, to one or more corporations (each a "New Newco
Subsidiary") in exchange for all of the issued and outstanding capital stock of the New Newco
Subsidiary without the consent of TC-DEL subject to the conditions that: (i) all of such capital
stock is retained and held by Newco until such time as it has effected a distribution of the
stock of a New Newco Subsidiary in accordance with the provisions of Section F.1.(e)(ii)
below or has effected a sale of the stock of a New Newco Subsidiary in accordance with the
provisions of Section F.1.(e)(iii) below; and (ii) the New Newco Subsidiary delivers to TC-DEL
a joinder and undertaking agreement in form and substance reasonably satisfactory to
TC-DEL pursuant to which New Newco Subsidiary agrees to join in this Agreement as if it
had been an original party hereto and undertakes to perform all of the obligations of Newco
hereunder with respect to the assets of the Coating Business or the Packaging Business along
with a notice address for New Newco Subsidiary.
(e)(i) Except as provided in the immediately following sentence, during
the term of this Agreement Newco shall not permit the transfer on its
stock register of any shares of capital stock which are held by any
shareholder of Newco owning at least one percent of the issued and
outstanding capital stock of Newco except for transfers by will or
intestate succession. In the event that, at any time after the third
anniversary of the Effective Date, the shareholders of Newco enter into
an agreement to sell at least fifty-one percent (51%) of the issued and
outstanding capital stock of Newco or a New Newco Subsidiary in a
single transaction or a series of related transactions which are bona fide
and arm's-length in nature, including, by way of example, a
management buy-out, an employee stock ownership plan or a
combination of both (whether by sale, merger, reorganization or
otherwise), Newco shall give notice of such event to TC-DEL and shall
enclose a complete copy of such agreement and any amendments or side
agreements with respect thereto (without editing or redaction) to TC-DEL. Upon the
delivery of such notice and the consummation of the
transactions described in such agreement upon the terms and conditions
set forth therein, all of the covenants of Newco or a New Newco
Subsidiary (through its joinder in this Agreement) set forth in Section D
hereof shall terminate and Newco or a New Newco Subsidiary, as
applicable, shall no longer have any obligation to abide by such
covenants, but all other provisions of this Agreement shall remain in full
force and effect.
(ii) In the event the assets of either the Coating Business or the
Packaging Business are transferred to a New Newco Subsidiary pursuant
to and in accordance with the provisions of Section F.1.(d) hereof and,
following such transfer, Newco proposes to distribute all of the stock of
New Newco Subsidiary to the shareholders of Newco, Newco shall give
notice to such effect to TC-DEL at least sixty (60) days prior to the date
upon which the proposed distribution is to be consummated. Such notice
shall also include the most recent balance sheet of New Newco
Subsidiary (which shall not be dated earlier than its most recently
completed fiscal quarter) and an undertaking by New Newco Subsidiary
that it: (A) will not make any distribution, direct or indirect, of any of
its assets or property in respect of its capital stock if, after giving effect
to such distribution, the Stockholders' equity as reflected on the balance
sheet of New Newco Subsidiary as of the date of such distribution would
be less than the Stockholders' equity reflected on the Coating Business
Balance Sheet or the Packaging Business Balance Sheet, as the case may
be; and (B) will not make any loan or advance of any kind, whether in
cash or in kind, to any of its shareholders, except as permitted by
Section D.2(a) hereof. Thereafter, a New Newco Subsidiary shall have
the right to sell all or substantially all of its assets in a single transaction
or series of related transactions which are bona fide and arm's-length in
nature including, by way of example, a management buy-out, an
employee stock ownership plan or a combination of both (whether by
sale, merger, reorganization or otherwise).
(iii) In the event of a transfer of assets to a New Newco
Subsidiary as described in the third sentence of Section F.1.(d) is
consummated pursuant to and in accordance with the terms thereof or, in
the event of a transfer of assets to a New Newco Subsidiary as described
in the third sentence of Section F.1(d) is so consummated and thereafter
the stock of the New Newco Subsidiary is distributed to the shareholders
of Newco as described in Section F.1(e)(ii) pursuant to and in
accordance with the terms thereof, and in the event Newco or the
shareholders of New Newco Subsidiary, as the case may be, thereafter
enter into an agreement to sell at least fifty-one percent (51%) of the
issued and outstanding capital stock of New Newco Subsidiary in a
single transaction or a series of related transactions which are bona fide
and arm's-length in nature, including, by way of example, a
management buy-out, an employee stock ownership plan or a
combination of both (whether by sale, merger, reorganization or
otherwise), upon compliance by New Newco Subsidiary with the
obligations set forth in subsection (d)(i) above with respect to the sale of
the stock of New Newco Subsidiary as if New Newco Subsidiary was
Newco, all of the covenants set forth in Sections D and F.1.(d)(ii) hereof
shall terminate as to New Newco Subsidiary and New Newco Subsidiary
shall no longer have an obligation to abide by such covenants, but all of
the other provisions of this Agreement shall remain in full force and
effect.
(f) Except as expressly restricted pursuant to the foregoing provisions of
this Section F.1, Newco and its existing Newco Subsidiaries shall be
free to conduct their businesses and to enter into any transactions which
they deem appropriate.
2. Transfers of Stock of Pharmaceutical Subsidiaries.
(a) TC-DEL hereby represents, warrants to, and agrees with Newco
that until the third anniversary of the Effective Date, it shall not,
and shall not permit any of its existing subsidiaries to:
(i) cease operations;
(ii) make a material disposition of any of its existing assets
by means of a sale, exchange or transfer, distribution to
shareholders or otherwise (including, without limitation,
transfers from TC-DEL to UDL-IL, UDL-FL, AP or PD
or transfers from UDL-IL, UDL,FL, AP or PD to TC-DEL, Mylan or any
subsidiary of Mylan);
(iii) dispose of any capital stock of any of its existing
subsidiaries by sale, exchange or transfer, distribution to
shareholders or otherwise (including, without limitation,
transfers from TC-DEL to Mylan or any subsidiary of
Mylan);
(iv) liquidate or merge with any other corporation (including
Mylan or a subsidiary of Mylan); or
(v) in the case of TC-DEL only, cease to engage in the
active conduct of a trade or business within the meaning
of Code Section 355(b)(2).
Except as expressly restricted pursuant to the foregoing
provisions of this Section F.2(a), TC-DEL and its existing subsidiaries
shall be free to conduct their respective businesses and to enter into any
transactions which they deem to be appropriate.
(b) In the event TC-DEL desires to take any of the actions described
in Section F.2.(a) or in the event TC-DEL desires to cause or
permit any of its existing subsidiaries to take any of the actions
described in Section F.2.(a), TC-DEL shall first deliver to
Newco an opinion of counsel to TC-DEL, addressed to TC-DEL
and those persons who have been designated as the
representatives of the holders of Company preferred stock and
common stock of TC-DEL immediately prior to the
consummation of the transactions under the Merger Agreement
(the "Stockholders' Representative") which opinion shall be
reasonably satisfactory to the Stockholders' Representative, or a
favorable ruling letter from the appropriate taxing authority,
reasonably satisfactory to the Stockholders' Representative, that
such actions would not adversely affect the tax consequences of
the transactions described in the Plan of Reorganization to TC-DEL or such holders
of the preferred stock or common stock of
TC-DEL, or adversely affect the tax consequences of the Merger
to TC-DEL or such holders of the preferred stock or common
stock of TC-DEL. TC-DEL has no present intention to take or
permit any such action.
(c) At any time after the third anniversary of the Effective Date, TC-DEL shall have
the right to transfer the stock of any of the
Pharmaceutical Subsidiaries (the "Transferred Pharmaceutical
Subsidiary") without the consent of Newco on the condition that
the Transferred Pharmaceutical Subsidiary or, at the option of
TC-DEL, Mylan delivers to Newco a joinder and undertaking
agreement in form and substance reasonably satisfactory to
Newco pursuant to which the Transferred Pharmaceutical
Subsidiary or Mylan, as the case may be, agrees to join in this
Agreement as if it had been an original party hereto and
undertakes to perform all of the obligations of TC-DEL
hereunder along with a notice address for the Transferred
Pharmaceutical Subsidiary.
3. Representations and Warranties. The parties to this Agreement hereby
represent and warrant to each other that each such party is a corporation duly formed,
organized and in good standing under the laws of the jurisdiction in which it was incorporated,
that each such party has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement on its part and that, upon the execution and
delivery of this Agreement by such party, this Agreement will constitute a valid, binding and
enforceable obligation of such party, enforceable in accordance with its terms subject to
applicable bankruptcy and insolvency laws.
4. No Limitation. The liability of Newco and TC-DEL under this
Agreement shall in no way be limited or impaired by (a) any extensions of time for
performance required by any of the provisions of this Agreement; (b) the accuracy or
inaccuracy of the representations and warranties made by Newco or TC-DEL in this
Agreement; (c) the release of any of Newco or TC-DEL or any other person from
performance or observance of any of the agreements, covenants, terms or conditions contained
in this Agreement by operation of law, the voluntary act of TC-DEL or Newco, respectively,
or otherwise; or (d) the invalidity, irregularity or unenforceability, in whole or in part, of this
Agreement; and, in any such case, whether with or without notice to Newco or TC-DEL and
with or without consideration.
5. Waiver. Newco and TC-DEL agree that any payments required to be
made hereunder shall become due on demand. Newco and TC-DEL expressly waive and
relinquish all rights and remedies accorded by applicable law to indemnitors or guarantors.
6. Confidentiality. Each of Newco and TC-DEL will hold and will cause
its affiliates, employees, representatives, consultants and advisors to hold in strict confidence,
unless compelled to disclose by judicial or administrative process, or, in the opinion of its
counsel, by other requirements of law, all documents and information delivered by one party
to the other pursuant to the terms of this Agreement (except to the extent that such information
can be shown to have been (A) previously known by either party or any affiliate of it, (B) in
the public domain through no fault of the receiving party, or any of its affiliates, (C) later
lawfully acquired from other sources unless the receiving party knew such information was
obtained in violation of an agreement of confidentiality or (D) publicly disclosed by the
delivering party,) and will not release or disclose such information to any other person, except
its auditors, attorneys, financial advisors, and other consultants and advisors and lending
institutions (including banks) in connection with this Agreement (it being understood that such
persons shall be informed by such party of the confidential nature of such information and
shall be directed by such party to treat such information confidentially). If either Newco or
TC-DEL shall be required to make disclosure of any such information by operation of law,
such party shall give prior notice to the other party of the making of such disclosure and shall
use all reasonable efforts to afford such party an opportunity to contest the making of such
disclosures.
7. Successors and Assigns. (a) Except as herein provided, this
Agreement shall be binding upon and inure to the benefit of the Newco and TC-DEL and their
respective successors and assigns. Notwithstanding the foregoing, neither Newco nor TC-DEL,
without the prior written consent of the other, which may be granted or withheld in the
discretion of the other in each instance, may assign, transfer or set over to another, in whole
or in part, all or any part of their benefits, rights, duties and obligations hereunder.
(b) Notwithstanding any ownership by TC-DEL at any time of all or
any portion of the Newco Property, in no event shall TC-DEL (including its successors and
assigns), its affiliates, or Mylan be bound by any obligations or liabilities of Newco or the
Newco Subsidiaries.
(c) Mylan, on the one hand, and the Newco Shareholders, on the
other hand, are intended to be, and shall have the rights of, third-party beneficiaries of the
duties and obligations of Newco and TC-DEL, respectively, hereunder. As such, Mylan and
the Newco Shareholders shall have the right to take action in their own names to enforce the
duties and obligations of Newco and TC-DEL, respectively, hereunder. Neither Mylan nor
the Newco Shareholders shall have the right to assign their rights as third- party beneficiaries
of this Agreement without the prior written consent of Newco or TC-DEL, respectively.
8. Limitation on Claims. (a) Notwithstanding anything to the contrary
contained elsewhere in this Agreement, the right of TC-DEL to assert a claim against Newco
for any of the Newco Environmental Liabilities, Newco Tax Liabilities, Newco Securities
Laws Liabilities or Newco General Liabilities shall terminate on the first to occur of the date
upon which the assertion of any claims by third parties for Newco Environmental Liabilities,
Newco Tax Liabilities, Newco Securities Laws Liabilities or Newco General Liabilities, as the
case may be, is barred by the applicable statute of limitations or the fifth anniversary of the
date of this Agreement.
(b) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, the right of Newco to assert a claim against TC-DEL for any of the
Pharmaceutical Environmental Liabilities, Pharmaceutical Tax Liabilities, the TC-DEL
Reorganization Tax Liabilities, Pharmaceutical Securities Laws Liabilities and Pharmaceutical
General Liabilities shall, terminate on the first to occur of the date upon which the assertion of
any claims by third parties for Pharmaceutical Environmental Liabilities, Pharmaceutical Tax
Liabilities, the TC-DEL Reorganization Tax Liabilities, Pharmaceutical Securities Laws
Liabilities or Pharmaceutical General Liabilities, as the case may be, is barred by the
applicable statute of limitations or the fifth anniversary of the date of this Agreement.
(c) No extension of any applicable statute of limitations will be
granted by TC-DEL or Newco without the prior written consent of the other party and neither
TC-DEL nor Newco will be liable to the other for any claim asserted during a time period
extending an applicable statute of limitations unless such consent has been so obtained.
(d) Any indemnification claim made will be deemed to be timely
made within the applicable time limit set forth in this Section 8 if a matter will have become
known which may give rise to a right for indemnification hereunder and either Newco or
TC-DEL, as the case may be, prior to or within thirty (30) days following the expiration of such
time limit, will have given notice thereof to the other party in accordance with this Agreement,
in which event the right to indemnification and the indemnification provisions of this
Agreement with respect to such matter will continue until such matter is fully and finally
resolved.
9. Term. The term of this Agreement shall commence on the date hereof
and shall end on the fifth anniversary of the date hereof and on such date the provisions of
Section D, Section E (except to the extent necessary to give effect to the provisions of Sections
C.1, C.2 and C.3) and Sections F.1 and F.2 shall terminate and be of no further force and
effect. The remaining provisions of this Agreement shall continue in full force and effect and
be binding upon Newco and TC-DEL until all of the Newco Obligations and the TC-DEL
Obligations which have arisen as a result of a claim or claims timely made in accordance with
the provisions of Section F.8. have been fully paid and performed and such payment and
performance has been acknowledged in a writing by Newco and TC-DEL which specifically
refers to this Section and this Agreement, whereupon this Agreement shall terminate.
10. Notices. All notices provided for herein shall be deemed given upon
receipt or rejection when deposited in the United States mail by registered or certified mail,
postage prepaid, return receipt requested and addressed to TC-DEL, or Newco, respectively,
at the following addresses, or to such substitute address as may be specified from time to time
by either party, by hand delivery by courier against receipt, or upon confirmation of
completed delivery of facsimile transmission at the numbers set forth below with respect to the
final resolution and satisfaction of any Newco Obligations:
TC-DEL:
Roderick Corporation
781 Chestnut Ridge Road
Morgantown, West Virginia 26505
Attention: Roderick P. Jackson, Senior Vice President
Facsimile: (304) 599-7284
with a copy to:
Buchanan Ingersoll Professional Corporation
One Oxford Centre
20th Floor
301 Grant Street
Pittsburgh, PA 15219-1410
Attention: John R. Previs
Facsimile: (412) 562-1041
Newco:
TC Manufacturing Co., Inc.
1527 Lyons Street
Evanston, Illinois 60201
Attention: President
Facsimile: (708) 866-8596
with a copy to:
Rivkin, Radler & Kremer
30 North LaSalle Street
Chicago, IL 60602-2507
Attention: Keith R. Abrams, Esquire
Facsimile: (312) 782-3112
11. Additional Provisions. Newco and TC-DEL agree as follows:
(a) No course of dealing between the Newco and TC-DEL nor any
failure to exercise, nor any delay in exercising, on the part of Newco or TC-DEL any right,
power or privilege hereunder or under this Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any other right, power or
privilege.
(b) All of the rights and remedies of Newco and TC-DEL, whether
established hereby or by any other agreements, instruments or documents or by law, shall be
cumulative and may be exercised singly or concurrently.
(c) The provisions of this Agreement are severable, and if any clause
or provisions shall be held invalid or unenforceable in whole or in part in any jurisdiction,
then such invalidity or unenforceability shall affect only such clause or provision, or part
thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.
12. Headings. The headings of the sections of this Agreement are for
convenience only and shall not affect the meaning or construction of the terms of this
Agreement.
13. Counterparts. This Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each of which shall
be deemed an original, but all of which when taken together shall constitute one and the same
instrument. Delivery of executed signature pages hereof by facsimile transmission shall
constitute effective and binding execution and delivery hereof.
14. Entire Agreement. This Agreement is an integrated document, contains
the entire agreement between the parties, wholly cancels, terminates and supersedes any and
all previous and/or contemporaneous oral agreements, negotiations, commitments and writings
between the parties hereto with respect to such subject matter. No change, modification,
termination, notice of termination, discharge or abandonment of this Agreement or any of the
provisions hereof, nor any representation, promise or condition relating to this Agreement,
shall be binding upon the parties hereto unless made in writing and signed by the party against
whom enforcement is sought.
15. JURISDICTION AND VENUE.
(a) THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA (WITHOUT GIVING
EFFECT TO PENNSYLVANIA'S PRINCIPLES OF CONFLICTS OF LAW). EACH
OF NEWCO AND TC-DEL HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY PENNSYLVANIA STATE OR FEDERAL COURT SITTING
IN THE CITY OF PITTSBURGH, AND ANY APPELLATE COURT TO WHICH AN
APPEAL MAY BE TAKEN, OVER ANY SUIT, ACTION OF PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND NEWCO AND TC-DEL HEREBY
AGREE AND CONSENT THAT, IN ADDITION TO ANY METHODS OF SERVICE OF
PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
PENNSYLVANIA STATE OR FEDERAL COURT SITTING IN THE CITY OF
PITTSBURGH MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO NEWCO OR TC-DEL, AS THE CASE MAY
BE, AT ITS ADDRESS SET FORTH IN SECTION F.10, AND SERVICE SO MADE
SHALL BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN
SO MAILED.
(b) NEWCO AND TC-DEL IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT THEY MAY LEGALLY
AND EFFECTIVELY DO SO, ANY OBJECTION WHICH THEY MAY NOW OR
LATER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
COURT OF THE COMMONWEALTH OF PENNSYLVANIA OR FEDERAL COURT
AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
16. No Presumption. Each party having been represented in the negotiation of
this Agreement, and having had ample opportunity to review the language thereof, there shall
be no presumption against any party on the ground that such party was responsible for
preparing this Agreement or any part thereof.
IN WITNESS WHEREOF, Newco and TC-DEL have caused this Agreement to
be executed in Pittsburgh, Pennsylvania on the date first written above, intending the same to
take effect as, and constitute, a sealed instrument.
ATTEST: TC MANUFACTURING CO.,
INC., an Illinois corporation
____________________________________ By:___________________________________
Keith R. Abrams, Assistant Secretary Herbert L. Stern, Jr., Chairman of
the Executive Committee of the Board
of Directors
ATTEST: TC MANUFACTURING CO., INC., a
Delaware corporation
____________________________________ By:___________________________________
Keith R. Abrams, Assistant Secretary Herbert L. Stern, Jr., Chairman of
the Executive Committee of the Board
of Directors
<PAGE>
EXHIBIT A-1
Coating Business Balance Sheet
<PAGE>
EXHIBIT A-2
Newco Business Balance Sheet
<PAGE>
EXHIBIT A-3
Packaging Business Balance Sheet
<PAGE>
EXHIBIT A-4
TC-DEL Balance Sheet
<PAGE>
EXHIBIT B
Tax Returns to Be Prepared and Filed by NEWCO
Filing Requirements
"D" reorganization to occur on the date of this Indemnification Agreement.
"B" reorganization to occur on the date of this Indemnification Agreement.
Due Date
Type
Corporation
Basis
Period Covered
Fiscal Year Ended 10/31/95
1/15/96
Federal
TC-DEL and
Subsidiaries
Consolidated,
including HSW,
UDL-IL and UDL-FL
11/1/94 to
10/31/95
1/15/96
Illinois
TC-DEL and
Subsidiaries
Consolidated,
including HSW,
UDL-IL and UDL-FL
11/1/94 to
10/31/95
2/1/96
Florida
UDL-FL
Separate entity
11/1/94 to
10/31/95
2/15/96
Virginia
HSW
Subsidiaries
Separate entity
11/1/94 to
10/31/95
5/15/96
Texas
TC-DEL
Separate entity
11/1/94 to
12/15/95
4/30/96
Canada Form T2
Tapecoat, Ltd.
Separate entity
11/1/94 to
10/31/95
4/30/96
Canada Form T2
Tapecoat, Inc.
Separate entity
11/1/94 to
10/31/95
4/30/96
Ontario Form
CT23
Tapecoat, Ltd.
Separate entity
11/1/94 to
10/31/95
4/30/96
Ontario Form
CT23
Tapecoat, Inc.
Separate entity
11/1/94 to
10/31/95
Short Period - 11/1/95 to the date of this Indemnification Agreement
6/17/96
Federal
TC-DEL and
Subsidiaries
Consolidated,
including HSW,
HSW
subsidiaries,
UDL-IL, UDL-FL
& NEWCO
for HSW, UDL-IL,
UDL-FL &
NEWCO 11/1/95
to the date
hereof
6/17/96
Illinois
TC-DEL and
Subsidiaries
Consolidated,
including HSW,
HSW
subsidiaries,
UDL-IL, UDL-FL
& NEWCO
for HSW, UDL-IL,
UDL-FL &
NEWCO 11/1/95
to the date
hereof
7/1/96
Florida
UDL-FL
Separate entity
11/1/95 to the
date hereof
7/15/96
Virginia
HSW subsidiaries
Separate entity
11/1/95 to the
date hereof
NOTES:
Extended due dates not shown
Taxpayer can elect to file combined or consolidated returns in Virginia
Dates to be changed to reflect actual Effective Date
</TABLE>
Exhibit 5
Buchanan Ingersoll
P R O F E S S I O N A L
C O R P O R A T I O N
Attorneys
One Oxford Centre
301 Grant Street, 20th Floor
Pittsburgh, PA 15219-1410
Telephone:
412-562-8800
Fax: 412- 562-1041
December 8, 1995
Mylan Laboratories, Inc.
130 Seventh Street
1030 Century Building
Pittsburgh, PA 15222
Gentlemen:
We have acted as counsel to Mylan Laboratories, Inc., a
Pennsylvania corporation (the "Company"), in connection with the
proposed issuance and sale by the Company of up to 2,450,000
shares (the "Shares") of the company's common stock, par value
$.50 per share, to be issued pursuant to the Agreement and Plan of
Merger dated October 10, 1995 by and among the Company, MLI
Acquisition Corp. and TC Manufacturing Co., Inc. (the
"Agreement"). This opinion is furnished in connection with the
filing by the Company of a Registration Statement on Form S-4
under the Securities Act of 1933, as amended, relating to such
proposed sale.
In connection with such proposed issuance and sale by
the Company, we have examined the Amended and Restated Articles of
Incorporation and By-laws of the Company, as amended to date, the
relevant corporate proceedings of the Company, the Registration
Statement on Form S-4, covering the issuance and sale of the
Shares, filed by the Company with the Securities and Exchange
Commission (the "Registration Statement"), including the Proxy
Statement/Prospectus filed as a part of the Registration
Statement, and such other documents, records, certificates of
public officials, statutes and decisions as we considered
necessary to express the opinions contained herein. We understand
that the Shares are to be offered and sold in the manner described
in the Proxy Statement/Prospectus which is a part of the
Registration Statement.
Based upon the foregoing, we are of the opinion that the
Shares have been duly authorized by all necessary corporate action
and, when and to the extent issued pursuant to the terms of the
Agreement, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to us
in the Proxy Statement/Prospectus under the heading "Legal
Matters."
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
By: /s/ John R. Previs
John R. Previs
Pittsburgh Harrisburg Philadelphia Miami Tampa
Lexington Princeton Buffalo
<TABLE>
<S> <C>
Exhibit 10(a)
IRREVOCABLE PROXY
(Preferred Stock)
In consideration of the negotiations and discussions which have occurred to date between
Mylan Laboratories Inc., a Pennsylvania corporation (the "Parent"), and TC Manufacturing Co.,
Inc., a Delaware corporation ("the Company"), and in order to induce the Parent to execute and
deliver the Agreement and Plan of Merger among the Parent, MLI Acquisition Corp., a Delaware
corporation (the "Subsidiary") and the Company dated October 10, 1995 (the "Merger
Agreement") and to proceed with the transactions contemplated thereby, pursuant to which the
undersigned, as a holder of shares of 8% Cumulative Preferred Stock, par value $100.00 per
share, of the Company ("Company Preferred Stock"), will receive securities of the Parent, the
undersigned hereby irrevocably appoints Roderick P. Jackson and David M. Satter and each of
them, or any other designee of the Parent, the attorneys and proxies of the undersigned, with full
power of substitution, to vote all shares of Company Preferred Stock now owned or hereafter
acquired by the undersigned which the undersigned is entitled to vote (the "Shares") as follows:
(1) in favor of calling a special meeting of the holders of Company Preferred Stock and
the holders of the Common Stock of the Company for the purpose of considering and
approving the Merger Agreement and the transactions contemplated thereby;
(2) in favor of approving the Merger Agreement and the transactions contemplated
thereby, all on the terms and conditions provided for therein; and
(3) against approval of any merger, consolidation or sale of assets of the Company
which requires a vote of the shareholders of the Company pursuant to Section 251 or
Section 271 of the Delaware General Corporation Law at any annual, regular or special
meeting of such shareholders in such manner as each such attorney and proxy or his designee
shall in his sole discretion deem proper. This Proxy is coupled with an interest and is
irrevocable. This Proxy will terminate on the first to occur (i) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the Merger Agreement; or
(ii) such date and time as the Merger Agreement shall be terminated and abandoned pursuant to
Section 6 of the Merger Agreement; or (iii) February 28, 1996.
The attorneys and proxies named above may not exercise this Proxy on any other matter
except as provided in clauses (1), (2) and (3) above. The undersigned stockholder may vote
the Shares on all other matters.
The undersigned represents and warrants to the Parent as follows:
(i) the undersigned is not subject to any restraint or limitation upon the granting of this Proxy
and has full power, authority and legal capacity to execute and deliver this Proxy and to perform
the obligations of the undersigned hereunder;
(ii) the execution by the undersigned of this Proxy will not result in a breach or violation of
any order, writ, injunction, judgment or decree of any court or governmental authority or of any
contract provision which might conflict with, result in a default, right to accelerate or loss of
rights under, or result in the creation of any lien, charge or encumbrance on the Shares; and
(iii) this Proxy is a valid and binding obligation of the undersigned, and is enforceable
against the undersigned in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors'
rights in general and subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
This Proxy shall be governed by and construed and enforced in accordance with the internal
laws of the State of Delaware.
All authority herein conferred shall survive the death or incapacity of the undersigned, and
any obligation of the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
The undersigned further agrees not to sell, assign, transfer or otherwise convey any of the
Shares except by operation of law or by will or the laws of descent or distribution prior to the
termination of this Proxy.
Signature of Stockholder:
Printed Name of Stockholder:
Shares beneficially owned: _________ shares of Company Preferred Stock
Dated: October ____, 1995
IRREVOCABLE PROXY
(Common Stock)
In consideration of the negotiations and discussions
which have occurred to date between Mylan Laboratories Inc., a Pennsylvania corporation
(the "Parent"), and TC Manufacturing Co., Inc., a Delaware corporation ("the Company"), and in
order to induce the Parent to execute and deliver the Agreement and Plan of Merger among the
Parent, MLI Acquisition Corp., a Delaware corporation (the "Subsidiary") and the Company
dated October 10, 1995 (the "Merger Agreement") and to proceed with the transactions
contemplated thereby, pursuant to which the undersigned, as a holder of shares of Common
Stock, $1.00 par value per share, of the Company ("Company Common Stock"), will receive
securities of the Parent, the undersigned hereby irrevocably appoints Roderick P. Jackson and
David M. Satter and each of them, or any other designee of the Parent, the attorneys and proxies
of the undersigned, with full power of substitution, to vote all shares of Company Common
Stock now owned or hereafter acquired by the undersigned which the undersigned is entitled to
vote (the "Shares") as follows:
(1) in favor of calling a special meeting of the holders of Company
Common Stock and the holders of the Preferred Stock of the Company for the purpose of
considering and approving the Merger Agreement and the transactions contemplated
thereby;
(2) in favor of approving the Merger Agreement and the transactions
contemplated thereby, all on the terms and conditions provided for therein; and
(3) against approval of any merger, consolidation or sale of assets of the
Company which requires a vote of the shareholders of the Company pursuant to Section
251 or
Section 271 of the Delaware General Corporation Law at any annual, regular or special
meeting of such shareholders in such manner as each such attorney and proxy or his designee
shall in his sole discretion deem proper. This Proxy is coupled with an interest and is
irrevocable. This Proxy will terminate on the first to occur (i) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the Merger Agreement; or
(ii) such date and time as the Merger Agreement shall be terminated and abandoned pursuant to
Section 6 of the Merger Agreement; or (iii) February 28, 1996.
The attorneys and proxies named above may not exercise this Proxy on any other
matter except as provided in clauses (1), (2) and (3) above. The undersigned stockholder may
vote the Shares on all other matters.
The undersigned represents and warrants to the Parent as follows:
(i) the undersigned is not subject to any restraint or limitation
upon the granting of this Proxy and has full power, authority and legal capacity to
execute and deliver this Proxy and to perform the obligations of the undersigned
hereunder;
(ii) the execution by the undersigned of this Proxy will not result in a breach or
violation of any order, writ, injunction, judgment or decree of any court or governmental
authority or of any contract provision which might conflict with, result in a default, right to
accelerate or loss of rights under, or result in the creation of any lien, charge or encumbrance on
the Shares; and
(iii) this Proxy is a valid and binding obligation of the undersigned, and is
enforceable against the undersigned in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at law).
This Proxy shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware.
All authority herein conferred shall survive the death or incapacity of the undersigned,
and any obligation of the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
The undersigned further agrees not to sell, assign, transfer or otherwise convey any of
the Shares except by operation of law or by will or the laws of descent or distribution prior to
the termination of this Proxy.
Signature of Stockholder:
Printed Name of Stockholder:
Shares beneficially owned: _________ Shares of Company Common Stock
Dated: October ____, 1995
</TABLE>
<TABLE>
<S> <C>
Exhibit23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of Mylan
Laboratories Inc. On Form S-4 of our report dated April 28, 1995, appearing and incorporated by
reference in the Annual Report on Form 10-K of Mylan Laboratories Inc. For the year ended
March 31, 1995 and to the reference to us under the heading "Experts" in the Prospectus, which
is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
December 8, 1995
Exhibit 23(b)
Consent of KPMG Peat Marwick LLP
The Board of Directors
TC Manufacturing Company, Inc.
We consent to the inclusion of our report dated December 9, 1994, with respect to the
consolidated balance sheets of TC Manufacturing Co., Inc. and subsidiaries as of
October 31, 1994 and 1993, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year period ended
October 3, 1994, which report appears in the registration statement on Form S-4 to be
filed by Mylan Laboratories Inc. on December 11, 1995.
/s/
KPMG Peat Marwick LLP
Chicago, Illinois
December 8, 1995
EXHIBIT 99.1
PRELIMINARY COPY
TC MANUFACTURING CO., INC.
1527 Lyons Street
Evanston, IL 60201
Dear Stockholder:
You are cordially invited to attend a Special Meeting of
Stockholders (the "Special Meeting") of TC Manufacturing Co., Inc.
("TC") which will be held at _____________________________ on
__________________ ____, 1996 at ________ a.m., local time.
At the Special Meeting, you will be asked to consider and approve
an Agreement and Plan of Merger that provides for the merger (the
"Merger") of MLI Acquisition Corp. ("MLI"), a Delaware corporation
and wholly owned subsidiary of Mylan Laboratories Inc. ("Mylan"),
a Pennsylvania corporation, with and into TC. As a result of the
Merger, the separate existence of MLI would cease and TC would
continue as the surviving corporation and the wholly owned direct
subsidiary of Mylan.
Your Board of Directors has unanimously approved the
proposal to be presented at the Special Meeting and recommends
that you vote FOR it. The accompanying Proxy Statement/Prospectus
more fully describes the proposed Merger and other information
about TC and Mylan. In view of the significance of these matters,
you are urged to study carefully the Proxy Statement/Prospectus,
as well as the Annexes thereto.
IF YOU DID NOT EXECUTE AN IRREVOCABLE PROXY IN
CONNECTION WITH THE EXECUTION OF THE MERGER AGREEMENT, PLEASE
COMPLETE, SIGN, AND DATE YOUR PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING.
Sincerely,
/s/ Herbert
L. Stern, Jr.
Herbert L.
Stern, Jr.
Chairman of the Executive Committee
_____________ ______, 1995
EXHIBIT 99.2
PRELIMINARY COPY
TC MANUFACTURING CO., INC.
1527 Lyons Street
Evanston, IL 60201
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on ________ ____, 1996
Dear Stockholder:
NOTICE IS HEREBY GIVEN that a Special Meeting of
Stockholders (the "Special Meeting") of TC Manufacturing Co., Inc.
("TC") will be held at ________________________ on
________________, 1996 at _____ a.m., local time, for the
following purposes:
1. To consider and vote upon a proposal to
approve an Agreement and Plan of Merger (the "Merger Agreement"),
which provides for the merger (the "Merger") into TC of MLI
Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Mylan Laboratories Inc., a Pennsylvania corporation,
on the terms and subject to the conditions set forth in the Merger
Agreement, which is attached to and described in the enclosed
Proxy Statement/Prospectus; and
2. To transact such other business as may
properly come before of the meeting.
The Board of Directors has fixed the close of business
on December 11, 1995, as the record date for the determination of
stockholders entitled to notice of and to vote at the Special
Meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Herbert L. Stern, Jr.
Herbert L. Stern, Jr.
Secretary
Evanston, Illinois
_______ ____, 1995
YOU ARE CORDIALLY INVITED TO ATTEND THIS MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN.
EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE
PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE EITHER IN
PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO ITS EXERCISE.
EXHIBIT 99.3
PRELIMINARY COPY
PROXY
TO VOTE SHARES OF COMMON STOCK
SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF TC MANUFACTURING CO., INC.
The undersigned hereby appoints Herbert L. Stern, Jr. and
Shiro F. Shiraga proxies, or either of them, and with full power
of substitution, of the undersigned to vote all shares of Common
Stock, par value $1.00 per share, of TC Manufacturing Co., Inc.
which the undersigned would be entitled to vote at the Special
Meeting of Stockholders to be held at
________________________________________ on
________________________________________, 1996, and at all
adjournments thereof, as fully as the undersigned could if
personally present upon the following matters:
(1) Approval of the Agreement and Plan of Merger, dated as of
October 10, 1995, providing for the merger of MLI Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of
Mylan Laboratories Inc., with and into TC Manufacturing Co.,
Inc.
FOR Approval AGAINST Approval ABSTAIN
(2) WITH or WITHOUT authority to vote on any other business
that may properly come before the meeting or any adjournment,
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE
MEETING. IF NO CHOICE IS INDICATED FOR THEM (1) ABOVE, SUCH SHARES
WILL BE VOTED IN FAVOR OF THE PROPOSAL REFERRED TO IN THAT ITEM.
IF A CHOICE IS MADE, SUCH SHARES WILL BE VOTED IN ACCORDANCE WITH
THE CHOICE SO INDICATED. UNLESS OTHERWISE DIRECTED, IN THEIR
DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY
POSTPONEMENT OR ADJOURNMENT THEREOF.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO A VOTE
THEREON.
Please complete, sign and promptly mail this proxy in the enclosed
envelope.
Dated: , 1996
(Signature)
Please sign exactly as your name
appears on this Proxy. When signing
as attorney, executor,
administrator, guardian or corporate
official, title should be stated.
If shares are held jointly, each
holder should sign.
PLEASE EXECUTE AND RETURN THIS PROXY IMMEDIATELY
IN THE ENCLOSED ENVELOPE.
EXHIBIT 99.4
PRELIMINARY COPY
PROXY
TO VOTE SHARES OF 8% PREFERRED STOCK
SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF TC MANUFACTURING CO., INC.
The undersigned hereby appoints Herbert L. Stern, Jr. and
Shiro F. Shiraga proxies, or either of them and with full power
of substitution, of the undersigned to vote all shares of 8%
Cumulative Preferred Stock, par value $100 per share, of TC
Manufacturing Co., Inc. which the undersigned would be entitled
to vote at the Special Meeting of Stockholders to be held at
________________________________________ on
________________________________________, 1996, and at all
adjournments thereof, as fully as the undersigned could if
personally present upon the following matters:
(1) Approval of the Agreement and Plan of Merger, dated as of
October 10, 1995, providing for the merger of MLI Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of
Mylan Laboratories Inc., with and into TC Manufacturing Co.,
Inc.
FOR Approval AGAINST Approval ABSTAIN
(2) WITH or WITHOUT authority to vote on any other business
that may properly come before the meeting or any adjournment,
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE
MEETING. IF NO CHOICE IS INDICATED FOR THEM (1) ABOVE, SUCH SHARES
WILL BE VOTED IN FAVOR OF THE PROPOSAL REFERRED TO IN THAT ITEM.
IF A CHOICE IS MADE, SUCH SHARES WILL BE VOTED IN ACCORDANCE WITH
THE CHOICE SO INDICATED. UNLESS OTHERWISE DIRECTED, IN THEIR
DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY
POSTPONEMENT OR ADJOURNMENT THEREOF.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO A VOTE
THEREON.
Please complete, sign and promptly mail this proxy in the enclosed
envelope.
Dated: , 1996
(Signature)
Please sign exactly as your name
appears on this Proxy. When signing
as attorney, executor,
administrator, guardian or corporate
official, title should be
stated. If shares are held jointly,
each holder should sign.
PLEASE EXECUTE AND RETURN THIS PROXY IMMEDIATELY IN THE ENCLOSED
ENVELOPE
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