<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SALICK HEALTH CARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8099
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
95-4333272
(I.R.S. EMPLOYER IDENTIFICATION NO.)
8201 BEVERLY BOULEVARD LESLIE F. BELL
LOS ANGELES, CALIFORNIA 90048 SALICK HEALTH CARE, INC.
(213) 966-3400 8201 BEVERLY BOULEVARD
(ADDRESS, INCLUDING ZIP CODE, AND LOS ANGELES, CALIFORNIA 90048
TELEPHONE NUMBER, INCLUDING AREA (213) 966-3400
CODE, OF REGISTRANT'S PRINCIPAL (NAME, ADDRESS, INCLUDING ZIP CODE, AND
EXECUTIVE OFFICES) TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR
SERVICE FOR SALICK HEALTH CARE, INC.)
COPY TO:
IRWIN G. BARNET, ESQ.
SANDERS, BARNET, GOLDMAN, SIMONS & MOSK
A PROFESSIONAL CORPORATION
1901 AVENUE OF THE STARS, SUITE 850
LOS ANGELES, CALIFORNIA 90067
--------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ZENECA GROUP PLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ENGLAND 2834
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
NONE
(I.R.S. EMPLOYER IDENTIFICATION NO.)
15 STANHOPE GATE GLENN M. ENGELMANN
LONDON, W1Y 6LN ZENECA INC.
011-44-171-304-5000 1800 CONCORD PIKE
(ADDRESS, INCLUDING ZIP CODE, AND WILMINGTON, DELAWARE 19897
TELEPHONE NUMBER, INCLUDING (302) 886-3000
AREA CODE, OF REGISTRANT'S PRINCIPAL (NAME, ADDRESS, INCLUDING ZIP CODE,
EXECUTIVE OFFICES) AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE FOR
ZENECA GROUP PLC)
COPY TO:
WINTHROP B. CONRAD, JR., ESQ.
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
--------------
APPROXIMATE DATE OF COMMENCEMENT OF 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 of Atkemix Thirty-nine Inc.
with and into Salick Health Care, Inc., pursuant to an Agreement and Plan of
Merger, dated as of December 22, 1994, as amended, 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
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT (2) PRICE (2) FEE(2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Callable Puttable Common Stock of Salick Health Care, Inc.
(1)....................................................... 5,171,003 $31.75 $164,179,345.25 $56,613.57
- ---------------------------------------------------------------------------------------------------------------------
Options to Purchase Shares of Callable Puttable Common
Stock of Salick Health Care, Inc. (and shares of Callable
Puttable Common Stock issuable upon exercise thereof)
(1)....................................................... 543,153 $35.375 $19,214,037.38 $6,625.53
- ---------------------------------------------------------------------------------------------------------------------
Contingent Debt Obligations of Zeneca PLC (3).............. -- $0 $0 $0
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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(1) The number of shares represents the maximum number of shares of Callable
Puttable Common Stock expected to be issued in the Merger, including
shares thereof issuable upon exercise of options to purchase shares of
Callable Puttable Common Stock which will be issued in connection with the
Merger.
(2) Estimated solely for purposes of computing the registration fee. Pursuant
to Rule 457(f), the registration fee was computed on the basis of the cash
to be paid by the registrant and the market value of the Common Stock of
Salick Health Care, Inc. to be exchanged in the Merger for the Callable
Puttable Common Stock and was computed in accordance with Rule 457(c) on
the basis of the average of the high and low prices per share of the
Common Stock of Salick Health Care, Inc. on the Nasdaq National Market on
March 8, 1995. Pursuant to Rule 457(b), the registration fee has been
reduced by $80,448.30 paid on February 9, 1995 upon the filing under the
Securities Exchange Act of 1934, as amended, of preliminary copies of the
proxy materials of Salick Health Care, Inc. included herein. Therefore, no
registration fee is payable upon the filing of this Registration Statement.
(3) Contingent Debt Obligations are issued together with the Callable Puttable
Common Stock pursuant to the Merger, are not separable from the Callable
Puttable Common Stock, will not trade separately from the Callable
Puttable Common Stock and no additional consideration will be paid with
respect to the Contingent Debt Obligations.
--------------
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.
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<PAGE>
SALICK HEALTH CARE, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NO. FORM S-4 CAPTIONS LOCATION IN PROXY STATEMENT/PROSPECTUS
---- ----------------- --------------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE
TRANSACTION
1. Forepart of Registration
Statement and Outside
Front cover Page of
Prospectus............. Facing Page of the Registration Statement;
Outside Front Cover Page of Proxy Statement/
Prospectus
2. Inside Front and Outside
Back Cover Pages of
Prospectus............. AVAILABLE INFORMATION; INCORPORATION OF
DOCUMENTS BY REFERENCE; Table of Contents
3. Risk Factors, Ratio of
Earnings to Fixed
Charges and Other
Information............ SUMMARY; MERGER PROPOSAL--
Investment Considerations;
UNAUDITED PRO FORMA FINANCIAL INFORMATION
4. Terms of the Transaction. SUMMARY--The Annual Meeting;
--Opinions of Financial Advisors;--Certain
Federal Income Tax Consequences;
--Accounting Treatment; INTRODUCTION--
Purpose of Annual Meeting; MERGER
PROPOSAL--Background of and Reasons for
the Merger;--Opinions of the Company's
Financial Advisors;--Certain Federal
Income Tax Consequences;--Accounting
Treatment; THE MERGER AGREEMENT;
DESCRIPTION OF THE SPECIAL COMMON STOCK
5. Pro Forma Financial
Information............ UNAUDITED PRO FORMA FINANCIAL INFORMATION
6. Material Contacts with
the Company Being
Acquired............... MERGER PROPOSAL--Background of and Reasons
for the Merger
7. Additional Information
Required for Reoffering
by Persons and Parties
Deemed to Be
Underwriters........... *
8. Interests of Named
Experts and Counsel.... LEGAL MATTERS
9. Disclosure of Commission
Position on
Indemnification for
Securities Act
Liabilities............ *
B. INFORMATION ABOUT THE
REGISTRANT
10. Information with Respect
to S-3 Registrants..... *
11. Incorporation of Certain
Information by
Reference.............. INCORPORATION OF DOCUMENTS BY REFERENCE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM
NO. FORM S-4 CAPTIONS LOCATION IN PROXY STATEMENT/PROSPECTUS
---- ----------------- --------------------------------------
<C> <S> <C>
12. Information with Respect to S-3
Registrants......................... *
13. Incorporation of Certain Information
by Reference........................ *
14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants......................... *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies........................... *
16. Information with Respect to S-2 or S-
3 Companies......................... *
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies..... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited.. Forepart of Proxy Statement/ Prospectus;
SUMMARY--The Annual Meeting;--Appraisal
Rights;--Record Date; Vote Required;
Forepart of INTRODUCTION; INTRODUCTION--
Record Date; Voting Rights; Proxies;--
Solicitation of Proxies;--Required Vote;
MERGER PROPOSAL--Agreements Ancillary to
Merger Agreement;--Interests of Certain
Persons in the Merger; APPRAISAL RIGHTS;
ELECTION OF DIRECTORS; STOCK OWNERSHIP;
EXECUTIVE COMPENSATION; INTEREST OF
MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS
19. Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange Offer... *
</TABLE>
- --------
*Item is omitted because the answer is negative or the item is
inapplicable.
<PAGE>
ZENECA GROUP PLC
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION OR HEADING IN PROXY
LOCATION OR ITEM NO. AND CAPTION STATEMENT/PROSPECTUS
-------------------------------- ----------------------------
<C> <S> <C>
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus...... Facing Page of the Registration Statement;
Outside Front Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus..... AVAILABLE INFORMATION; INCORPORATION OF
DOCUMENTS BY REFERENCE; Table of Contents
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information................... SELECTED FINANCIAL DATA OF ZENECA PLC
4. Terms of the Transaction....... SUMMARY--The Annual Meeting;--Opinions of
Financial Advisors;--Certain Federal
Income Tax Consequences;--Accounting
Treatment; INTRODUCTION--Purpose of Annual
Meeting; MERGER PROPOSAL--Background of
and Reasons for the Merger;--Opinions of
the Company's Financial Advisors;--Certain
Federal Income Tax Consequences;
--Accounting Treatment; THE MERGER
AGREEMENT; DESCRIPTION OF THE SPECIAL
COMMON STOCK
5. Pro Forma Financial
Information................... UNAUDITED CONDENSED PRO FORMA FINANCIAL
INFORMATION OF ZENECA PLC
6. Material Contacts with the
Company Being Acquired........ MERGER PROPOSAL--Background of and Reasons
for the Merger
7. Additional Information Required
for Preoffering by Persons and
Parties Deemed to Be
Underwriters.................. *
8. Interests of Named Experts and
Counsel....................... *
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... *
10. Information with Respect to F-3
Registrants................... *
11. Incorporation of Certain
Information by Reference...... AVAILABLE INFORMATION; INCORPORATION OF
DOCUMENTS BY REFERENCE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OR HEADING IN PROXY
LOCATION OR ITEM NO. AND CAPTION STATEMENT/PROSPECTUS
-------------------------------- ----------------------------
<C> <S> <C>
12. Information with Respect to F-2 or
F-3 Registrants.................. *
13. Incorporation of Certain
Information by Reference......... *
14. Information with Respect to
Registrants Other Than F-3 or F-2
Registrants...................... *
15. Information with Respect to F-3
Companies........................ AVAILABLE INFORMATION; INCORPORATION OF
DOCUMENTS BY REFERENCE
16. Information with Respect to F-2 or
F-3 Companies.................... *
17. Information with Respect to
Companies Other Than F-3 or F-2
Companies........................ *
18. Information if Proxies, Consents
or Authorizations are to be
Solicited........................ *
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange
Offer............................ *
</TABLE>
- --------
*Omitted because inapplicable or answer is in the negative.
<PAGE>
[LOGO OF SALICK HEALTH CARE, INC.]
SALICK HEALTH CARE, INC.
8201 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 13, 1995
----------------
The Annual Meeting of Stockholders (the "Annual Meeting") of Salick Health
Care, Inc., a Delaware corporation (the "Company"), will be held at the
Company's principal executive offices located at 8201 Beverly Boulevard, Los
Angeles, California 90048 on April 13, 1995 at 9:30 A.M., local time, for the
following purposes:
1. To consider and vote upon a proposal (the "Merger Proposal") to
approve and adopt the Agreement and Plan of Merger, dated as of December
22, 1994, as amended (the "Merger Agreement"), among the Company, Zeneca
Limited, an English company ("Zeneca"), and Atkemix Thirty-nine Inc., a
Delaware corporation and an indirect wholly owned subsidiary of Zeneca
("Merger Subsidiary"), pursuant to which, among other things, (i) Merger
Subsidiary will be merged with and into the Company (the "Merger"), with
the Company being the surviving corporation, (ii) the certificate of
incorporation of the Company will be amended by operation of the Merger to,
among other things, authorize the issuance by the Company of Callable
Puttable Common Stock, par value $.001 per share (the "Special Common
Stock"), having the rights described in the Proxy Statement/Prospectus
accompanying this Notice,(iii) each outstanding share of Common Stock,
$.001 par value per share, of the Company (the "Shares") (other than Shares
as to which appraisal rights have been perfected), will be converted
pursuant to the Merger into the right to receive $18.875 in cash and,
although no fractional shares will be issued, one-half share of Special
Common Stock, and (iv) the outstanding common stock of Merger Subsidiary
will be converted pursuant to the Merger into shares of the Common Stock of
the Company representing immediately after the Merger fifty percent of the
equity of the Company (assuming exercise in full of all options outstanding
immediately prior to the Merger). Pursuant to the Merger Agreement, Zeneca
will provide the aggregate cash consideration to be received by
stockholders in the Merger in exchange for their Shares. All fractional
shares of Special Common Stock that holders of Shares otherwise would be
entitled to receive will be aggregated and sold and the net proceeds paid
to such holders. Holders of the Special Common Stock will have the right to
cause the Company to purchase all or some of the shares thereof during a
twenty business day period commencing two and one-half years after the
consummation of the Merger (the "Closing") at a price of $42.00 per share;
and the Company will have the right to acquire all, but not less than all,
of the Special Common Stock at any time during the four year period
commencing with the Closing at the market price therefor (subject, during
the first two years and seven months, to a minimum price of $42.00 per
share, discounted from a date which is two years and six months from the
effective time of the Merger, if called prior to that date, at a rate
which, when compounded daily, is equal to four percent on an annualized
basis, and a maximum price of $50.00 per share). As additional
consideration for Shares converted in the Merger, the Company will make a
distribution to all holders of record of Shares immediately prior to the
effective time of the Merger in an aggregate amount of $0.625 per Share, to
be paid in two equal installments of $0.3125 each, the first to be paid 180
days after the Closing and the second to be paid 360 days after the
Closing.
<PAGE>
Approval of the Merger Proposal by the Company's stockholders will also
constitute approval of the treatment and disposition of outstanding options
under the Company's stock option and other plans as contemplated by the
Merger Agreement, approval of revisions to the certificate of incorporation
and by-laws of the Company and the election of ten nominees to serve as
directors of the Company following the Merger.
2. To elect two Class I directors to serve for a three year term and
until their successors are duly elected and qualified (or, if the Merger is
approved, until the consummation thereof).
3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Holders of the Shares have the right to dissent from the Merger and obtain a
judicial determination of the "fair value" of their Shares and to receive
payment therefor by following the procedures prescribed in Section 262 of the
Delaware General Corporation Law, which is attached as Annex D to, and
summarized under "APPRAISAL RIGHTS" in, the accompanying Proxy
Statement/Prospectus.
Detailed information relating to the Merger Proposal and related matters, as
well as the other matters to be considered at the Annual Meeting, is contained
in the accompanying Proxy Statement/Prospectus, and the annexes thereto, which
form a part of this Notice.
Only stockholders of record on March 3, 1995, the record date for the Annual
Meeting, are entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof. A list of such stockholders will be
available for examination at the principal executive offices of the Company
located at 8201 Beverly Boulevard, Los Angeles, California 90048 at least ten
days prior to the Annual Meeting.
To assure that your interests will be represented, whether or not you expect
to attend the Annual Meeting in person, it is important that you promptly
complete, sign, date and return the proxy card in the enclosed envelope, which
requires no postage if mailed in the United States.
By Order of the Board of Directors
Leslie F. Bell
Secretary
March 13, 1995
Los Angeles, California
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE>
SALICK HEALTH CARE, INC.
8201 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
----------------
PROXY STATEMENT RELATING TO
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 13, 1995
PROSPECTUS COVERING 5,714,156 SHARES
OF CALLABLE PUTTABLE COMMON STOCK
----------------
ZENECA GROUP PLC
15 STANHOPE GATE
LONDON W1Y 6LN
PROSPECTUS
This Proxy Statement/Prospectus ("Proxy Statement") constitutes the Proxy
Statement of Salick Health Care, Inc., a Delaware corporation (the "Company"),
and relates to the solicitation of proxies by and on behalf of the Board of
Directors of the Company for use at the Annual Meeting of Stockholders of the
Company (the "Annual Meeting") scheduled to be held on April 13, 1995, at 9:30
A.M., local time, at the Company's principal executive offices, located at 8201
Beverly Boulevard, Los Angeles, California 90048, and any adjournments or
postponements thereof. This Proxy Statement and the related form of proxy are
first being mailed to stockholders of the Company on or about March 15, 1995.
At the Annual Meeting, the Company's stockholders will be asked to consider
and vote upon a proposal (the "Merger Proposal") to approve and adopt the
Agreement and Plan of Merger, dated as of December 22, 1994, as amended (the
"Merger Agreement"), among the Company, Zeneca Limited, an English company
("Zeneca"), and Atkemix Thirty-nine Inc., a Delaware corporation and an
indirect wholly owned subsidiary of Zeneca ("Merger Subsidiary"), pursuant to
which, among other things, (i) Merger Subsidiary will be merged with and into
the Company (the "Merger"), with the Company being the surviving corporation,
(ii) the Company's certificate of incorporation will be revised by operation of
the Merger to, among other things, authorize the issuance by the Company of
Callable Puttable Common Stock, par value $.001 per share (the "Special Common
Stock"), having the rights described in this Proxy Statement, (iii) each
outstanding share of Common Stock, $.001 par value per share, of the Company
(the "Shares") (other than Shares as to which appraisal rights have been
perfected under Section 262 of the Delaware General Corporation Law (the
"Delaware Law")), will be converted pursuant to the Merger into the right to
receive $18.875 in cash (the "Cash Consideration") and, although no fractional
shares will be issued, one-half share of Special Common Stock (the "Stock
Consideration"; the Cash Consideration and the Stock Consideration are
collectively referred to herein as the "Merger Consideration"), and (iv) the
outstanding common stock of Merger Subsidiary will be converted pursuant to the
Merger into shares of the Common Stock of the Company representing immediately
after the Merger fifty percent of the equity of the Company (assuming exercise
of all options outstanding immediately prior to the Merger). Pursuant to the
Merger Agreement, Zeneca will provide the aggregate Cash Consideration to be
received by stockholders in the Merger in exchange for their Shares. All
fractional shares of Special Common Stock that holders of Shares otherwise
would be entitled to receive will be aggregated and sold and the net proceeds
paid to such holders. Holders of the Special Common Stock will have the right
(the "Put") to cause the Company to purchase all or some of the shares thereof
during a twenty business day period commencing two and one-half years after the
Merger is effective (or earlier upon a change of control as defined in the
Company's certificate of incorporation, as revised) at a purchase price of
$42.00 per share (the "Put Price"), subject to having funds legally available
therefor as described herein. If such funds are not legally available to the
Company as set forth in the Merger Agreement,
<PAGE>
Zeneca Group PLC, an English company of which Zeneca is a wholly owned
subsidiary ("Zeneca PLC" ), will assume the obligations of the Company with
respect to the Put. The Company will have the right (the "Call") to acquire,
subject to having available funds as described herein, all, but not less than
all, of the Special Common Stock at any time during the four year period
commencing with the Closing at the market price therefor (subject, during the
first two years and seven months, to a minimum price of $42.00 per share,
discounted from the date which is two and one-half years from the Effective
Time (defined below), if called prior to that date, at a rate which, when
compounded on a daily basis, is equal to four percent on an annualized basis,
and a maximum price of $50.00 per share; hereinafter, the "Call Price").
Holders of the Special Common Stock will have the right to elect five of the
ten directors of the Company following the Merger with the remaining five
directors to be elected by the holders of the Common Stock. Upon any
liquidation, dissolution or winding up of the Company, prior to any
distributions to the holders of the Common Stock, the holders of the Special
Common Stock will be entitled to receive a liquidation preference, out of the
assets of the Company, in the amount of $42.00 per share (plus interest under
specified circumstances). See "DESCRIPTION OF THE SPECIAL COMMON STOCK--
Liquidation." The Merger will be effective on the date and at the time of the
filing of a Certificate of Merger by the Company and Merger Subsidiary with the
Secretary of State of the State of Delaware (the "Effective Time"). As
additional consideration for Shares converted in the Merger, the Company will
make a distribution, out of funds legally available therefor, to all holders of
record of Shares immediately prior to the Effective Time in an aggregate amount
of $0.625 per Share, to be paid in two equal installments of $0.3125 each, the
first to be paid 180 days after the date of the Closing and the second to be
paid 360 days after the date of the Closing. See the Merger Agreement, which is
attached as Annex A to this Proxy Statement, and "THE MERGER AGREEMENT."
Approval of the Merger Proposal by the Company's stockholders will also
constitute approval of the treatment and disposition of outstanding options
under the Company's Stock Option Plan (the "Stock Option Plan") and Non-
Employee Director Stock Option Plan (the "Director Option Plan;" the Stock
Option Plan and the Director Option Plan are collectively referred to herein as
the "Plans") as contemplated by the Merger Agreement, approval of revisions to
the certificate of incorporation and by-laws of the Company and the election of
ten nominees to serve as directors of the Company immediately following the
Merger. See "MERGER PROPOSAL--Agreements Ancillary to Merger Agreement" and "--
Conduct of the Company after the Merger," "THE MERGER AGREEMENT--Treatment of
Stock Options" and "DESCRIPTION OF AMENDMENTS TO THE CHARTER DOCUMENTS OF THE
COMPANY."
At the Annual Meeting, the Company's stockholders will also be asked to elect
two Class I directors who will serve for a three-year term expiring in 1998
(or, if the Merger is approved, until consummation thereof) and to transact
such other business, if any, as may properly come before the Annual Meeting.
This Proxy Statement also constitutes the Prospectus of the Company with
respect to the shares of Special Common Stock to be issued pursuant to the
Merger. The Company has filed a registration statement on Form S-4 (the
"Registration Statement"), of which this Proxy Statement is a part, with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), covering the shares of Special
Common Stock and options to purchase shares of Special Common Stock (and the
shares of Special Common Stock issuable upon exercise thereof) to be issued
pursuant to the Merger. Subsequent to the Merger, the Special Common Stock will
be traded in the Nasdaq National Market under the symbol "SHCID."
This Proxy Statement also constitutes the Prospectus of Zeneca PLC with
respect to certain contingent obligations of Zeneca PLC described herein.
Zeneca PLC has filed a registration statement on Form F-4 ("Form F-4
Registration Statement"), of which this Proxy Statement is a part, with the
Commission under the Securities Act, covering such contingent obligations.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR THE
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is March 13, 1995.
2
<PAGE>
AVAILABLE INFORMATION
As permitted by the rules and regulations of the Commission, this Proxy
Statement omits certain information contained in the Registration Statement.
For such information reference is made to the Registration Statement and the
annexes thereto. The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. Zeneca PLC as a foreign issuer of securities trading in
the United States is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the Commission relating to its business, financial condition and other
matters. Information, as of particular dates, concerning Zeneca PLC's directors
and officers, their remuneration, options granted to them, the principal
holders of Zeneca PLC's securities and any material interest of such persons in
transactions with Zeneca PLC is required to be disclosed in proxy statements
distributed and filed with the Commission. The Registration Statement and the
Form F-4 Registration Statement of which this Proxy Statement forms a part, as
well as reports, proxy statements and other information filed by the Company
and filed by Zeneca PLC, can be inspected and copied at the Commission's public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at certain of the Commission's regional
offices located at 7 World Trade Center, New York, New York 10048, and
Kluczynski Federal Building, Suite 1400, 500 West Madison Avenue, Chicago,
Illinois 60661 and copies of such material can be obtained from the public
reference section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington D.C. 20549 at prescribed rates.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS OF THE COMPANY BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) ARE AVAILABLE WITHOUT
CHARGE, UPON ORAL OR WRITTEN REQUEST BY ANY PERSON RECEIVING THIS PROXY
STATEMENT, FROM LESLIE F. BELL, SECRETARY OF THE COMPANY, SALICK HEALTH CARE,
INC., 8201 BEVERLY BOULEVARD, LOS ANGELES, CALIFORNIA 90048, (213) 966-3400. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
APRIL 6, 1995.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS OF ZENECA PLC BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) ARE AVAILABLE WITHOUT
CHARGE, UPON ORAL OR WRITTEN REQUEST BY ANY PERSON RECEIVING THIS PROXY
STATEMENT, FROM ZENECA PLC, IN CARE OF ANN V. BOOTH-BARBARIN, ZENECA INC., 1800
CONCORD PIKE, WILMINGTON, DELAWARE 19897. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY APRIL 6, 1995.
All information contained in this Proxy Statement concerning Zeneca, Merger
Subsidiary or Zeneca PLC was provided by Zeneca. The Company assumes no
responsibility for the accuracy of such information.
All information contained in this Proxy Statement concerning the Company was
provided by the Company. None of Zeneca PLC, Zeneca or Merger Subsidiary
assumes any responsibility for the accuracy of such information.
3
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant to
the Exchange Act are incorporated by reference in this Proxy Statement:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1994, as amended by Form 10K/A, Amendment No. 1, filed December
29, 1994;
(b) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1994;
(c) The Company's Form 8-K, with date of earliest event reported being
December 22, 1994; and
(d) The description of Shares contained in the Company's Registration
Statement on Form 8-B filed pursuant to the Exchange Act, and any amendment
or report filed for the purpose of updating such description.
The following documents filed with the Commission by Zeneca PLC are
incorporated by reference in this Proxy Statement:
(a) Zeneca PLC's Form 20-F for the fiscal year ended December 31, 1993;
and
(b) Zeneca PLC's Form 6-K for the six months ended June 1994.
All documents filed by the Company or Zeneca PLC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act and, to the extent designated therein,
reports furnished to the Commission on Form 6-K by Zeneca PLC, subsequent to
the date hereof and prior to, in the case of the Company, the date of the
Annual Meeting referred to herein and, in the case of Zeneca PLC, the date on
which the Merger is consummated, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing thereof. 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 to the extent that a statement contained herein, or in any
other subsequently filed document that is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement. If the Merger is
consummated, the Company will continue to be required to file periodic reports,
proxy statements and other information with the Commission pursuant to the
Exchange Act.
Zeneca PLC is an English public limited company. Substantially all of the
directors and executive officers of Zeneca PLC named in this Proxy Statement or
in the documents incorporated herein by reference are non-residents of the
United States. A substantial portion of the assets of Zeneca PLC and a
substantial portion of the assets of such persons are located outside the
United States. As a result, it may not be possible to effect service of process
within the United States upon Zeneca PLC or such persons with respect to
matters arising under the United States securities laws or to enforce against
them judgments of United States courts predicated upon civil liability under
United States federal securities laws. Zeneca PLC has been advised by G.H.R.
Musker, Secretary and Solicitor of Zeneca PLC, that there is doubt as to the
enforceability in the United Kingdom, in original actions or in actions for
enforcement of judgments of United States courts, of civil liabilities
predicated upon United States federal securities laws. Zeneca PLC has consented
to service of process in the State of New York for claims based upon the Zeneca
Put Obligation (as defined below).
4
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
SUMMARY.................................................................... 7
INTRODUCTION............................................................... 14
Purpose of Annual Meeting................................................ 14
Record Date; Voting Rights; Proxies...................................... 15
Solicitation of Proxies.................................................. 16
Quorum................................................................... 16
Required Vote............................................................ 16
MERGER PROPOSAL............................................................ 17
Investment Considerations................................................ 17
Background of and Reasons for the Merger................................. 17
Agreements Ancillary to Merger Agreement................................. 19
Recommendation of the Company's Board of Directors....................... 24
Opinions of the Company's Financial Advisors............................. 25
Certain Projections...................................................... 29
Effects of the Merger.................................................... 30
Conduct of the Company after the Merger.................................. 31
Zeneca's Reasons for the Merger.......................................... 33
Interests of Certain Persons in the Merger............................... 33
Certain Federal Income Tax Consequences.................................. 33
Accounting Treatment..................................................... 36
Certain Regulatory Matters............................................... 36
THE MERGER AGREEMENT....................................................... 36
General.................................................................. 36
The Merger............................................................... 37
Effective Time........................................................... 37
Conversion and Exchange of Shares........................................ 37
Surrender and Payment.................................................... 37
Fractional Shares........................................................ 39
Additional Cash Consideration............................................ 39
Obligations of Zeneca PLC Regarding Put.................................. 39
Convertible Subordinated Debentures...................................... 39
Appraisal Rights......................................................... 40
Treatment of Stock Options............................................... 40
Covenants; Representations and Warranties................................ 41
Conditions to Consummation of the Merger................................. 43
Termination; Amendments; Assignment...................................... 44
Expenses; Termination Fee................................................ 45
DESCRIPTION OF THE SPECIAL COMMON STOCK.................................... 45
Authorized Shares........................................................ 46
Call and Put Features of the Special Common Stock........................ 46
Voting Rights............................................................ 48
Election of Directors.................................................... 49
Special Voting Rights.................................................... 50
Liquidation.............................................................. 50
</TABLE>
5
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<TABLE>
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PAGE
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<S> <C>
APPRAISAL RIGHTS........................................................... 51
DESCRIPTION OF AMENDMENTS TO THE CHARTER DOCUMENTS OF THE COMPANY.......... 54
Certificate of Incorporation............................................. 54
By-Laws.................................................................. 54
ZENECA..................................................................... 55
SELECTED FINANCIAL DATA OF THE COMPANY..................................... 56
MARKET PRICES FOR SHARES................................................... 57
UNAUDITED PRO FORMA FINANCIAL INFORMATION.................................. 58
SELECTED FINANCIAL DATA OF ZENECA PLC...................................... 62
ELECTION OF DIRECTORS...................................................... 66
STOCK OWNERSHIP............................................................ 68
Principal Stockholders................................................... 68
Management............................................................... 69
EXECUTIVE COMPENSATION..................................................... 70
Employment Agreements.................................................... 71
Stock Option Plan........................................................ 71
Employee Qualified Stock Purchase Plan................................... 72
Salary Savings Plan...................................................... 73
Management Incentive Compensation Plan................................... 73
Stock Performance Graph.................................................. 75
Compensation Committee Report on Executive Compensation.................. 76
Compensation Committee Interlocks and Insider Participation.............. 77
CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS............................... 78
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.................. 78
INDEPENDENT ACCOUNTANTS.................................................... 79
STOCKHOLDER PROPOSALS...................................................... 79
LEGAL MATTERS.............................................................. 79
EXPERTS.................................................................... 80
OTHER MATTERS.............................................................. 80
</TABLE>
<TABLE>
<S> <C>
UNAUDITED CONDENSED PRO FORMA FINANCIAL INFORMATION
OF ZENECA PLC.......................................................... F-1-F-7
</TABLE>
<TABLE>
<S> <C>
Annex A Agreement and Plan of Merger
Annex B Certificate of Incorporation
Annex C By-Laws
Annex D Section 262 of the Delaware General Corporation Law
Annex E Opinion of Goldman, Sachs & Co.
Annex F Opinion of Lazard Freres & Co.
</TABLE>
6
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SUMMARY
The following is a brief summary of the more detailed information contained
in this Proxy Statement with respect to the Merger discussed herein. This
Summary is not intended to be complete and is qualified in its entirety by the
more detailed information contained elsewhere in this Proxy Statement, the
Annexes hereto and other documents referred to in this Proxy Statement. Terms
used but not defined in this Summary have the meanings ascribed to them
elsewhere in this Proxy Statement. Cross references in this Summary are to the
captions of sections of this Proxy Statement.
Stockholders are urged to read this Proxy Statement and the Annexes hereto in
their entirety.
THE COMPANY
Salick Health Care, Inc. provides disease-specific health care services and
risk-based products for health care payors, principally in the areas of the
diagnosis and treatment of cancer and the treatment of kidney failure. The
Company was organized in 1983 as a California corporation, but changed its
state of incorporation to Delaware in 1991. The principal executive offices of
the Company are located at 8201 Beverly Boulevard, Los Angeles, California
90048 and its telephone number at that address is (213) 966-3400.
ZENECA
Zeneca is a wholly owned subsidiary of Zeneca PLC. Zeneca holds substantially
all of the operating assets of Zeneca PLC. Zeneca PLC is a major international
bioscience business engaged in the research, development, manufacture and
marketing of ethical (prescription) pharmaceuticals, agricultural chemicals,
specialty chemicals, seeds and biological products. Zeneca and Zeneca PLC's
principal executive offices are located at 15 Stanhope Gate, London W1Y 6LN,
United Kingdom, and the telephone number is 011-44-171-304-5000. Zeneca PLC and
its consolidated subsidiaries are referred to hereinafter as "Zeneca Group" or
"Group." Merger Subsidiary is an indirect wholly owned subsidiary of Zeneca.
Merger Subsidiary has not conducted any business other than in connection with
the Merger Proposal. Zeneca and Zeneca PLC are English companies and Merger
Subsidiary is a Delaware corporation. The principal executive offices of Merger
Subsidiary are located at 1800 Concord Pike, Wilmington, Delaware 19897 and the
telephone number is (302) 886-3000.
THE ANNUAL MEETING
The Annual Meeting will be held on April 13, 1995 at 9:30 A.M., local time,
at the Company's principal executive offices located at 8201 Beverly Boulevard,
Los Angeles, California 90048. At the Annual Meeting, the Company's
stockholders will be asked to consider and vote upon the Merger Proposal, the
election of two Class I Directors and such other matters as may properly come
before the Annual Meeting.
The Merger Agreement provides for the merger of Merger Subsidiary with and
into the Company, with the Company being the surviving corporation. The Merger
Agreement also provides that, in the Merger, each Share (other than Shares as
to which appraisal rights under Section 262 of the Delaware Law have been
perfected) will be converted into the right to receive: (i) $18.875 in cash and
(ii) although no fractional shares will be issued, one-half share of Special
Common Stock of the Company. The shares of common stock of Merger Subsidiary
will be converted into shares of the Common Stock of the Company representing
immediately after the Merger fifty percent of the equity of the Company
(assuming exercise in full of all options outstanding immediately prior to the
Merger), in exchange for which Zeneca will provide all the cash consideration
to be received by stockholders in the Merger in exchange for their Shares. All
fractional shares of Special Common Stock that holders of Shares otherwise
would be entitled to receive will be aggregated and sold and the net proceeds
paid to such holders. Holders of the Special Common Stock may exercise the Put
during a twenty business day period commencing two and one-half years after the
Effective Time (or earlier upon a change of control as defined in the
Certificate of Incorporation) and sell all or some of their
7
<PAGE>
shares of the Special Common Stock to the Company at the Put Price, subject to
having funds legally available therefor as described herein. If such funds are
not legally available to the Company as set forth in the Merger Agreement,
Zeneca PLC will assume the obligations of the Company with respect to the Put.
The Company will have the right to Call, subject to having available funds
therefor as described herein, all, but not less than all, of the Special Common
Stock at any time during the four year period commencing with the Closing at
the Call Price. As additional consideration for Shares converted in the Merger,
the Company will make a distribution, out of funds legally available therefor,
to all holders of record of Shares immediately prior to the Effective Time in
an aggregate amount of $0.625 per Share, to be paid in two equal installments
of $0.3125 each, the first to be paid 180 days after the Closing and the second
to be paid 360 days after the Closing. See "THE MERGER AGREEMENT--Conversion
and Exchange of Shares," "--Surrender and Payment," "--Fractional Shares," "--
Additional Cash Consideration" and "--Obligations of Zeneca PLC Regarding Put."
Shares with respect to which appraisal rights shall have been perfected will
be converted in the Merger into the right to receive the amount to which the
holder thereof is entitled upon appraisal. See "MERGER PROPOSAL--Appraisal
Rights" and "APPRAISAL RIGHTS."
Approval of the Merger Proposal will also constitute approval of amendments
to the Company's certificate of incorporation to, among other things, authorize
ten members for the Board of Directors, five of whom are to be elected by the
holders of the Common Stock and five of whom are to be elected by the holders
of the Special Common Stock. From the Effective Time, the Board of Directors
will consist of Robert C. Black, Dr. Michael G. Carter, John G. Goddard, Dr.
Thomas F.W. McKillop and Dr. Clifford Richard Guy who have been designated by
Zeneca and Bernard Salick, M.D., Leslie F. Bell, Michael T. Fiore, Barbara
Bromley-Williams and Thomas Mintz, M.D., who have been designated by the
Company and currently serve on the Company's Board of Directors.
Additionally, approval of the Merger Proposal by the Company's stockholders
will also constitute approval of (i) revisions to the Company's certificate of
incorporation to, among other things, authorize the issuance by the Company of
Special Common Stock, (ii) revisions to the Company's existing by-laws, and
(iii) the treatment and disposition of outstanding options under the Plans, as
contemplated by the Merger Agreement. Pursuant to the Merger Agreement,
outstanding options granted under the Plans will, in connection with the
Merger, be exchanged for options to purchase shares of Special Common Stock,
with appropriate upward (but not downward) adjustments to the exercise price
and appropriate downward (but not upward) adjustments to the number of shares
of Special Common Stock subject to such options so that the spread between the
value (determined as set forth in the Merger Agreement) of the shares of
Special Common Stock and the exercise price under the Replacement Options will
not exceed the spread immediately prior to the Effective Time between the value
of the Shares and the exercise price under the Company Options for which the
Replacement Options are exchanged. See "THE MERGER AGREEMENT--Treatment of
Stock Options" and "DESCRIPTION OF AMENDMENTS TO THE CHARTER DOCUMENTS OF THE
COMPANY."
Additionally, at the Annual Meeting, the Company's stockholders will be asked
to elect two Class I directors to serve for a three year term and until their
successors are duly elected and qualified. If the Merger is approved, such
persons will serve as Class I directors only until the consummation thereof.
RECORD DATE; VOTE REQUIRED
Only holders of records of Shares at the close of business on March 3, 1995
(the "Record Date") will be entitled to vote at the Annual Meeting. At the
Record Date, there were 10,342,006 Shares outstanding and entitled to vote.
Under the Company's certificate of incorporation, subject to certain
exceptions, each Share entitles the holder thereof to ten votes on each matter
to be considered at the Annual Meeting, except that no holder is entitled to
exercise more than one vote on any such matter in respect of any Share with
respect to which there has been a change of beneficial ownership after August
27, 1991 or, except for Shares issued on
8
<PAGE>
conversion of the Company's 7 1/4% Convertible Subordinated Debentures Due 2000
(the "Debentures") or exercise of options held on that date, Shares which were
issued after that date. The number of votes to which a holder of Shares is
entitled to ten votes cannot, however, exceed that percentage of the votes
entitled to be cast at the Annual Meeting which is equal to that percentage of
the total outstanding Shares which such Shares represented as of August 27,
1991.
Based on the information with respect to beneficial ownership possessed by
the Company at the Record Date, it is estimated that the holders of
approximately 40% of the Shares will be entitled (subject to the limitation
described in the preceding sentence) to exercise ten votes per Share at the
Annual Meeting, the holders of the remainder of the outstanding Shares will be
entitled to one vote per Share and Dr. Salick, Chairman of the Board and Chief
Executive Officer of the Company, who beneficially owned approximately 21.2% of
the outstanding Shares on the Record Date (excluding Shares issuable upon
exercise of presently exercisable options), will be entitled (after application
of the limitation described in the preceding sentence) to approximately 39.7%
of the votes entitled to be cast at the Annual Meeting (see "STOCK OWNERSHIP--
Management"). The actual voting power of each holder of Shares, including Dr.
Salick, will be based on information possessed by the Company at the time of
the Annual Meeting. Under the Company's certificate of incorporation shares
held in "street" or "nominee" name are presumed to have had a change in
beneficial ownership after August 27, 1991 and are, absent satisfactory
evidence to the contrary, entitled to one vote per Share.
As of the Record Date, directors and executive officers of the Company and
their affiliates owned beneficially an aggregate of 2,318,252 Shares (excluding
Shares issuable upon exercise of presently exercisable options) or
approximately 22.4% of the Shares outstanding on such date. Based on the
information with respect to beneficial ownership possessed by the Company at
the Record Date, it is estimated that such persons are entitled (after
application of the above-described limitation on the number of votes) to cast
approximately 41.8% of the votes entitled to be cast on the Merger. Dr. Salick
has entered into a Voting and Standstill Agreement with Zeneca pursuant to
which he has agreed to vote the Shares beneficially owned by him over which he
has voting power in favor of the Merger. See "MERGER PROPOSAL--Agreements
Ancillary to the Merger Agreement."
There is no cumulative voting.
The presence in person or by properly executed proxy of holders of a majority
of all of the votes entitled to be cast at the Annual Meeting is necessary to
constitute a quorum at the Annual Meeting. Under the Delaware Law, the
affirmative vote of holders of Shares possessing a majority of the votes
entitled to be cast at the Annual Meeting is required to approve the Merger
Proposal. Abstentions and broker non-votes will not be voted for or against the
approval and adoption of the Merger Agreement but will have the effect of a
negative vote because the affirmative vote of holders of a majority of the
votes entitled to be cast is required to approve the Merger Proposal.
The candidates for election of directors receiving the highest number of
affirmative votes of the Shares present at the Annual Meeting entitled to vote
on the election of directors will be the directors elected. Any vote against
the candidates or withheld from voting (whether by abstention, broker non-votes
or otherwise) will not be counted and will have no legal effect or effect on
the vote with respect to the election of directors.
Shares represented by properly executed proxies timely received by the
Company will be voted in accordance with the instructions indicated thereon. If
no instructions are so indicated, such Shares will be voted FOR approval of the
Merger Proposal and FOR the election of the two Class I director nominees. See
"INTRODUCTION--Record Date; Voting Rights; Proxies."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has determined that the Merger is fair
to and in the best interests of the Company and its stockholders and
unanimously recommends approval of the Merger Proposal to the
9
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Company's stockholders. See "MERGER PROPOSAL--Background of and Reasons for the
Merger," "--Recommendation of the Company's Board of Directors," "--Effects of
the Merger," and "--Interests of Certain Persons in the Merger."
EFFECTIVE TIME AND CONDITIONS TO THE MERGER; TERMINATION
The Merger will become effective on the day and at the time that a
Certificate of Merger is filed with the Secretary of State of the State of
Delaware pursuant to the Delaware Law. It is currently expected that, if all
conditions to the Merger have been met or waived, the filing will take place on
the date of the Annual Meeting, or as soon thereafter as practicable. See
"MERGER PROPOSAL--Certain Regulatory Matters" and "THE MERGER AGREEMENT--
Conditions to Consummation of the Merger."
Stockholders should not send certificates representing their Shares to the
Company or the Exchange Agent for the Merger prior to receipt of a Letter of
Transmittal that will be sent to stockholders following the Annual Meeting. See
"THE MERGER AGREEMENT--Surrender and Payment."
The obligations of the Company, Zeneca and Merger Subsidiary to consummate
the Merger are subject to certain conditions including, among other things, the
approval of the Merger Proposal by the stockholders of the Company in
accordance with the Delaware Law, the expiration or termination of any
applicable waiting period (including any extensions thereof) under the HSR Act,
the execution and delivery of certain Employment Agreements, the consent of
certain parties and the absence of any injunction or other legal prohibition to
consummation of the Merger. On January 13, 1995, the Company and Zeneca were
notified that the requisite waiting period under the HSR Act had been
terminated. Additionally, the Merger Agreement required the Company to call for
redemption and redeem the Debentures not converted into Shares. The Debentures
were called in December 1994 and all outstanding Debentures were converted into
Shares. See "MERGER PROPOSAL--Regulatory Matters" and "THE MERGER AGREEMENT--
Conditions to the Consummation of the Merger" and "--Convertible Subordinated
Debentures."
The Merger Agreement may be terminated at any time prior to the Effective
Time (notwithstanding any approval of the Merger Proposal by the stockholders
of the Company): (i) by mutual written consent of the Company and Zeneca, (ii)
by either the Company or Zeneca, if the Merger has not been consummated by June
30, 1995, (iii) by either the Company or Zeneca, if there is any law,
regulation or final judgment, injunction, order or decree that makes
consummation of the Merger illegal or otherwise prohibited, (iv) by Zeneca,
upon the occurrence of certain specified events, (v) by Zeneca, if any
representation or warranty of the Company in the Merger Agreement was not true
and correct in all material respects when made or deemed made or the Company
has failed to observe or perform, in any material respect, any of its
obligations under the Merger Agreement, (vi) by the Company, if any
representation or warranty of Zeneca or Merger Subsidiary in the Merger
Agreement was not true and correct in all material respects when made or deemed
made or Zeneca or Merger Subsidiary has failed to observe or perform in any
material respect its obligations under the Merger Agreement, and (vii) by
either the Company or Zeneca, if the stockholders of the Companyfail to approve
and adopt the Merger Proposal at the Annual Meeting. See "THE MERGER
AGREEMENT--Termination; Amendments; Assignment."
The Merger Agreement provides that the Company will pay Zeneca a termination
fee of $11 million (plus up to an additional $1 million as reimbursement for
all reasonable fees payable and expenses incurred) if the Merger Agreement is
terminated pursuant to the provisions described in clause (iv) above. Such
termination fee was required by Zeneca as a condition to its willingness to
enter into the Merger Agreement. See "THE MERGER AGREEMENT--Termination;
Amendments; Assignment" and "--Expenses; Termination Fee."
SPECIAL COMMON STOCK
Effective upon consummation of the Merger, the Company's certificate of
incorporation will be amended by operation of the Merger to, among other
things, authorize the issuance of the Special Common Stock. Shares of Special
Common Stock will be substantially identical to the Shares, except that (i) for
a period of four years after the Effective Time, the Company has the right (the
Call) to acquire, subject to having available
10
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funds therefor as described herein, all, but not less than all, of the shares
of the Special Common Stock at the fair market value thereof subject to a floor
of $42.00 per share (discounted from the date which is two and one-half years
from the Effective Time, if called prior to that date, at a rate which, when
compounded on a daily basis, is equal to four percent on an annualized basis),
and a ceiling of $50.00 per share during the two years and seven month period
from and after the Effective Time, (ii) for a twenty-business day period
commencing two and one-half years after the Effective Time (or earlier upon a
change of control as defined in the Certificate of Incorporation), the holders
of the Special Common Stock have the right (the Put) to require the Company to
purchase all or some of their shares thereof at $42.00 per share, subject to
having funds legally available therefor as described herein, and (iii) the
holders of shares of Special Common Stock will be entitled to receive a $42.00
per share preferential distribution upon any liquidation, dissolution or
winding up of the Company prior to any distribution being made to the holders
of the Common Stock. See "DESCRIPTION OF THE SPECIAL COMMON STOCK." In
addition, until the end of the Put Period, the holders of the Special Common
Stock will have the right to elect five of the ten directors of the Company
following the Merger, with the remaining five directors to be elected by the
holders of the Common Stock. Certain of the shares of the Special Common Stock
will be entitled to ten votes per share when voting separately as a class. See
"DESCRIPTION OF THE SPECIAL COMMON STOCK--Voting Rights."
OPINIONS OF FINANCIAL ADVISORS
Goldman Sachs and Lazard Freres acted as financial advisors to the Company in
connection with its consideration of the Merger transaction. Goldman Sachs and
Lazard Freres each provided to the Board of Directors of the Company its
written opinion, dated December 22, 1994, that, as of the date thereof, the
consideration to be received by the holders of Shares pursuant to the Merger
Agreement is fair to such holders. Each of the financial advisors confirmed in
writing to the Company's Board of Directors such opinion as of the date of
mailing of this Proxy Statement. The full text of the written opinion of each
of Goldman Sachs and Lazard Freres, dated December 22, 1994, which sets forth
the assumptions made, the matters considered and the scope of reviews
undertaken in connection therewith, is set forth in Annex E and F,
respectively, to this Proxy Statement and should be read in its entirety. See
"MERGER PROPOSAL--Opinions of the Company's Financial Advisors."
APPRAISAL RIGHTS
Under the Delaware Law, any holder of record of Shares who votes against or
abstains from voting in favor of the Merger and delivers a demand for appraisal
prior to the vote of the Company's stockholders on the Merger, has the right to
obtain cash payment for the "fair value" of his, her or its Shares (excluding
any element of value arising from the accomplishment or expectation of the
Merger). In order to exercise such rights, a stockholder must strictly comply
with all the procedural requirements of Section 262 of the Delaware Law, a
description of which is provided in "THE MERGER AGREEMENT--Appraisal Rights"
and "APPRAISAL RIGHTS" and the full text of which is attached as Annex D to
this Proxy Statement. Section 262 should be read in its entirety. Such "fair
value" would be determined in judicial proceedings, the result of which cannot
be predicted. Failure to comply strictly with all of the requirements of
Section 262 may result in a loss of appraisal rights.
MARKET PRICES
The Shares are traded on the Nasdaq National Market under the symbol "SHCI."
The following table sets forth, for the periods indicated, the high and low
closing prices of the Shares on the Nasdaq National Market as reported by
NASDAQ:
<TABLE>
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HIGH LOW
------- -------
<S> <C> <C>
1st quarter ended November 30, 1992...................... $14 3/4 $ 9 3/4
2nd quarter ended February 28, 1993...................... $ 16 $10 3/4
3rd quarter ended May 31, 1993........................... $13 3/8 $10 1/2
4th quarter ended August 31, 1993........................ $14 1/4 $11 3/4
1st quarter ended November 30, 1993...................... $16 1/2 $ 13
2nd quarter ended February 28, 1994...................... $17 1/4 $ 14
3rd quarter ended May 31, 1994........................... $ 19 $15 1/2
4th quarter ended August 31, 1994........................ $18 1/2 $14 1/4
1st quarter ended November 30, 1994...................... $25 1/4 $17 3/4
2nd quarter ended February 28, 1995...................... $35 3/8 $23 1/2
</TABLE>
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On December 21, 1994, the last full trading day prior to the announcement
that the Merger Agreement had been executed, the closing price per Share, as
reported on the Nasdaq National Market, was $29.25. On March 10, 1995, the
closing sale price per Share, as reported on the Nasdaq National Market, was
$35 1/2.
Based upon security position listings and the Company's belief, it is
estimated there were more than 1,500 holders of the Shares as of March 3, 1995.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
A portion of each Share exchanged by a stockholder in the Merger will be
considered to have been sold to Zeneca and the remainder will be considered to
have been exchanged with the Company for the Special Common Stock and the right
to the Distribution. An exchanging stockholder will recognize gain or loss on
the exchange of that portion of each Share considered to have been sold to
Zeneca measured by the difference between the consideration received from
Zeneca and such stockholder's basis in such portion of the Share. Any gain on
the exchange of that portion of each Share considered to have been exchanged
with the Company (measured by the excess of the value of the Special Common
Stock and the right to the Distribution over the basis in such portion of the
Share) will be recognized only to the extent of the value of the right to the
Distribution. An exchanging stockholder will not recognize any loss on the
exchange of that portion of each Share considered to have been exchanged with
the Company.
If the Special Common Stock were treated as preferred stock for purposes of
Section 305 of the Code, holders of Special Common Stock would be required to
include in gross income the excess of the Put Price over the fair market value
of such share at issuance during the period starting at the Effective Time and
ending during the Put Period. While there is no authority directly on point,
and the issue is not free from doubt, special counsel to the Company believes
that the Special Common Stock should not be recharacterized as preferred stock
for this purpose and the Company intends to treat it accordingly. See "MERGER
PROPOSAL--Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The proposed Merger will be accounted for as a recapitalization of the
Company. The net carrying amount of the Debentures has been credited to
stockholders' equity upon the conversion thereof. The Common Stock issued to
Zeneca will be capitalized in an amount equal to the Cash Consideration to be
received by existing stockholders of the Company in exchange for their Shares.
The cash proceeds paid to existing stockholders in exchange for their Shares
(including the Distribution payable by the Company) will be charged to
stockholders' equity. The Special Common Stock issued to existing stockholders
will be capitalized at par value. Cash consideration paid to existing
stockholders upon exercise of the Put and/or the Call will be charged against
stockholders' equity at the date of exercise. Cash consideration received by
the Company from Zeneca to fund the Put and/or the Call will be credited to
stockholders' equity. The proposed accounting treatment will result in an
increase in total stockholders' equity as a result of the conversion of the
Debentures and assumed exercise of outstanding stock options, offset by the
Merger transaction expenses and accrual of the Distribution payable by the
Company. See "MERGER PROPOSAL--Accounting Treatment" and "THE MERGER
AGREEMENT--Convertible Subordinated Debentures."
12
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
regarding the Company's operating results and financial position for each of
the five fiscal years in the period ended August 31, 1994 and for each of the
three month periods ended November 30, 1993 and 1994. The selected consolidated
financial information for the Company for the five years shown below has been
derived from the audited consolidated financial statements of the Company. The
historical data are not necessarily indicative of results to be expected after
consummation of the Merger and should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Company incorporated
herein by reference.
The interim unaudited financial information for the Company for the three
months ended November 30, 1993 and 1994 reflect, in the opinion of the
Company's management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the information for such
interim periods. The results of operations of such interim periods are not
necessarily indicative of results which may be expected for any other interim
period or for the year as a whole.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED AUGUST 31, ENDED NOVEMBER 30,
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
------------------------------------------ --------------------
1990 1991 1992 1993 1994 1993 1994
------- ------- -------- -------- -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues, net. $64,775 $73,773 $95,056 $115,893 $131,529 $29,463 $35,965
Operating income........ $ 7,420 $ 9,134 $11,686 $ 14,418 $ 16,679 $ 3,658 $ 4,606
Income before taxes and
extraordinary item..... $ 6,100 $ 7,236 $11,252 $ 14,387 $ 16,882 $ 3,797 $ 4,890
Extraordinary item, net
of income tax effect... $ 528
Net income.............. $ 4,150 $ 4,518 $ 6,920 $ 8,976 $ 10,380 $ 2,392 $ 2,960
Earnings per share:
Primary:
Income before extraor-
dinary item.......... $ 0.65 $ 0.80 $ 0.94 $ 1.05 $ 1.19 $ 0.28 $ 0.34
Extraordinary item.... $ 0.09
------- ------- -------- -------- -------- -------- -------
Net earnings per share.. $ 0.74 $ 0.80 $ 0.94 $ 1.05 $ 1.19 $ 0.28 $ 0.34
======= ======= ======== ======== ======== ======== =======
Fully diluted:
Income before extraor-
dinary item........... $ 0.65 $ 0.75 $ 0.88 $ 0.98 $ 1.10 $ 0.26 $ 0.31
Extraordinary item..... 0.07
------- ------- -------- -------- -------- -------- -------
Net earnings per share.. $ 0.72 $ 0.75 $ 0.88 $ 0.98 $ 1.10 $ 0.26 $ 0.31
======= ======= ======== ======== ======== ======== =======
<CAPTION>
AUGUST 31, NOVEMBER 30,
(IN THOUSANDS) (UNAUDITED)
------------------------------------------ ------------
1990 1991 1992 1993 1994 1994
------- ------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital......... $28,866 $26,719 $ 58,732 $ 63,503 $ 67,940 $ 65,331
Total assets............ $77,858 $87,819 $131,018 $146,401 $166,082 $173,039
Long-term debt and capi-
talized leases......... $32,393 $32,541 $ 33,676 $ 37,231 $ 39,548 $ 38,414
Stockholders' equity.... $34,690 $39,262 $ 82,214 $ 91,431 $102,295 $105,282
</TABLE>
13
<PAGE>
INTRODUCTION
This Proxy Statement is furnished to stockholders of the Company in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of the Company for use at the Annual Meeting to be held at 9:30 A.M.,
local time, on Thursday, April 13, 1995, at the Company's principal executive
offices, and any adjournments or postponements thereof. The Company's principal
executive offices are located at 8201 Beverly Boulevard, Los Angeles,
California 90048 and the telephone number therefor is (213) 966-3400.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the Merger Proposal. Approval of the Merger Proposal
will constitute approval and adoption of the Merger Agreement (including the
revisions to the Company's certificate of incorporation and by-laws to be made
pursuant thereto), approval of the treatment and disposition of outstanding
options under the Plans and the election of ten nominees to serve as directors
of the Company following the Merger. If the Merger Proposal is approved, the
size of the Company's Board of Directors will be increased from 8 to 10
members, five of whom have been designated by the Company's current Board of
Directors and five of whom have been designated by Zeneca. Information with
respect to such persons is set forth under "MERGER PROPOSAL--Conduct of the
Company After the Merger" and "ELECTION OF DIRECTORS."
Pursuant to the Merger Agreement, Merger Subsidiary will be merged with and
into the Company, with the Company being the surviving corporation, and each
Share then issued and outstanding (other than Shares as to which appraisal
rights have been perfected under Section 262 of the Delaware Law) will be
converted into the right to receive $18.875 in cash and, although no fractional
shares will be issued, one-half share of Special Common Stock. In the Merger,
the shares of common stock of Merger Subsidiary will be converted into a number
of shares of the Company's Common Stock such that Zeneca will own fifty percent
of the equity of the Company outstanding following the Merger (assuming
exercise in full of all options outstanding immediately prior to the Merger),
in exchange for which Zeneca will provide all the cash consideration to be
received by stockholders in the Merger in exchange for their Shares. All
fractional shares of Special Common Stock that holders of Shares otherwise
would be entitled to receive will be aggregated and sold and the net proceeds
paid to such holders. Holders of the Special Common Stock will have the right
to cause the Company to purchase all or some of the shares thereof during a
period of twenty business days commencing two and one-half years after the
Closing at $42.00 per share, subject to having funds legally available therefor
as described herein. If such funds are not legally available to the Company as
set forth in the Merger Agreement, Zeneca PLC will assume the obligations of
the Company with respect to the Put. The Company will have the right to
acquire, subject to having available funds therefor as described herein, all,
but not less than all, of the Special Common Stock at any time during the four
year period commencing with the Closing at the market price therefor (subject,
during the first two years and seven months, to a minimum price of $42.00 per
share, discounted from the date which is two and one-half years from the
Effective Time, if called prior to that date, at a rate which, when compounded
on a daily basis, is equal to four percent on an annualized basis, and a
maximum price of $50.00 per share). As additional consideration for Shares
converted in the Merger, the Company will make a distribution out of funds
legally available therefor to all holders of record of Shares immediately prior
to the Effective Time of the Merger in an aggregate amount of $0.625 per share,
to be paid in two equal installments of $0.3125 each, the first to be paid 180
days after the Closing and the second to be paid 360 days after the Closing.
See "THE MERGER AGREEMENT--Conversion and Exchange of Shares," "--Surrender and
Payment," "--Fractional Shares" and "--Additional Cash Consideration."
Approval of the Merger Proposal by the Company's stockholders will also
constitute approval of the treatment and disposition of outstanding options
under the Plans as contemplated by the Merger Agreement, approval of amendments
to the Company's certificate of incorporation (to read in its entirety as set
forth in Annex B to this Proxy Statement; the "Certificate of Incorporation")
and by-laws (to read in their entirety as
14
<PAGE>
set forth in Annex C to this Proxy Statement; the "By-Laws") and the election
of ten nominees to serve as directors of the Company following the Merger.
Subject to the fulfillment or waiver of the other conditions of the Merger
Agreement, the Merger is expected to become effective as soon as practicable
following approval of the Merger Proposal by the stockholders of the Company.
See "MERGER PROPOSAL--Conduct of the Company after the Merger," "THE MERGER
AGREEMENT--Treatment of Stock Options" and "DESCRIPTION OF AMENDMENTS TO THE
CHARTER DOCUMENTS OF THE COMPANY."
The Annual Meeting will also be held for the purpose of electing two Class I
directors who will serve for a three year term expiring in 1998 (or, if the
Merger is approved, until consummation thereof) and transacting such other
business, if any, as may properly come before the Annual Meeting.
RECORD DATE; VOTING RIGHTS; PROXIES
Only holders of Shares of record on March 3, 1995, the Record Date for the
Annual Meeting, are entitled to notice of and to vote at the Annual Meeting and
any adjournments or postponements thereof. As of the Record Date, the Company
had 10,342,006 Shares outstanding.
Under the Company's certificate of incorporation, subject to certain
exceptions, each Share entitles the holder thereof to ten votes on each matter
to be considered at the meeting, except that no holder is entitled to exercise
more than one vote on any such matter in respect of any Share with respect to
which there has been a change of beneficial ownership after August 27, 1991 or
Shares which were issued after that date (except for Shares issued on
conversion of the Debentures or exercise of options held on that date). The
number of votes to which a holder of Shares entitled to ten votes cannot,
however, exceed that percentage of the votes entitled to be cast at the meeting
which is equal to that percentage of the total outstanding shares of Common
Stock which such Shares represented as of August 27, 1991. Based on the
information with respect to beneficial ownership possessed by the Company at
the Record Date, it is estimated that the holders of approximately 40% of the
Shares will be entitled (subject to the limitation described in the preceding
sentence) to exercise ten votes per Share at the meeting, the holders of the
remainder of the outstanding Shares will be entitled to one vote per Share and
Bernard Salick, M.D., Chairman of the Board and Chief Executive Officer of the
Company ("Dr. Salick"), who beneficially owned approximately 21.2% of the
outstanding Shares on the Record Date (excluding Shares issuable upon exercise
of presently exercisable options), will be entitled (after application of the
limitation described in the preceding sentence) to approximately 39.7% of the
votes entitled to be cast at the meeting. As of the Record Date, directors and
executive officers of the Company and their affiliates owned beneficially an
aggregate of 2,318,252 Shares (excluding Shares issuable upon exercise of
presently exercisable options) or approximately 22.4% of the Shares outstanding
on such date. Based on the information with respect to beneficial ownership
possessed by the Company at the Record Date, it is estimated that such persons
are entitled (after application of the above-described limitation on the number
of votes) to cast approximately 41.8% of the votes entitled to be cast on the
Merger. See "STOCK OWNERSHIP--Management." The actual voting power of each
holder of Shares, including Dr. Salick, will be based on information possessed
by the Company at the time of the meeting. Under the Company's certificate of
incorporation Shares held in "street" or "nominee" name are presumed to have
had a change in beneficial ownership after August 27, 1991 and are, absent
satisfactory evidence to the contrary, entitled to one vote per Share.
IF STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING BELIEVE THEY ARE THE
OWNERS OF SHARES ENTITLED TO TEN VOTES PER SHARE, THEY MUST FURNISH EVIDENCE
SATISFACTORY TO THE COMPANY WHICH MAY BE IN THE FORM OF A COPY OF THE STOCK
CERTIFICATE, BROKERAGE ACCOUNT OR TRADE TICKET SHOWING THEIR OWNERSHIP OF THE
SHARES AS OF AUGUST 27, 1991.
There is no cumulative voting.
15
<PAGE>
All Shares represented by properly executed proxies will, unless such proxies
have been previously revoked, be voted in accordance with the instructions
indicated in such proxies. If no instructions are indicated, such Shares will
be voted (1) FOR approval of the Merger Proposal, (2) FOR the election of the
Board's two nominees as Class I directors of the Company, and (3) in the
discretion of the proxy holder as to any other matter which may properly come
before the Annual Meeting. The Company does not know of any matters, other than
as described in the Notice of Annual Meeting, that are to come before the
Annual Meeting. If any other matter or matters are properly presented for
action at the Annual Meeting, the persons named in the enclosed form of proxy
and acting thereunder will have the discretion to vote on such matters in
accordance with their best judgment, unless such authorization is withheld.
Stockholders who execute proxies retain the right to revoke them at any time by
giving written notice of revocation to the Secretary of the Company at 8201
Beverly Boulevard, Los Angeles, California 90048 so that it is received by no
later than the closing of the polls at the Annual Meeting for the vote with
respect to Proposal 1 (the Merger Proposal) on the enclosed proxy card or by
attending the Annual Meeting in person and voting thereat or by executing a
later dated proxy delivered prior to the closing of the polls at the Annual
Meeting for the vote with respect to such Proposal 1. Unless so revoked, the
Shares represented by the proxies solicited by the Board of Directors of the
Company will be voted in accordance with the directions given therein by the
stockholder.
SOLICITATION OF PROXIES
The expense of preparing, printing and mailing proxy material will be borne
by the Company. In addition to the solicitation of proxies by mail,
solicitation may be made by certain directors, officers and other employees of
the Company by personal interview, telephone, facsimile or telegraph. No
additional compensation will be paid for such solicitation. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries and
custodians to forward to beneficial owners of Shares held in their names. The
Company will reimburse such persons for their reasonable expenses in forwarding
solicitation material to such beneficial owners.
QUORUM
The presence in person or by properly executed proxy of holders of a majority
of all of the votes entitled to be cast at the Annual Meeting is necessary to
constitute a quorum at the Annual Meeting.
REQUIRED VOTE
The approval of the Merger Proposal requires the vote of the holders of at
least a majority of the total votes entitled to be cast at the Annual Meeting.
Abstentions and broker non-votes will not be voted for or against the approval
and adoption of the Merger Proposal but will have the effect of a negative vote
because the affirmative vote of holders of a majority of the votes entitled to
be cast is required to approve such proposal.
The candidates for election as Class I Directors receiving the highest number
of affirmative votes of the Shares present in person or represented by proxy at
the meeting and entitled to vote on the election of directors are the directors
elected. Any votes against the candidates or withheld from voting (whether by
abstention, broker non-votes or otherwise) will not be counted and will have no
effect on the vote with respect to the election of directors.
THE MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING ARE OF GREAT IMPORTANCE TO
THE STOCKHOLDERS OF THE COMPANY. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ
AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT, AND
TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
16
<PAGE>
MERGER PROPOSAL
(PROPOSAL 1 ON PROXY CARD)
In considering the Merger Proposal, stockholders should be aware of certain
factors regarding the Merger Proposal, which are set forth below or which are
discussed elsewhere in this Proxy Statement.
INVESTMENT CONSIDERATIONS
If the Merger is approved and consummated, each Share outstanding at the
Effective Time will be converted into the right to receive cash in the amount
of $18.875 and (although no fractional shares will be issued) one-half share of
the Special Common Stock. Additionally, the holders of Shares will be entitled
to receive $0.625 per Share, payable in two equal installments one hundred
eighty days and three hundred sixty days, respectively, after the Closing. See
"THE MERGER AGREEMENT--Conversion and Exchange of Shares" and "--Additional
Cash Consideration." Since holders of Shares will be receiving Special Common
Stock as partial consideration for their Shares, the holders should consider
the attributes and limitations of the Special Common Stock. See "DESCRIPTION OF
THE SPECIAL COMMON STOCK" below. Because of the Put and Call rights of the
Special Common Stock (see "DESCRIPTION OF THE SPECIAL COMMON STOCK" below),
participation by the holders of the Special Common Stock in increases in value
of the Company may be limited and, following the expiration of the period in
which the Put is exercisable, the Special Common Stock may have limited
marketability (see "Effects of the Merger" and "Recommendation of the Company's
Board of Directors"). Such factors as well as tax consequences relating to the
Merger Proposal and the Special Common Stock (see "Certain Federal Income Tax
Consequences" below) should be considered (together with the information
provided elsewhere in this Proxy Statement) in evaluating the Merger Proposal.
BACKGROUND OF AND REASONS FOR THE MERGER
In 1993 the health care industry began undergoing a process of rapid and
major consolidation in both the provider and payor segments. Considering these
factors, the Company believed it had to develop plans for accelerated expansion
in order to assure the Company's competitive advantages and position. The
Company's management initially explored expanding the business of the Company
through the expansion of its existing facilities and services as well as
through development of new disease-specific entities. The Company's management
recognized that, to enable it to achieve those plan objectives, the Company
would require substantially more capital at better rates and terms than the
Company might be able to obtain on its own, additional skilled and other
support personnel and a substantial increase in its investment in information
systems and personnel.
By early 1994 the Company's management had concluded that the best interests
of the Company and its stockholders would be served by concentrating efforts in
the expansion, domestically and internationally, of the Company's cancer
centers and related programs and services, increasing the number of agreements
with hospitals for cancer services, providing inpatient services, and
concentrating efforts in the Company's recently commenced managed care
subsidiary, SalickNet, rather than in the development of new disease-specific
entities.
To deal with these considerations in a manner determined to be in the
Company's best interest while preserving and fostering the quality of the
Company's operations and patient care services, the Company's management
considered various possibilities. These included strategic alliances (such as
partnerships or joint ventures), raising additional capital through debt or
equity offerings either on a public or private placement basis, acquisition(s)
of other entities and the merger and/or sale of the Company.
In the spring of 1994, the Company began to investigate various possible
strategic alliances with companies engaged in, among others, the health care,
information systems and certain manufacturing and distribution industries. The
purpose of the investigation was to determine the initial level of interest
that some of these companies might have in becoming partners with the Company,
either directly or indirectly through an investment in the Company.
17
<PAGE>
By July 1994, the Company determined that the best way to achieve its goals
would be to enter into a financial transaction (not involving a partnership or
a joint venture) with another party that had sufficient capital, market
presence, and skilled personnel to participate in the Company's accelerated
expansion efforts. The party would have to be committed to the Company's
programs and services and plans for growth and to providing patients with the
quality of patient care for which the Company was recognized and would have to
be willing to pay a premium to the Company's stockholders for the opportunity.
To assist the Company in reviewing its available alternatives, in July 1994,
the Company engaged the services of Goldman, Sachs & Co. ("Goldman Sachs") and
Lazard Freres & Co. ("Lazard Freres"), which entity had been working with the
Company in a limited capacity, to act as its financial advisors. Together with
the Company, the financial advisors identified companies with the potential to
meet the Company's requirements. Through December 1994, the Company and its
financial advisors solicited indications of interest from a substantial number
of entities that were identified as possibly having an interest in doing a
financial transaction with the Company and conducted confidential conversations
with certain of these entities.
In May and June 1994, the Company had initial, general discussions with
Zeneca regarding potential transactions between them. Following the engagement
of the financial advisors, the Company's management determined to explore a
transaction with Zeneca. Between July and October 1994, the Company's financial
advisors had several meetings and discussions with Zeneca's financial advisors.
Although the management of the Company had several telephonic discussions with
representatives of Zeneca during the period from July through October 1994, no
additional meetings were held between them until November 1994. Until a
definitive agreement was executed, the Company continued to meet and discuss
possible transactions with other entities.
In November 1994, Zeneca proposed a transaction whereby it would acquire
fifty percent of the equity of the Company on terms and conditions to be
defined in further discussions. The Company's management informed Zeneca that
any potential transaction would also have to provide the Company's stockholders
with the ability to readily liquidate their holdings in the Company, and Zeneca
informed the Company's management that any potential transaction would have to
allow Zeneca to acquire such holdings. To accomplish this result, the
transaction was structured to create the Special Common Stock with the Put and
Call features described herein. See "DESCRIPTION OF THE SPECIAL COMMON STOCK"
below. Zeneca insisted as a condition to the transaction that Dr. Salick enter
into a Voting and Standstill Agreement by which he would agree to vote his
Shares in favor of the transaction and that each of Dr. Salick and Messrs. Bell
and Fiore enter into employment agreements and agreements not to compete. See
"Agreements Ancillary to Merger Agreement." Although, despite the Company's
request, Zeneca did not commit to make capital available to the Company as may
be necessary to fund its anticipated expansion and maintain the Company's
quality of care and operations, the Company's Board of Directors was
subsequently satisfied that Zeneca would assist the Company in obtaining the
required capital. See "Recommendation of the Company's Board of Directors."
The Company's management determined that the goals of the Company, taking
into account Zeneca's stated interest in initially acquiring only fifty percent
of the Company, could best be accommodated by the transaction structure. The
structure provides for a strategic alliance and immediate cash payment to the
stockholders, combined with the possibility that either the stockholders
(through the Put mechanism) or Zeneca (through the Call mechanism) would be
able to convert the strategic relationship into a controlling or complete
acquisition by Zeneca. The Company's management determined that the immediate
cash payment as part of the Cash Consideration, the possibility of the
participation in the growth of the Company resulting from the strategic
alliance with Zeneca and the certainty of the premium over the market price at
which the holders of the Shares could dispose of their remaining equity in the
Company in two and one-half years, outweighed the limitations on the
participation in the growth of the Company which would result from the
potential exercise of the Call by Zeneca.
18
<PAGE>
Thereafter and through December 21, 1994 (and while discussions were taking
place with other entities), the agreements relating to the terms and conditions
of the Merger, the Special Common Stock, the governance provisions, the
Company's charter documentation and the ancillary documents were negotiated.
Throughout the entire process beginning in late 1993 the Company's Board of
Directors was regularly advised of and consulted with concerning the efforts by
the Company's management to develop its strategy in light of the new
competitive situation. During the month of December 1994, the Company's Board
of Directors held six meetings to discuss and evaluate the activities of the
Company's management and financial advisors in seeking a financial transaction,
issues regarding the Merger and the negotiations thereof and the fairness of
the consideration to be received in the Merger. In December 1994, the
independent directors engaged the law firm of Buchalter, Nemer, Fields and
Younger to act as their special counsel to advise them as to their various
duties and responsibilities concerning their review and evaluation of the
Merger Proposal.
The Board believed that the Merger Consideration (including the Distribution)
would provide the stockholders with a fair price for the Shares. Since the Call
allowed Zeneca to purchase all of the Special Common Stock at a maximum price
of $50.00 per share during the two years and seven months following the
Effective Time, the Board felt it was of primary importance that there be a
minimum Call Price in the event that the Call was exercised prior to the Put
Period, that the stockholders of the Company have the absolute right to be able
to sell the Special Common Stock at $42.00 per share (discounted from the
beginning of the Put Period at a rate which, when compounded daily, is equal to
four percent on an annualized basis) and that such right be protected.
At a meeting held by conference telephone on December 21, 1994, at which all
members of the Board and legal counsel for the independent directors were
present, each of Goldman Sachs and Lazard Freres advised the Company's Board of
Directors that, in its opinion as a financial advisor to the Company, the
Merger Consideration (including the Distribution) was, as of that date, fair to
the holders of the Shares and that they were prepared to deliver their opinion
to that effect. In considering the Merger Proposal, the Board considered a
variety of factors. See "Recommendation of the Company's Board of Directors."
The Board of Directors then unanimously approved the Merger Proposal,
authorized the execution and delivery of the Merger Agreement and ancillary
agreements and recommended adoption of the Merger Proposal by the stockholders
of the Company.
On December 22, 1994, the Company, Zeneca and Merger Subsidiary executed the
Merger Agreement. Additionally, the Company, Zeneca and Dr. Salick executed a
Governance Agreement and Agreement Not to Compete (to become effective at the
Effective Time); Zeneca and Dr. Salick executed a Voting and Standstill
Agreement; the Company and Dr. Salick executed a Second Amended and Restated
Employment Agreement; and the Company, Merger Subsidiary and Dr. Salick and his
spouse executed a letter regarding the lease or sale of the real property upon
which the Company's corporate headquarters are located. For a description of
the terms of the Merger Agreement and such other agreements, see "Agreements
Ancillary to Merger Agreement" and "THE MERGER AGREEMENT" below.
On December 22, 1994, each of Goldman Sachs and Lazard Freres delivered to
the Company's Board of Directors its opinion as to the fairness of the Merger
Consideration.
On December 22, 1994, the Company and Zeneca issued a joint press release
regarding the Merger Proposal.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE APPROVAL
AND ADOPTION OF THE MERGER PROPOSAL.
AGREEMENTS ANCILLARY TO MERGER AGREEMENT
Pursuant to the Merger Proposal, the Company's certificate of incorporation
will be amended to, among other things, provide that the holders of the Common
Stock will be entitled to elect five directors (the "Common Stock Directors")
and the holders of the Special Common Stock will be entitled to elect five
19
<PAGE>
directors (the "Special Common Stock Directors"). Notwithstanding the terms of
the Governance Agreement (described below), the Certificate of Incorporation
provides that, under certain specified default or insolvency circumstances, the
authorized number of directors of the Company will automatically increase by a
number which will, together with the authorized number of Special Common Stock
Directors, represent a majority of the Board. In that event, the Special Common
Stock Directors will have the sole right to fill the vacancies created thereby
and, thereafter, the holders of Special Common Stock will be entitled to elect
a majority of the Board until such defaults are cured. See "Governance
Agreement" and "DESCRIPTION OF THE SPECIAL COMMON STOCK--Election of Directors"
below.
Concurrently with the execution of the Merger Agreement, the Company entered
into several ancillary agreements discussed below. The following summary does
not purport to be complete and is qualified in its entirety by reference to the
terms of the specific agreements, copies of which are on file with the
Commission.
Governance Agreement. The Company is party to a Governance Agreement, dated
as of December 22, 1994, as amended (the "Governance Agreement"), with Zeneca
and Dr. Bernard Salick, the provisions of which become effective immediately
upon the consummation of the Merger and terminates upon the earlier of the date
upon which (1) the Company has exercised the Call and has paid to the
Depositary (as defined below) the aggregate Call Price and (2) the Put Period
has expired and the Company has paid the Depositary the Put Price for all
shares of Special Common Stock with respect to which the Put has been exercised
(the "Termination Date").
The Governance Agreement provides (and the By-Laws will provide) that the
Company will not take or agree to take (nor permit its subsidiaries to take or
agree to take), directly or indirectly, certain specified actions without the
approval of a majority of the Board present and voting at the meeting. The
majority must include at least one Common Stock Director who at such time is an
employee of Zeneca (or certain of its affiliates) and at least one Special
Common Stock Director who was an executive officer of the Company prior to the
Merger. Those actions include, without limitation (and, in certain cases,
subject to specified exceptions): (i) adoption, repeal or modification of any
business plan of the Company (as a business plan for fiscal year 1995, the
Governance Agreement contemplates a business plan consistent with the Company's
1995 budget, projections derived from which are set forth under "MERGER
PROPOSAL--Certain Projections"); (ii) authorization, sale, distribution or
other issuance of, or the granting of rights with respect to, any securities of
the Company, except for any issuances of Special Common Stock pursuant to the
terms of the Replacement Options (as defined below), (iii) a repurchase,
redemption or exchange of any shares of capital stock of the Company, other
than as contemplated by the terms of the Special Common Stock or in connection
with the exercise of the Replacement Options, (iv) amendment of the Certificate
of Incorporation or the By-Laws of the Company, (v) incurrence of debt (see
"Recommendation of the Company's Board of Directors"), (vi) the liquidation of
(or investment in) marketable securities, (vii) acquisition or sale of any
interest in a business or assets exceeding certain dollar thresholds, (viii)
the execution or amendment of certain agreements creating a liability, or
requiring payments, over certain dollar thresholds, (ix) entry into a line of
business other than providing diagnostic and therapeutic services to patients
with complex chronic illnesses requiring sophisticated long-term care, (x) the
making of any investment in or entry into joint ventures or partnerships, (xi)
the initiation or settlement of certain litigation matters, (xii) the taking of
certain extraordinary corporate actions (such as the sale of all or
substantially all of the Company's assets, a merger or recapitalization of the
Company, filing of a bankruptcy petition and the like), (xiii) except for any
transaction contemplated by, authorized by or described in the Employment
Agreements (defined below), the appointment or removal of or transactions by
the Company or its subsidiaries with any senior officer of the Company or any
transactions by the Company with any of its directors or any of its
subsidiaries or their affiliates or with any of Zeneca or certain of its
affiliates, (xiv) the creation and composition of any committee of the Board of
Directors, (xv) the adoption or amendment of any employee plan or arrangement
or the execution or amendment of or supplement to any collective bargaining or
union contract, (xvi) the payment of dividends or distributions, other than as
contemplated by the Merger Agreement, (xvii) licensing or sublicensing of
material intellectual property, (xviii) any change in the Company's fiscal
year, and (xix) the appointment or termination of the engagement of the
Company's accountants.
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Pursuant to the terms of the Governance Agreement, Zeneca is required to
designate the persons who will serve as the five initial Common Stock
Directors, at least one of whom must be an independent director (as defined in
Section 6(c) of Schedule D to the By-laws of the National Association of
Securities Dealers, Inc. ("NASD")). Thereafter, Zeneca may (but is not
required) to nominate those persons who will stand for election as the
successors to the Common Stock Directors, at least one of whom at all times
will be an independent director. The five persons designated by Zeneca to serve
as the initial Common Stock Directors are Robert C. Black, Dr. Michael G.
Carter, John G. Goddard, Dr. Thomas F.W. McKillop and Dr. Clifford Richard Guy.
See "Conduct of the Company After the Merger." Pursuant to the Governance
Agreement, the Company has designated Dr. Salick, Leslie F. Bell, Michael T.
Fiore, Barbara Bromley-Williams and Thomas Mintz, M.D. as the persons to serve
as the five initial Special Common Stock Directors. See "ELECTION OF
DIRECTORS." Thereafter, a majority of the Special Common Stock Directors in
office will nominate those persons who will stand for election as the
successors to the Special Common Stock Directors, at least one of whom will, at
all times, be an independent director.
Upon the expiration of the term of directorship of those persons constituting
the Board immediately after the Effective Time, and thereafter upon the
expiration of the term of directorship of each successor thereto, the Company
will nominate the persons (and only those persons) selected in the manner
described above as the group of nominees proposed by the Board of Directors of
the Company for election to the Board at each meeting of the stockholders of
the Company being held for the election of directors, will recommend to the
stockholders of the Company each such nominee's election to the Board and
solicit proxies for each such nominee from all holders of voting securities of
the Company entitled to vote thereon.
The Governance Agreement further provides that the Company will have an
executive committee, an audit committee and a compensation committee, each
consisting of an equal number of Common Stock Directors and Special Common
Stock Directors. The Governance Agreement further requires (and the By-Laws
will permit) the establishment of an operational committee, also consisting of
an equal number of Common Stock Directors and Special Common Stock Directors,
to which committee the Board of Directors may delegate the power to approve the
taking of certain of the specified actions described above, as the Board
determines is appropriate, which approval otherwise requires approval by a
majority of the Board, including one Common Stock Director who is then an
employee of Zeneca or certain of its affiliates and one Special Common Stock
Director who was an executive officer of the Company prior to the Merger.
The Governance Agreement further provides that, at the written request of
Zeneca, the Company will take any action required to allow Zeneca to exercise
the Call. The members of the Board will use their best efforts, consistent with
their fiduciary duties to the Company, to do all necessary and useful actions
in connection with the exercise by Zeneca of the Call.
Zeneca has the right (but not the obligation) under the Governance Agreement
to designate (subject to the Company's approval) up to three employees of
Zeneca or its affiliates to be employed by the Company after the Closing, one
of whom would be an executive officer and the other two of whom would be staff-
level employees in the area of financial management and management information
systems. The salary and benefits of one staff-level employee will be paid by
the Company and the salary and benefits of the other two employees will be paid
by Zeneca, subject to review of the arrangements within one year after the
Merger.
Under the Governance Agreement, the Company will be subject to certain
continuing covenants including without limitation advising and consulting with
Zeneca as to the business of the Company and permitting Zeneca (or a
representative thereof) to visit and inspect any of the properties of the
Company or any of its subsidiaries, at such reasonable times and as often as
Zeneca may reasonably request. Further, the Company is required to deliver
copies of its monthly, quarterly and year-end financial and other operating
statements to Zeneca. Each of the parties to the Governance Agreement has
agreed to hold in confidence and not use (and use its best efforts to cause its
affiliates, shareholders, directors, officers, employees, accountants, counsel,
consultants, advisors and other agents to hold in confidence and not use),
subject to certain specified exceptions, all confidential documents and
information received from the other parties to the Governance Agreement.
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Zeneca may assign its rights, but not its obligations, under the Governance
Agreement to any Zeneca Group entity and may assign its rights and obligations
under the Governance Agreement to Zeneca PLC or Zeneca Holdings, Inc., a
Delaware corporation and an indirect wholly-owned subsidiary of Zeneca, without
the consent of the Company or Dr. Salick or it may assign its rights and
obligations under the Governance Agreement to any other Zeneca Group entity
with the consent of both Dr. Salick and the Company, such consent not to be
unreasonably withheld.
Employment Agreements. The Company is presently party to employment
agreements with each of Dr. Salick and Messrs. Bell and Fiore. The terms
thereof are summarized under "EXECUTIVE COMPENSATION--Employment Agreements"
below.
In connection with the Merger Agreement, the Company and Dr. Salick have
entered into a Second Amended and Restated Employment Agreement, dated as of
December 22, 1994 (the "Salick Agreement"), which will, on the consummation of
the Merger, supersede the existing employment agreement between the Company and
Dr. Salick. The compensation and benefits under the Salick Agreement are
substantially the same as those contained in Dr. Salick's existing employment
agreement. See "EXECUTIVE COMPENSATION--Employment Agreements" below. The
Salick Agreement provides that Dr. Salick will be employed as the Chairman of
the Board, Chief Executive Officer and President and as Medical Director of the
Company's facilities for a period of five years from the Closing. The Salick
Agreement provides for an annual salary of $878,320 (increased annually by an
amount at least equal to the annual increase in the All Urban Consumers Los
Angeles-Long Beach-Anaheim consumer price index), an annual bonus equal to the
greater of that determined by the Executive Compensation Committee, the Board
of Directors of the Company or as calculated as set forth in the Salick
Agreement (which formula provides that the first $300,000 of net profits of the
Company are payable to Dr. Salick as a bonus), continued participation in the
Company's Management Incentive Compensation Plan ("MICP"), and payment of
certain professional fees, expenses and benefits. The Salick Agreement may be
terminated by the Company for "Good Cause" as therein defined which includes,
without limitation, misappropriation of Company funds; repeated willful
misconduct or a single act of wanton and egregious misconduct; conviction of a
felony; engaging in intentional acts of fraud; engaging in any business,
profession or occupation which is competitive with the business of the Company;
a violation of the Company's Employee Handbook or Personnel Policy & Procedure
Manual or the Policy on the Ethical Conduct of Business developed by Zeneca;
and breach of certain covenants regarding the transfer of any patentable
inventions and the information with respect to the same which may be developed
by Dr. Salick. The Salick Agreement may be terminated by Dr. Salick for "Good
Reason" which includes, without limitation, a reduction in his base salary; a
change in the principal offices of the Company (other than to facilities of a
substantially similar size and quality in West Los Angeles or Santa Monica,
California); a reduction in the Company's employees or working hours by at
least thirty percent (which is not caused by a significant decline in the
economic performance of the Company); a material adverse change in the
operations, policies, funding, procedures, practices or professionalism
relating to the overall quality of patient care by the Company which is
inconsistent with the Company's past or existing practices; the name of the
Company being changed to not include the name "Salick;" certain reductions in
benefits to Dr. Salick or a change in the calculations of his bonus; a breach
by the Company of the Salick Agreement; a change in control of the Company
during the first thirty months after the Closing; and the reasonable
determination by Dr. Salick that, as a result of changes initiated by Zeneca
that significantly adversely affect his position, he is unable to exercise the
nature or scope of his authority, duties, powers, or functions that he
exercised at the time of execution of the Salick Agreement. If Dr. Salick's
employment is terminated during the term thereof for any reason other than Good
Cause or if Dr. Salick terminates the Salick Agreement for Good Reason, then he
will be entitled to severance pay in an amount equal to 299% of his "Base
Salary" (as therein defined). The Company has agreed to indemnify Dr. Salick
for any liabilities or losses incurred by him in connection with any litigation
relating to actions or omissions prior to the Effective Time to which he is a
party by reason of being an officer, director, employee or agent of the Company
or based on or arising out of his serving in such capacities, other than
litigation with respect to which Dr. Salick had actual knowledge and did not
disclose pursuant to the Merger Agreement. As to actions taken or omitted to be
taken after the Effective Time, the
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Company will indemnify Dr. Salick for any liabilities or losses incurred by him
in connection with any litigation to which he is made a party by reason of, or
based on or arising out of his services as, an officer, director, employee or
agent of the Company or out of certain tax audits, other than any litigation
arising from repeated willful misconduct by Dr. Salick.
As required under the Salick Agreement, Dr. Salick and the Company entered
into an Agreement Not to Compete which prohibits him, for a period of thirty
months from the Closing, from being employed by or otherwise participating in
any business which competes with the business of the Company within certain
geographical limits and from soliciting employees or former employees without
the prior written consent of the Company. Although entered into on December 22,
1994, the Agreement Not to Compete only becomes effective after the Effective
Time and then only in the event that the employment of Dr. Salick is terminated
by the Company for Good Cause or is terminated by him for any reason other than
Good Reason (other than termination for Zeneca-initiated changes included
within the definition of Good Reason).
As a condition to the obligations of Zeneca to proceed with the Closing, the
Company shall have also entered into employment agreements and agreements not
to compete with each of Leslie F. Bell and Michael T. Fiore in substantially
the same form as the Salick Agreement (collectively, the Salick Agreement and
such other employment agreements are referred to herein as the "Employment
Agreements"). The compensation and benefits under these agreements will be
substantially the same as those contained in Messrs. Bell's and Fiore's
existing employment agreements. See "EXECUTIVE COMPENSATION--Employment
Agreements." The Employment Agreement to be entered into with Mr. Bell will
provide for his employment as Executive Vice President, Chief Financial
Officer, Secretary and General Counsel to the Company at an annual salary of
$392,893 (with cost of living adjustments) and the Employment Agreement to be
entered into with Mr. Fiore will provide for his employment as Executive Vice
President and Chief Operating Officer of the Company at an annual salary of
$307,528 (with cost of living adjustments). Each of Messrs. Bell and Fiore will
be entitled to continued participation in the MICP. On the consummation of the
Merger, the employment agreements between the Company and each of Messrs. Bell
and Fiore will be superseded by the Employment Agreements.
Voting and Standstill Agreement. The Company, Zeneca and Dr. Salick are
parties to a Voting and Standstill Agreement, dated as of December 22, 1994
(the "Voting Agreement"), pursuant to which Dr. Salick has agreed to vote all
Shares held by him as of December 22, 1994 and all Shares acquired by him after
that date in favor of the Merger. Additionally, Dr. Salick has agreed not to
vote any of such Shares in favor of any action or agreement which would result
in a breach in any material respect of any covenant of the Company under the
Merger Agreement. Furthermore, during the term thereof, Dr. Salick is
prohibited from transferring any beneficial interest in such Shares without the
prior written consent of Zeneca and from taking any action to solicit, initiate
or encourage any Acquisition Proposal (as defined below) or, subject to his
fiduciary duties as a director of the Company, to engage in negotiations
concerning an Acquisition Proposal. The Voting Agreement further provides that,
for a period of thirty months after the Closing of the Merger, Dr. Salick may
not sell or otherwise dispose of any of his shares of the Special Common Stock
except pursuant to Rule 144 promulgated under the Securities Act or the Call
and Put features of the Special Common Stock. The Voting Agreement will
terminate upon termination of the Merger Agreement.
Real Property Agreement. The Company, Dr. Salick and his spouse are presently
parties to a lease for the Company's corporate headquarters and related offices
(the "Real Property"). See "Interests of Certain Persons in the Merger" below.
The lease for the Real Property contains a provision which, in the event of
certain changes of control of the Company and, among other things, a change in
Dr. Salick's authority prior to the last two years of the term of the lease,
permits Dr. Salick and his spouse, if then the lessors and at their option, to
require the lessee of the Real Property to (a) purchase the Real Property at a
formula purchase price, or (b) pay an assumption fee of $250,000. In light of
this provision, Dr. and Mrs. Salick, the Company and Merger Subsidiary executed
an agreement, dated December 22, 1994 (the "Real Property Agreement"), pursuant
to which Dr. Salick and his spouse agreed that, prior to the Effective Time,
they will elect to either (1) continue to own the Real Property and continue to
lease it to the Company under the lease without
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amendment and without an assumption fee, provided that they waive any rights to
require the Company to purchase the Real Property on account of Zeneca's
obtaining control of the Company, or (2) sell the Real Property to the Company
for an aggregate purchase price of $14,650,000 in cash, which purchase price is
approximately $1,160,000 less than the formula purchase price in the lease.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
At its meeting on December 21, 1994, the Board of Directors of the Company
determined that the Merger was in the best interests of the Company and its
stockholders and unanimously recommended approval of the Merger Proposal to the
Company's stockholders. In reaching this conclusion and making such
recommendation, the members of the Company's Board of Directors considered a
variety of factors, including the valuation of the Merger Consideration
(including the Distribution) and the fact that it represented a substantial
premium over historical trading prices. In addition, the Board considered the
results of the process undertaken by the Company, with the assistance of its
financial advisors, in soliciting indications of interest from a substantial
number of entities that the Company, with the assistance of its financial
advisors, had identified as possibly having an interest in doing a financial
transaction with the Company. The results of this process indicated that the
receipt of an offer more favorable to the stockholders of the Company than the
Merger Proposal was unlikely to be obtained. Further, the Board considered the
benefits and risks of the Company remaining independent, changes occurring in
the health care industry and the advantages and disadvantages of being
associated with Zeneca.
The Board also considered the oral presentation of the Company's financial
advisors to the Board and their opinions that the Merger Consideration
(including the Distribution) was fair to the Company's stockholders. See
"Opinions of the Company's Financial Advisors." The financial advisors
presented to the Board various financial and other considerations deemed by
them to be relevant in evaluating the Merger Consideration (together with the
Distribution), including a net present value analysis, stock trading history
analysis, a comparison of selected peer companies and an analysis of selected
acquisitions.
Additionally, the Board considered the terms and conditions of the Merger
Agreement and the documents contemplated thereby (see "Agreements Ancillary to
Merger Agreement"). In that regard, the Board took into account the fact that
the Shares were not being purchased entirely for cash payable at the Effective
Time but that a portion of the Merger Consideration was to be paid in shares of
Special Common Stock which could be liquidated only through a market sale,
which might not reflect the full value of such shares, or upon exercise of the
Put two years and six months from the Effective Time.
The Board considered the fact that Zeneca or Zeneca PLC would finance and
stand behind the Company's obligation to purchase all of the shares of the
Special Common Stock upon exercise of the Put (see "THE MERGER AGREEMENT--
Obligations of Zeneca PLC Regarding Put"), and the protections provided to the
rights of the holders of Special Common Stock, some of which are contained in
the Governance Agreement as well as changes to the Certificate of Incorporation
and By-Laws which were designed for such purpose. These provisions, which
expire at the end of the period during which the Put is exercisable, allow the
holders of Special Common Stock to be represented on the Board by a number of
directors equal to those elected by Zeneca, require approval of at least one
director elected by the holders of Special Common Stock for certain
transactions (see "Agreements Ancillary to Merger Agreement"), and require a
class vote of holders of Special Common Stock for certain extraordinary
transactions, including adversely amending the rights of the holders of the
Special Common Stock (see "DESCRIPTION OF THE SPECIAL COMMON STOCK--Voting
Rights"). In addition, the Board considered the fact that, if the Call was
exercised prior to the Put Period, the stockholders would still be entitled to
receive, at a minimum, an amount equal to $42.00 per share of Special Common
Stock discounted from the date which is two years and six months from the
Effective Time at a rate which, when compounded daily, is equal to four percent
on an annualized basis. The Board also considered the fact that there is a
ceiling of $50.00 per share on the Call Price and that the Put and Call could
result in substantially all of the Special Common Stock being acquired
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by the Company on or prior to the end of the Put Period. See "DESCRIPTION OF
THE SPECIAL COMMON STOCK--Call and Put Features of the Special Common Stock."
As a result thereof, the holders of the Special Common Stock may not
participate in any further increase in the value of the Company and its
business. The Board also considered the taxable nature of the transaction but
believed that the concerns with respect thereto were offset by the premium
being paid to the Company's stockholders.
Although Zeneca did not commit to do so, the Board was satisfied that Zeneca
would assist the Company in obtaining capital necessary to fund the Company's
anticipated expansion and maintain the Company's quality of care and
operations. The Board considered the facts that Zeneca had approved the
Company's planned capital expenditures for fiscal 1995 and 1996, including
among other things the costs and expenses of the Merger, the payment of the
Distribution and the purchase of the Real Property should Dr. and Mrs. Salick
elect to sell the same to the Company (see "Agreements Ancillary to Merger
Agreement") and that under the Governance Agreement the incurrence of debt
which has previously been approved in principle for financing any approved
business plan or budget, including these expenditures, requires Zeneca's
approval only as to terms of the debt. If Zeneca does not approve such terms,
it is obligated under the Governance Agreement to ensure, directly or
indirectly, access to the same amount of debt on terms acceptable to it. The
Board also believed that Zeneca would have the incentive to make the requisite
capital available to the Company and enable the management of the Company to
expand the Company's operations and to preserve the Company's quality of care
for its patients based on various factors. Those factors included without
limitation the financial statements of Zeneca; the size of the investment being
made by Zeneca to acquire the Shares and fund the Put; the arrangements
provided by the Governance Agreement pursuant to which, among other things,
Zeneca is to provide information system personnel; the fact that, prior to the
expiration of the Put Period or, if earlier, the exercise of the Call, any
distribution to Zeneca must be approved by a majority of the Board, including
one director elected by the holders of Special Common Stock who was an
executive officer of the Company prior to the Merger; and the employment
agreements with the three members of senior management, including that of Dr.
Salick, under which each of them has the right to terminate his employment
agreement without a covenant not to compete if, among other things, there is a
material adverse change relating to the overall quality of patient care or
substantial employee terminations or reductions. See "Agreements Ancillary to
Merger Agreement." The Board also considered and believed that the affiliation
of the Company with Zeneca which would result from the Merger would give the
Company access to Zeneca's experience in biological sciences, information
systems and technology, the anti-cancer pharmaceutical marketplace, managed
care relationships and operations in a large number of diverse markets as well
as in the global marketplace. The Board believed that such relationship would
better enable the Company to fulfill its expansion plans and long-term
potential, while preserving the quality of patient care, and would enhance the
Company's ability to obtain credit, thus improving its ability to finance its
expansion plans. The Board also believed that the relationship with Zeneca
would give the Company access to Zeneca's relationships with oncologists and
other practitioners domestically and internationally and with academic,
teaching and urban medical centers. The Board considered Zeneca's commitment to
clinical research and the applicability thereof to new treatment modalities.
The Board also considered that Dr. Salick, the Company's largest stockholder,
was willing, at the request of Zeneca, to sign an agreement to vote all of the
Shares owned by him in favor of the Merger Proposal.
During its deliberations regarding the Merger, the Board did not quantify or
attempt to assign relative weights to the factors considered in determining to
approve the Merger Proposal and recommending it to the Company's stockholders.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE APPROVAL
AND ADOPTION OF THE MERGER PROPOSAL.
OPINIONS OF THE COMPANY'S FINANCIAL ADVISORS
As indicated above under the heading "Background of and Reasons for the
Merger," the Company engaged Goldman Sachs and Lazard Freres to act as its
financial advisors in connection with the Merger and to render opinions as to
the fairness of the Merger Consideration (including the Distribution) to the
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Company's stockholders. Although representatives from each of Goldman Sachs and
Lazard Freres participated in the structuring and negotiation of the Merger
Proposal, the Company and Zeneca determined the form and amount of the Merger
Consideration (including the Distribution) and Goldman Sachs and Lazard Freres
did not recommend the form or amount of consideration to be paid. On December
21, 1994, at the telephonic meeting of the Company's Board at which the
Company's Board approved and adopted the Merger Agreement, Goldman Sachs and
Lazard Freres each delivered an oral opinion, which was subsequently confirmed
in writing, that the Merger Consideration (including the Distribution) is fair
to the Company's stockholders. The written opinion of Goldman Sachs is attached
as Annex E to this Proxy Statement and is incorporated herein by reference; the
written opinion of Lazard Freres is attached as Annex F to this Proxy Statement
and is incorporated herein by reference. The Company's stockholders are advised
to read the opinions in their entirety for assumptions made, matters
considered, the scope and limitations of the review undertaken and the
procedures followed by the financial advisors. The assumptions made, matters
considered and limits of review contained in each oral opinion delivered
December 21, 1994 were substantially the same as those contained in the
respective opinions attached hereto. No limitations were placed on either
Goldman Sachs or Lazard Freres by the Company's Board of Directors with respect
to the investigation made or the procedures followed in preparing and rendering
its opinion.
In arriving at their respective written opinions, each financial advisor
reviewed, among other things, (i) the Merger Agreement, (ii) Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company for the five fiscal
years ended August 31, 1994, (iii) certain other communications from the
Company to its stockholders and (iv) certain internal financial analyses and
forecasts for the Company prepared by its management. In addition, they
reviewed the reported price and trading activity for the Shares, compared
certain financial and stock market information for the Company with similar
information for certain other companies, the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the health care services industry specifically and in other industries
generally, and performed such other studies and analyses as each considered
appropriate. They also held discussions with members of the senior management
of the Company regarding its past and current business operations and financial
condition and its future prospects, and with members of the management of
Zeneca regarding the future operations of the Company.
In arriving at their respective opinions, each financial advisor relied upon
the accuracy and completeness of the financial and other information reviewed
by it and did not independently verify such information. In addition, neither
financial advisor performed an independent evaluation or appraisal of the
assets and liabilities of the Company or any of its subsidiaries and was not
furnished with any such evaluation or appraisal.
In connection with its oral and written opinions, each financial advisor
performed a variety of financial analyses, including those summarized below.
The following summary does not purport to be a complete description of the
analyses performed by each financial advisor. In addition, each financial
advisor believes that its analyses must be considered as a whole and that
selecting portions of such analyses or any of the factors considered, without
considering all such analyses and factors as a whole, could create an
incomplete view of the process underlying its analyses and opinions. The
preparation of fairness opinions is a complex process and is not susceptible to
partial analysis or summary description. In its analyses, each financial
advisor made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond
the Company's or Zeneca's control. Any estimates contained in either financial
advisor's analyses are not necessarily indicative of actual past or future
results or values, which may be significantly more or less favorable than such
estimates. In providing their opinions, neither Goldman Sachs nor Lazard Freres
expressed any view as to the prices at which the Special Common Stock may
trade. In performing its analyses, each financial advisor assumed (i) that the
stockholders of the Company who become holders of the Special Common Stock as a
result of the Merger will exercise the Put to the extent they have not
previously disposed of the Special Common Stock and (ii) that the obligation of
Zeneca pursuant to Section 1.10 of the Merger Agreement is a valid and binding
obligation of Zeneca. See "THE MERGER AGREEMENT--Obligations of Zeneca PLC
Regarding Put."
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The financial advisors reviewed data relating to the financial performance
and characteristics of the Company. These data included, but were not limited
to, five year historical income statement, balance sheet and cash flow data and
two years projected income statement data.
For the purpose of valuing the Merger Consideration proposed to be paid to
the Company's stockholders, including for this purpose the Distribution, the
financial advisors assumed all stockholders would exercise the Put feature of
the Special Common Stock when it becomes available. The financial advisors
valued the Merger Consideration at the sum of cash received at Closing plus the
discounted present value of the Distribution and the Special Common Stock
(assuming that holders of the Shares who become holders of the Special Common
Stock exercise the Put right when it becomes available), and they arrived at an
estimated value of the Merger Consideration (including the Distribution) of
$36.79 per Share.
The following is a summary of the combined financial analyses performed by
Goldman Sachs and Lazard Freres.
(i) Net Present Value Analysis. The financial advisors calculated the
present value of a Share assuming various price to earnings multiples
applied to the 1999 estimated earnings per Share, discounted at various
rates. The analysis incorporated forecasts of the Company's management for
earnings of the Company during the 1995 to 1996 period and long-term growth
rate for the 1996 to 1999 period of seventeen percent to twenty percent.
The present value analysis suggested a range of valuation for the Company
between $10.17 and $50.86 per Share.
(ii) Stock Trading History. The financial advisors examined the history
of the trading prices and volume for the Shares. This examination showed
that during the six month period from June 16, 1994 to December 16, 1994,
the trading price of the Company's Common Stock ranged from $14.25 per
share to $27.63 per share. This range may be compared to the Merger
Consideration. In addition, this examination showed that over the period
from December 31, 1993 to December 16, 1994, the trading price of the
Company's Common Stock ranged from $14.25 to $27.63, that over the period
from December 13, 1991 to December 16, 1994, the trading price of the
Company's Common Stock ranged from $9.00 to $27.63 and that over the period
from November 30, 1989 to November 30, 1994, the trading price of the
Company's Common Stock ranged from $4.50 to $25.13.
(iii) Comparison of Selected Peer Companies. The financial advisors
compared selected historical stock market, earnings and balance sheet data
and financial ratios for the following groups of selected healthcare
companies and the companies indicated within each such group: (a) Home
Infusion group: Abbey Healthcare Group, Homecare Management, Homedco Group,
Lincare Holdings, Surgical Care Affiliates, Tokos Medical; (b) Disease
Specific-Renal group: Renal Treatment Centers, REN Corp.-USA, Vivra; (c)
Disease Specific-Oncology group: Cancer Treatment Holdings, Physician
Reliance Network, Response Technologies; (d) Physicians Practice Management
group: Coastal Healthcare Group, Medaphis, PhyCor, Pacific Physicians
Services; (e) Hospitals group: OrNda Healthcorp, Quorum Health Group,
Universal Health Services; and (f) Temporary Care group: Advantage Health,
HealthSouth Rehabilitation, NovaCare. Such data and ratios included, among
other things, equity and levered market capitalization (current stock price
multiplied by shares outstanding plus debt less cash and cash equivalents),
levered market capitalization to latest twelve months ("LTM") revenues, LTM
earnings before interest, tax, depreciation and amortization ("EBITDA") and
LTM earnings before interest and taxes ("EBIT"), as well as current stock
prices to LTM earnings per share ("EPS"), current fiscal year estimated
earnings per share (as estimated by International Broker's Estimate System
("IBES")) and next fiscal year estimated earnings per share (as estimated
by IBES). In the case of the Company, LTM and current fiscal year results
reflect actual results through August 31, 1994. An analysis of levered
market capitalization to LTM revenues yielded a range of 0.5x to 4.6x
compared to 2.0x for the Company at its closing price on December 16, 1994
and 2.8x at a price of $36.79 per Share. An analysis of levered market
capitalization to LTM EBITDA yielded a range of 4.1x to 89.6x compared to
10.6x for the Company at its closing price on December 16, 1994 and 14.6x
at a price of $36.79 per Share. An analysis of levered market
capitalization to LTM EBIT yielded a range of 6.6x to 35.9x compared to
16.1x for
27
<PAGE>
the Company at its closing price on December 16, 1994 and 22.1x at a price
of $36.79 per Share. An analysis of current stock price to LTM EPS yielded
a range of 8.6x to 81.6x compared to 25.1x for the Company at its closing
price on December 16, 1994 and 33.4x at a price of $36.79. An analysis of
current stock price to current fiscal year estimated EPS yielded a range of
8.7x to 38.7x compared to 25.1x for the Company at its closing price on
December 16, 1994 and 33.4x at a price of $36.79 per Share. An analysis of
current stock price to next fiscal year estimated EPS yielded a range of
5.9x to 29.7x compared to 21.3x for the Company at its closing price on
December 16, 1994 and 28.3x at a price of $36.79 per Share.
(iv) Analysis of Selected Acquisitions. The financial advisors also
reviewed publicly available information on certain merger market
transactions involving the acquisition of all or part of certain health
care services companies. The financial advisors calculated multiples based
on levered acquisition value to LTM revenues, EBITDA and EBIT, and
multiple(s) of equity acquisition value to the LTM net income. The analysis
indicated a range of levered multiples of revenue of 0.3x to 16.2x, a range
of levered multiples of EBITDA of 3.4x to 45.6x, a range of levered
multiples of EBIT of 4.2x to 76.8x, and a range of multiples of LTM EPS to
net income of 5.4x to 194.2x. The above multiples of revenues, EBITDA, EBIT
and income are based on LTM results of the acquired companies and may be
compared to the respective multiples for the Company of 2.8x, 14.6x, 22.1x
and 33.4x.
No company or transaction used in the analyses described in (iii) and (iv)
above is identical to the Company or the proposed transaction. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading values of the companies or company to which
they are being compared.
The summary set forth above does not purport to be a complete description of
the analysis performed by either Goldman Sachs or Lazard Freres. As described
above, the preparation of a fairness opinion is a highly complicated process,
not generally susceptible to partial analysis or summary description. Selecting
portions of either financial advisor's analysis of any of the factors
considered by it, without considering all factors and the analysis as a whole,
could create an incomplete view of the process underlying its opinion.
Goldman Sachs and Lazard Freres both are internationally recognized
investment banking firms engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions, negotiated primary and
secondary underwritings, private placements and valuations for corporate and
other purposes. The Company selected Goldman Sachs and Lazard Freres as its
financial advisors based upon each financial advisor's familiarity with the
industry in which the Company operates and each financial advisor's experience,
ability and reputation with respect to mergers and acquisitions.
Assuming completion of the Merger, pursuant to the engagement letter between
the Company, Goldman Sachs and Lazard Freres, the Company will pay Goldman
Sachs approximately $3,000,000, and the Company will pay to Lazard Freres
approximately $3,000,000. The Company has also agreed to reimburse each
financial advisor for reasonable out-of-pocket expenses, including reasonable
fees and disbursements of counsel, and to indemnify each financial advisor
against certain expenses and liabilities incurred in connection with its
engagement, including liabilities which may arise under federal securities
laws.
Lazard Freres acted as co-manager for the Company in connection with its
secondary offering in 1992 and Lazard Freres received customary compensation.
Lazard Freres has also advised the Company in connection with other proposed
transactions and financings.
Except as described above, no material relationship existed during the past
two years between the Company and its affiliates and either Goldman Sachs and
its affiliates or Lazard Freres and its affiliates.
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CERTAIN PROJECTIONS
Set forth below is certain projected financial information for fiscal 1995
prepared by the Company's management. The Company does not, as a matter of
course, prepare projected information as to future revenues or earnings that is
intended to be publicly disclosed, and this information is presented solely
because it was provided to Goldman Sachs and Lazard Freres along with other
information in connection with the rendering of their opinions as to the
fairness of the Merger Consideration (including the Distribution) and was also
delivered to Zeneca as part of Zeneca's due diligence.
The projections discussed below were prepared for internal use and were not
prepared with a view toward compliance with published guidelines of the
Commission or the American Institute of Certified Public Accountants regarding
forward-looking information or generally accepted accounting principles. Price
Waterhouse LLP, independent accountants for the Company, has neither examined
nor compiled the projections discussed below and accordingly does not express
any opinion or any other form of assurance with respect thereto. These
projections necessarily make numerous assumptions, some (but not all) of which
are set forth below, with respect to industry performance, general business and
economic conditions, health care specific issues, federal and state legislative
and fiscal issues and other matters, many of which are beyond the control of
the Company and may not have been, or may no longer be, accurate. Additionally,
these projections do not reflect revised prospects for the Company's
businesses, changes in general or health care business and economic conditions,
federal and state legislative and fiscal issues or any other transaction or
event that has occurred subsequent to their preparation or that may occur after
the date hereof and that was not anticipated at the time of preparation.
Accordingly, the 1995 projections are not necessarily indicative of current
realization or values or future performance, which may be significantly more or
less favorable than as set forth below, and should not and cannot be regarded
as representations that they will be achieved. There can be no assurance that
the results of operations reflected in the projections will be realized or that
actual results will not be significantly higher or lower than those projected.
Because of these inherent uncertainties, neither the Company nor any other
person assumes any responsibility for their accuracy, and the inclusion of the
following projections in this Proxy Statement is not to be regarded as an
indication that the Company or any advisor to the Company considers such
information to be reasonable, accurate or reliable. The Company has not
represented to Zeneca that these projections are reasonable, accurate or
reliable. The Company does not intend to update or supplement these
projections.
PROJECTIONS ($ IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995
------
<S> <C>
Net Revenues...................................................... $155.5
Operating Income.................................................. 20.5
Net Income........................................................ 12.4
Primary Earnings Per Share........................................ 1.43
Fully Diluted Earnings Per Share.................................. 1.29
Capital Expenditures.............................................. 31.0
</TABLE>
The foregoing projections were based upon numerous assumptions, including,
but not limited to, the following:
(1) The 1995 projections do not assume the opening of any new cancer
centers.
(2) The 1995 projections assume an average increase in expenses of four
percent over 1994.
(3) The 1995 projections assume various increases in the contractual
discounts applicable to payments for certain services from 1994 depending
upon the service, which increases average approximately five percent.
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<PAGE>
At the time the financial advisors were preparing their opinions, the most
current projections available were projections for fiscal 1996 prepared by
management in the spring of 1993 and the projections for fiscal 1995 which were
derived from the 1995 budget prepared in the summer of 1994. The assumptions
upon which the 1996 projections were based were not updated and the 1996
projections did not reflect changes in circumstances after their preparation.
It was management's view, which was expressed to and acknowledged by both the
financial advisors and Zeneca, that the assumptions used in preparing the 1996
forecast were more optimistic than those which management believed to be
applicable in the fall of 1994. Accordingly, the 1996 projections are not
included herein.
EFFECTS OF THE MERGER
The transaction has been structured as a merger of Merger Subsidiary into the
Company with the Company as the surviving entity in order to effectuate the
purposes described herein and to preserve to the extent possible the Company's
existing contractual arrangements with third parties.
The Merger Consideration (including the Distribution) was negotiated between
representatives of the Company and Zeneca. The closing sales price per share of
the Shares on the last full trading day prior to the announcement of the Merger
Agreement, as reported by NASDAQ, was $29.25.
As a result of the Merger, the present holders of Shares will hold only
Special Common Stock. Zeneca may exercise the Call at any time during the four
year period after the Closing at the market price for the Special Common Stock
(subject to a minimum and a maximum price (see "DESCRIPTION OF THE SPECIAL
COMMON STOCK--Call and Put Features of the Special Common Stock") during the
first two years and seven months after the Effective Time) and, except in the
case of a change of control of Zeneca PLC (see "DESCRIPTION OF THE SPECIAL
COMMON STOCK--Call and Put Features of the Special Common Stock"), the holders
of the Special Common Stock may exercise the Put only during a twenty business
day period commencing two and one-half years after the Closing. It is unlikely
that, following the Merger, the Special Common Stock will trade at a price
higher than $50.00 per share, the maximum Call Price during the two year and
seven month period following the Effective Time. If the Special Common Stock
trades at prices in excess of the Put Price, it is unlikely that Zeneca will
exercise the Call prior to the Put Period. If the Call is not previously
exercised, it is likely that holders will exercise the Put and that, by virtue
thereof, the number of outstanding shares of Special Common Stock will be
substantially reduced. In such event, there may not thereafter be an active
market in the Special Common Stock and it may be difficult for a holder to sell
shares of Special Common Stock in the market at the fair value thereof. Upon
the exercise of the Call, there will be no shares of the Special Common Stock
outstanding and the holders thereof will no longer have an equity interest in
the Company and will no longer share in any future earnings or growth of the
Company or the risks associated with achieving any such earnings or growth.
Both the voting restrictions and the capital structure of the Company as set
forth in the Certificate of Incorporation, including the Call on the Special
Common Stock, will give Zeneca an effective veto with respect to, among other
things, extraordinary transactions which may discourage a future attempt by any
party (other than Zeneca and its affiliates) to acquire control of the Company.
As a result, holders of the Special Common Stock may not have an opportunity to
participate in any such transactions and receive for their shares any amount in
excess of the Put Price or Call Price.
As described above, the Governance Agreement and By-Laws will require that
certain extraordinary actions involving the Company be approved by a majority
of the Board, including at least one Common Stock Director who is then an
employee of Zeneca (or certain of its affiliates) and one Special Common Stock
Director who was an executive officer of the Company prior to the Merger. These
provisions give effective veto power to each class of directors over the
actions specified and may result in deadlocks on the Board.
Subsequent to the Merger, the registration of the Shares under the Exchange
Act will be terminated. However, the Special Common Stock will be registered
thereunder and the Company will continue to file reports with the Commission.
Subsequent to the Merger, the Special Common Stock will be traded on the Nasdaq
National Market under the symbol "SHCID."
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<PAGE>
Pursuant to the Merger Agreement, outstanding options granted under any of
the Plans or other compensation arrangements and outstanding at the Effective
Time (the "Company Options") will, in connection with the Merger, be exchanged
for options to purchase shares of Special Common Stock (the "Replacement
Options"), with appropriate upward (but not downward) adjustments to the
exercise price and appropriate downward (but not upward) adjustments to the
number of shares subject to such options so that the spread immediately after
the Effective Time between the average of the highest bid price of the Special
Common Stock on each of the ten trading days immediately following the day in
which the Effective Time occurs and the exercise price under the Replacement
Options will not exceed the spread immediately prior to the Effective Time
between the average of the highest bid price of the Shares on each of the ten
days immediately preceding the day in which the Effective Time occurs and the
exercise price under the options for which the Replacement Options are
exchanged. This formula will prevent the holder of Replacement Options from
sharing in any upside in the event that, immediately after the Merger, the
Special Common Stock trades at a price higher than the price at which the
Shares traded immediately before the Merger but will not protect the holder
thereof from any downside risk in the event that, immediately after the Merger,
the Special Common Stock trades at a price lower than the price at which the
Shares traded immediately before the Merger. Since holders of Company Options
will not be record holders of Shares immediately prior to the Effective Time,
they will not be entitled to receive the Distribution. Persons exercising their
stock options prior to the Effective Time will be entitled to receive the
Distribution with respect to Shares received upon exercise of such options. For
a more complete description of the treatment of stock options, see "THE MERGER
AGREEMENT--Treatment of Stock Options."
Holders of Shares have the right to demand appraisal of, and obtain payment
for, the "fair value" of their shares by following the procedures prescribed in
Section 262 of the Delaware Law, a copy of which is attached as Annex D to this
Proxy Statement, and is summarized under "APPRAISAL RIGHTS" below. Failure to
take any of the steps required under Section 262 on a timely basis could result
in the loss of appraisal rights.
CONDUCT OF THE COMPANY AFTER THE MERGER
As of the Effective Time, the authorized number of directors of the Company
will be ten and the Company's certificate of incorporation will be amended to
delete the classification of the directors into three classes. As provided in
the Certificate of Incorporation and the Governance Agreement, from the
Effective Time until the Termination Date, the Board will be comprised of five
persons elected by the holders of the Common Stock, voting separately as a
class, at least one of whom will be an independent director (as defined in
Section 6(c) of Schedule D to the By-Laws of the NASD) and five persons elected
by the holders of the Special Common Stock, voting separately as a class, at
least one of whom will be an independent director.
The five initial Common Stock Directors will consist of the following five
persons:
Robert C. Black. Mr. Black has been President of Zeneca Pharmaceuticals
Group, a business unit of Zeneca Inc. since 1991 and a Vice President of Sales
and Marketing from 1986 to 1988 and then since 1990. He is a member of the
Board of the Pharmaceuticals Research and Manufacturers of America, the
Anesthesiology Patient Safety Foundation of the American Anesthesiology
Association and the Industry's Coalition Against Cancer and an associate member
board of the National Wholesale Druggists Association. Mr. Black is a trustee
of the Wilmington Medical Center. He serves on the Advisory Committee of the
University of Delaware School of Nursing and is a member of the Editorial
Advisory Board of "Pharmaceutical Executive" magazine. Mr. Black is also a
member of the Board and treasurer of Pharmaceuticals Research and Manufacturers
of America Foundation.
Dr. Michael G. Carter. Dr. Carter has been International Marketing Director
and Chairman Commercial Development Committee of Zeneca Pharmaceuticals, a
business unit of Zeneca, since 1990. He previously was International Medical
Director from 1986 until December 1989. Dr. Carter has been a member of the
executive business team of ICI Pharmaceuticals and then Zeneca Pharmaceuticals
since 1986. Dr. Carter has been a member of the Medicines Commission since 1986
and a member of the Policy Board, Office Health Economics since 1992. He is a
Fellow of the Royal Pharmaceutical Society and the Faculty of Pharmaceutical
Medicine of the Royal College of Physicians.
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<PAGE>
John G. Goddard. Mr. Goddard has been Finance Director of Zeneca
Pharmaceuticals, a business unit of Zeneca PLC since April 1993. He was
previously Chief Financial Officer of ICI Asia Pacific from 1991 until 1993 and
a Finance Director of ICI Japan from 1988 until October 1991. From January 1986
through January 1988 he was Assistant Chief Accountant of ICI Agrochemicals.
Before joining ICI, he was European Treasurer of Bell & Howell, Ltd. from 1979
until 1985. Mr. Goddard is a chartered accountant. He is a member of the
Association of Corporate Treasurers.
Dr. Thomas F.W. McKillop. Dr. McKillop has been Chief Executive Officer of
Zeneca Pharmaceuticals, a business unit of Zeneca since July 1994. He was
appointed Deputy Chief Executive Officer of ICI Pharmaceuticals in May 1992 and
was Technical Director of ICI Pharmaceuticals from 1989 until April 1992. He is
a Non-Executive Director of Amersham International.
Dr. Clifford Richard Guy. Dr. Guy has been Vice President since 1986 and
Medical Director since 1983 of Winston-Salem Health Care Plan, Inc. His
practice area is internal medicine and cardiovascular diseases. Dr. Guy has
been certified by the National Board of Medical Examiners, American Board of
Internal Medicine, Subspecialty of Cardiovascular Disease, and American Board
of Medical Management, in each case for over five years. He is on courtesy
staff at Forsyth Memorial Hospital and Baptist Hospital and on honorary staff
at St. Vincent's Medical Center. He teaches at the University of Florida
College of Pharmacy, Bowman Gray School of Medicine and Babcock School of
Management, Wake Forest University. He is a member of the Board of Winston-
Salem Health Care Plan, Inc. and on the National Development Advisory Board,
University of Florida, Advisory Board, National Managed Health Care Congress,
Advisory Board, Center for Pharmaceutical Outcomes Research, University of
North Carolina and Medical Directors Advisory Board, Codman Research Group. He
is also a member of numerous professional organizations and has served on
numerous committees of such organizations.
The five initial Special Common Stock Directors will be Dr. Salick, Messrs.
Bell and Fiore, Barbara Bromley-Williams and Thomas Mintz, M.D., all of whom
are currently directors of the Company. For biographical information regarding
the Special Common Stock Directors, see "ELECTION OF DIRECTORS" below.
After the Merger and until the Termination Date, the authorized number of
directors may only be changed by an amendment to the Certificate of
Incorporation, approved by the holders of record of a majority of the shares of
Common Stock, voting separately as a class, and the holders of record of a
majority of the votes entitled to be cast by the Special Common Stock, voting
separately as a class, with certain holders of Special Common Stock being
entitled to ten votes per share. See "DESCRIPTION OF THE SPECIAL COMMON STOCK--
Voting Rights."
As of the Closing, the current employment agreements between the Company and
each of Dr. Salick and Messrs. Bell and Fiore will be terminated and the
Employment Agreements and agreements not to compete between the Company and
each of Dr. Salick and Messrs. Bell and Fiore will become effective. It is not
anticipated that there will be any immediate change in the officers of the
Company as a result of the Merger.
After the Merger, although the Stock Option Plan will continue in effect, it
is not presently anticipated that any options will be granted thereunder. The
Director Plan will be terminated immediately following the Merger. The MICP
will continue in effect and it is anticipated that additional cash (although
not stock) awards will be made thereunder. The Company's 1988 Qualified Stock
Purchase Plan (the "Purchase Plan") is an "employee stock purchase plan"
intended to qualify under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"), and provides participants with an opportunity to purchase
Shares on the open market at a discount, subject to certain limitations and
restrictions. See "EXECUTIVE COMPENSATION--Employee Qualified Stock Purchase
Plan" below. Approximately 260 employees of the Company are participants in the
Purchase Plan. It is presently anticipated that the Purchase Plan will be
terminated immediately following the Merger.
32
<PAGE>
ZENECA'S REASONS FOR THE MERGER
Zeneca's management believes the Merger will enable Zeneca through its
affiliation with the Company strategically to expand its business and broaden
its business from pharmaceutical products into disease management and provision
of health care services. Historically, Zeneca has conducted its business with a
view towards long-term growth of profits, which is largely dependent on
pharmaceutical innovation. As a major developer of cancer-related
pharmaceuticals, Zeneca has a commitment to the treatment of cancer and to
understanding and meeting the needs of its customers. The Merger will allow
Zeneca through its affiliation with the Company strategically to expand its
business in one of the major core areas for Zeneca's pharmaceutical business,
cancer, beyond its traditional pharmaceutical products and into the management
and provision of care for the disease.
Zeneca believes the Company is a leader in alternate-site diagnosis,
treatment and management of cancer with its comprehensive approach to the
delivery of care which is uniquely focused on anticipating and meeting the
needs of the patient. The resultant relationships and flows of data and
expertise between the technology-led research and development phase and the
service-oriented care delivery business should bring competitive advantage to
both Zeneca's pharmaceuticals business and the Company.
Zeneca, through its affiliation with the Company's provision of disease-
specific health care services to patients with cancer and other complex,
chronic illnesses, aims to compete better in the rapidly growing managed-care,
including capitation, systems in the United States.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Company leases the Real Property from Dr. Salick and his spouse for a
period expiring in 2011, in a building developed for the Company, the present
monthly rental for which, on a triple net basis, is $85,634. Dr. and Mrs.
Salick, the Company and Merger Subsidiary have entered into the Real Property
Agreement. See "Agreements Ancillary to Merger Agreement--Real Property
Agreement."
Dr. Salick has entered into the Salick Agreement, the term of which commences
with the Closing, and the related Agreement Not to Compete. Effective as of the
Closing, each of Leslie F. Bell and Michael T. Fiore will become parties to new
employment agreements and agreements not to compete with the Company. See
"Agreements Ancillary to Merger Agreement" above.
Under the Merger Agreement, for six years after the Effective Time, the
Company will indemnify the present officers and directors of the Company (and
its former officers and directors) in respect of acts or omissions occurring
prior to the Effective Time to the extent provided under the Company's existing
certificate of incorporation and by-laws or under their existing
indemnification agreements. Additionally, the Company has agreed to obtain an
extension of the Company's existing officers' and directors' liability policy
(or a replacement therefor) in respect of acts or omissions occurring prior to
the Effective Time which extension (or replacement) will permit claims to be
made under the policy for two years from the Effective Time. If the cost for
such insurance exceeds $300,000, the Company may reduce the coverage thereunder
so that the cost does not exceed $300,000. Zeneca has agreed to guarantee the
performance by the Company of these indemnification and insurance obligations.
Certain of the officers and directors of the Company own Shares and/or hold
options to purchase Shares. Pursuant to and in accordance with the terms of the
Merger Agreement, such persons will be entitled to receive, on the same terms
as all other stockholders and option holders of the Company, only the Merger
Consideration and/or Replacement Options therefor. See "STOCK OWNERSHIP" below.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Fried, Frank, Harris, Shriver & Jacobson, special counsel to the Company, are
of the opinion that the following are the material United States federal income
tax consequences, under currently applicable law, of
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<PAGE>
the Merger as well as of the ownership of the Special Common Stock, to the
holders of Shares who are United States citizens or resident individuals and
who hold such Shares as capital assets and will hold Special Common Stock as a
capital asset. It should be noted that an opinion of counsel is not binding on
the Internal Revenue service and that no ruling will be requested from the
Internal Revenue Service on these or any other issues. The following discussion
may not be applicable with respect to other categories of stockholders,
including corporate and foreign stockholders and stockholders who acquired
their Shares pursuant to the exercise of employee stock options or otherwise as
compensation. Such discussion does not address the tax consequences of the
Merger to holders of options.
The Merger. A portion of each Share exchanged by a stockholder in the Merger
will be considered to have been sold to Zeneca and the remainder will be
considered to have been exchanged with the Company for the Special Common Stock
(including any fractional shares constructively received) and the right to the
Distribution. A stockholder who exchanges shares in the Merger (an "Exchanging
Stockholder") will recognize capital gain (or loss) with respect to each Share
so exchanged (the "Sale Gain") equal to the amount by which the amount of cash
received with respect to such share exceeds (or is exceeded by) such
stockholder's basis for the portion of such share deemed exchanged for cash.
While there is no authority clearly on point, counsel believes that the basis
for the portion of each Share deemed exchanged for cash (the "Sale Basis")
should be that proportion of the basis for the entire Share which the amount of
such cash bears to the value at the Effective Time of the total consideration
(including the right to the Distribution) received in respect of such Share in
the Merger. Except as discussed in the next paragraph (or a sale by the
Exchange Agent with respect to fractional shares), an Exchanging Stockholder
will not recognize gain or loss with respect to that portion of a Share deemed
exchanged for the Special Common Stock and the right to the Distribution.
An Exchanging Stockholder will recognize gain (but not loss) in the Merger as
a result of receiving the right to the Distribution. Such gain (if any) will be
equal to the lesser of (i) the value (at the Effective Time) of the right to
the Distribution and (ii) such stockholder's otherwise unrecognized gain on the
portion of such Share deemed exchanged with the Company for consideration other
than cash in the Merger. If, with respect to any Share, the amount described in
clause (i) of the preceding sentence exceeds the amount described in clause
(ii), the excess will be treated as a return of capital, reducing the
Exchanging Stockholder's basis in the Special Common Stock received in exchange
therefor.
Gain or loss recognized by an Exchanging Stockholder with respect to cash
received in the Merger and gain, if any, recognized with respect to the receipt
of the right to the Distribution will be long-term capital gain (or loss) if,
at the time of the exchange, the exchanged Share has been held for more than
one year. An Exchanging Stockholder's basis for the Special Common Stock will
be equal to his, her or its basis for the portion of the Share exchanged in the
Merger for the Special Common Stock and the right to receive the Distribution
reduced by the amount, if any, that the right to receive the Distribution is
treated as a return of capital as discussed above. The holding period of the
Special Common Stock received in the exchange will include the period during
which the Share surrendered in the exchange was held by the Exchanging
Stockholder.
It is expected that the right to receive the Distribution will not be treated
as a return of capital for most Exchanging Stockholders who did not purchase
their Shares recently in contemplation of the transaction. Thus, the
consequences to most Exchanging Stockholders for each Share exchanged in the
Merger are the following: (i) gain recognition equal to the sum of (A) the
value of the right to the Distribution plus (B) the Sale Gain (as defined
above) with respect to such Share and (ii) the basis of the Special Common
Stock treated as exchanged for a portion of such Share will equal the excess of
the basis of such Share over the Sale Basis (as defined above) with respect to
such Share.
Pursuant to the Merger Agreement, Zeneca PLC has undertaken certain
obligations (the "Zeneca Put Obligation") to the Company with respect to the
stockholders' rights to put the Special Common Stock to the Company. See "THE
MERGER AGREEMENT--Obligations of Zeneca PLC Regarding Put" below. Counsel
believes that the Zeneca Put Obligation should be treated as an integral and
incidental part of the Special Common Stock. This issue is not free from doubt,
however, and if the Zeneca Put Obligation were to
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<PAGE>
be considered a property right separate from the Special Common Stock, it could
be treated as additional taxable consideration received by the Exchanging
Stockholders in the Merger from Zeneca PLC. Under this approach, the value, if
any, of the Zeneca Put Obligation at the Effective Time could be treated as if
it were additional cash consideration received by the Exchanging Stockholders.
The right to receive the Distribution will be treated as a debt instrument
subject to the rules governing the creation and taxation of original issue
discount. As a result, a cash-basis Exchanging Stockholder will recognize
ordinary income upon receipt of each of the two installments of the
Distribution equal in the aggregate to the excess of the total amount due under
the Distribution over the fair market value at the Effective Time of the right
to receive the Distribution.
The Special Common Stock. Distributions, if any, paid with respect to the
Special Common Stock will be taxable dividends to the extent of the Company's
applicable earnings and profits. To the extent that distributions of the
Special Common Stock exceed the Company's applicable earnings and profits, the
amount distributed will be applied to reduce the tax basis in such Special
Common Stock and, to the extent that any such amount distributed exceeds such
tax basis, will constitute long-term or short-term capital gain depending on
the holding period for such Special Common Stock.
Because of the Put and Call rights to which the Special Common Stock is
subject, the Special Common Stock could be viewed, for federal income tax
purposes, as not "participating in corporate growth to any significant extent"
in which case it would be treated as preferred stock for purposes of Section
305 of the Code. In that event, a holder of Special Common Stock would be
required, during the period starting at the Effective Time and ending during
the Put Period, to include currently in gross income, to the extent of the
Company's applicable earnings and profits, for each share of Special Common
Stock a portion (determined by analogy to the original issue discount rules for
debt instruments) of the excess of $42.00 (the Put Price) over the fair market
value of such share at issuance. While there is no authority directly on point
and the issue is not free from doubt, counsel believes that the Special Common
Stock should not be recharacterized as preferred stock for this purpose and the
Company intends to treat it accordingly.
Gain or loss on the sale of Special Common Stock (including a redemption
pursuant to the Call by the Company, a Put by the stockholder of all the
Special Common Stock he, she or it holds or is considered to hold through the
application of certain ownership attribution rules or a sale by the Exchange
Agent on behalf of holders who would otherwise be entitled to receive
fractional shares) will be long- or short-term capital gain or loss depending
on such stockholder's holding period. The redemption of the Special Common
Stock pursuant to a Put by a stockholder to the Company of less than all the
Special Common Stock such stockholder holds or is considered to hold through
the application of certain ownership attribution rules will be subject to the
stock redemption rules of Section 302 of the Code. Under those rules, the
entire cash proceeds received will be treated as a distribution taxable as a
dividend (to the extent of the Company's available earnings and profits),
unless the redemption is "substantially disproportionate" with respect to the
stockholder or is "not essentially equivalent to a dividend" with respect to
the stockholder.
The Special Common Stock will not be "Section 306 stock" within the meaning
of Section 306(c) of the Code nor will it constitute a "conversion transaction"
within the meaning of Section 1258(c) of the Code. Consequently, the provisions
of Sections 306 and 1258 of the Code, which, generally, would increase the
amount of ordinary income and decrease the amount of capital gain recognized by
a stockholder as a result of exchanging Shares in the Merger and holding or
disposing of the Special Common Stock, will not be applicable to the Special
Common Stock.
Backup Withholding. Under certain circumstances, a holder of Shares or
Special Common Stock may be subject to "backup withholding." This withholding
applies only if the holder, among other things, (i) has failed to furnish the
Company with his or her taxpayer identification number, (ii) has furnished the
Company with an incorrect taxpayer identification number, (iii) has failed
properly to report interest or dividends, or (iv) under certain circumstances
fails to provide the Company or his or her securities broker with a certified
statement, under penalty of perjury, that he or she is not subject to
withholding. The backup withholding rate is 31% of "reportable payments," such
as cash proceeds received in the Merger and the Distribution.
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Reports will be furnished to the holders of Shares and Special Common Stock and
the Internal Revenue Service for each calendar year stating the amount of
reportable payments paid during such year and the amount of tax withheld, if
any, with respect thereto.
EACH STOCKHOLDER SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM, HER OR IT OF THE MERGER AND THE OWNERSHIP,
EXCHANGE, REDEMPTION OR SALE OF THE SPECIAL COMMON STOCK INCLUDING THE
APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE FUTURE CHANGES IN
FEDERAL TAX LAWS.
ACCOUNTING TREATMENT
The proposed Merger will be accounted for as a recapitalization of the
Company. The net carrying amount of the Debentures has been credited to
stockholders' equity upon the conversion thereof. The Common Stock issued to
Zeneca will be capitalized in an amount equal to the Cash Consideration to be
received by existing stockholders of the Company in exchange for their Shares.
The cash proceeds paid to existing stockholders in exchange for their Shares
(including the Distribution payable by the Company) will be charged to
stockholders' equity. The Special Common Stock issued to existing stockholders
will be capitalized at par value. Cash consideration paid to existing
stockholders upon exercise of the Put and/or the Call will be charged against
stockholders' equity at the date of exercise. Cash consideration received by
the Company from Zeneca to fund the Put and/or the Call will be credited to
stockholders' equity. The proposed accounting treatment will result in an
increase in total stockholders' equity as a result of the conversion of the
Debentures and assumed exercise of outstanding stock options, offset by the
Merger transaction expenses and accrual of the Distribution payable by the
Company.
CERTAIN REGULATORY MATTERS
Certain acquisition transactions such as the Merger are reviewed by the
Antitrust Division of the U.S. Department of Justice (the "Justice Department")
or the Federal Trade Commission (the "FTC") to determine whether such
transactions comply with applicable antitrust laws. Under the provisions of the
Hart-Scott Rodino Antitrust Improvement Act of 1976, as amended (the "HSR
Act"), the Merger may not be consummated until certain information has been
furnished to the Justice Department and the FTC and certain waiting period
requirements of the HSR Act have been satisfied. Certain information was filed
with the Justice Department and the FTC under the HSR Act by the Company and by
Zeneca PLC on December 29, 1994. On January 13, 1995, the Company and Zeneca
PLC were notified that the requisite waiting period had been terminated.
Notwithstanding the termination of the HSR waiting period, at any time before
or after consummation of the Merger, either the Justice Department 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 Merger or the
divestiture of substantial assets of Zeneca or the Company. Private parties may
also bring legal action under the antitrust laws under certain circumstances.
There can be no assurance that a challenge to the Merger on antitrust grounds
will not be made or, if a challenge is made, what the result will be.
Consummation of the Merger is conditional upon, among other things, the absence
of any provisions of any applicable law or regulation and any judgment,
injunction, order or decree that will prohibit the consummation of the Merger.
Except as disclosed herein, neither the Company nor Zeneca is aware of any
federal, state or foreign governmental or regulatory approval that is required
in order to consummate the Merger. Should any such approval be required, it is
currently contemplated that such approval would be sought.
THE MERGER AGREEMENT
GENERAL
The following description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement,
a copy of which is attached to this Proxy Statement as Annex A and incorporated
herein by reference. All stockholders are urged to read the Merger Agreement in
its entirety.
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THE MERGER
The Merger Agreement provides that, subject to the adoption of the Merger
Agreement by the stockholders of the Company and the satisfaction or waiver of
the other conditions to the Merger, Merger Subsidiary will be merged with and
into the Company in accordance with the Delaware Law, whereupon the separate
existence of Merger Subsidiary will cease, and the Company will be the
surviving corporation. At the Effective Time, the conversion of Shares and the
conversion of shares of Merger Subsidiary common stock pursuant thereto, will
be effected as described in "Conversion and Exchange of Shares" below.
EFFECTIVE TIME
Following the adoption of the Merger Agreement and subject to satisfaction or
waiver of certain terms and conditions, including conditions to the Closing,
contained in the Merger Agreement, the Merger will become effective on such
date and at such time as a certificate of merger (the "Certificate of Merger")
is duly filed with the Secretary of State of the State of Delaware or at such
later time as is specified in the Certificate of Merger. The date and time at
which the Merger is effective is referred to herein as the "Effective Time." It
is currently anticipated that the filing of the Certificate of Merger will be
made as soon as practicable after all conditions contemplated by the Merger
Agreement have been satisfied or waived. See "Conditions to Consummation of the
Merger." The consummation of the Merger is referred to herein as the "Closing"
and the date of the Closing is referred to herein as the "Closing Date."
CONVERSION AND EXCHANGE OF SHARES
At the Effective Time: (i) each Share held by the Company as treasury stock
prior to the Effective Time will be cancelled, and no payment will be made with
respect thereto; (ii) the shares of common stock of Merger Subsidiary, $1.00
par value, outstanding immediately prior to the Effective Time will be
converted into and become the number of shares of Common Stock equal to the sum
of (1) the number of shares of Special Common Stock that will be outstanding
immediately after the Effective Time plus (2) the number of shares of Special
Common Stock issuable upon the exercise of all Replacement Options; and (iii)
each Share outstanding immediately prior to the Effective Time (other than
Shares held by the Company as treasury stock or Shares as to which appraisal
rights have been perfected under Section 262 of the Delaware Law) will be
converted into the right to receive (although no fractional shares will be
issued) one-half share of Special Common Stock and $18.875 in cash without
interest. The formula for determining the total number of Shares to be received
in exchange for the common stock of Merger Subsidiary will result in Zeneca
acquiring fifty percent of the total equity of the Company that will be
outstanding immediately following the Merger (assuming exercise in full of all
outstanding Company Options).
As of the Effective Time, present holders of Shares will cease to have any
rights as holders of such Shares, but will have the rights of holders of
Special Common Stock. From and after the Effective Time, there shall be no
further registration of Shares outstanding prior to the Effective Time.
SURRENDER AND PAYMENT
The Merger Agreement provides that, prior to the Effective Time, Zeneca will
appoint a bank or trust company having offices in Los Angeles, California as
agent (the "Exchange Agent") for the purpose of exchanging certificates
representing Shares for the Merger Consideration. Prior to the Effective Time,
Zeneca will deposit in trust with the Exchange Agent the Cash Consideration to
be paid in respect of the Shares and the Company will deposit in trust with the
Exchange Agent the Stock Consideration to be paid in exchange for the Shares.
For purposes of determining the Merger Consideration to be made available, it
will be assumed that no holder of Shares will perfect his, her or its right to
appraisal of his, her or its Shares. Promptly after the Effective Time, Zeneca
and the Company will send, or will cause the Exchange Agent to send, to each
holder of Shares at the Effective Time a letter of transmittal in customary
form for use in such exchange (which will specify that the delivery will be
effected, and risk of loss and title will pass, only upon proper delivery of
the certificates representing Shares to the Exchange Agent). Each holder of
Shares that have been
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converted into a right to receive the Merger Consideration, upon surrender to
the Exchange Agent of a certificate or certificates representing such Shares,
together with a properly completed letter of transmittal covering such Shares,
will be entitled to receive the Merger Consideration payable in respect of such
Shares. If any portion of the Merger Consideration is to be paid to a person
other than the registered holder of the Shares represented by the certificate
or certificates surrendered in exchange therefor, it will be a condition to
such payment that the certificate or certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such payment shall pay to the Exchange Agent any transfer or
other taxes required as a result of such payment to a person other than the
registered holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. After the
Effective Time, each such certificate will, until so surrendered, represent for
all purposes only the right to receive such Merger Consideration.
UNDER THE FEDERAL INCOME TAX LAWS, THE EXCHANGE AGENT WILL BE REQUIRED TO
WITHHOLD 31% OF THE AMOUNT OF ANY PAYMENTS MADE TO CERTAIN STOCKHOLDERS
PURSUANT TO THE MERGER. TO PREVENT SUCH BACKUP FEDERAL INCOME TAX WITHHOLDING
WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES, A STOCKHOLDER MUST
PROVIDE THE EXCHANGE AGENT WITH THE STOCKHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY THAT THE STOCKHOLDER IS NOT SUBJECT TO BACKUP
FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED
IN THE LETTER OF TRANSMITTAL. IF THE STOCKHOLDER IS A NONRESIDENT ALIEN OR
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, THE STOCKHOLDER MUST GIVE THE
EXCHANGE AGENT A COMPLETED FORM W-8 CERTIFICATE OF FOREIGN STATUS.
STOCKHOLDERS OF THE COMPANY SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR
SHARES TO THE COMPANY OR TO THE EXCHANGE AGENT PRIOR TO RECEIPT OF THE LETTER
OF TRANSMITTAL.
Pursuant to the Merger Agreement, any portion of the Stock Consideration or
the Cash Consideration deposited with the Exchange Agent pursuant to the Merger
Agreement that remains unclaimed by the holders of Shares six months after the
Effective Time will be returned to Zeneca (as to the Cash Consideration) and
the Company (as to the Stock Consideration), upon demand, and any such holder
who has not exchanged his, her or its Shares for the Merger Consideration prior
to that time will thereafter look only to Zeneca and the Company, respectively,
for payment of the Merger Consideration in respect of his, her or its Shares,
but will have no greater rights against Zeneca and the Company than may be
accorded to their general creditors under applicable law. However, neither
Zeneca nor the Company will be liable to any holder of Shares for any amount
paid to a public official pursuant to applicable abandoned property laws. Any
portion of the Cash Consideration or the Stock Consideration remaining
unclaimed by holders of Shares two years after the Effective Time (or such
earlier date immediately prior to such time as such amounts would otherwise
escheat to or become property of any governmental entity) will, to the extent
permitted by applicable law, become the property of Zeneca (with respect to the
Cash Consideration) or the Company (with respect to the Stock Consideration),
free and clear of any claims or interest of any person previously entitled
thereto.
The Merger Agreement provides that any portion of the Stock Consideration or
the Cash Consideration deposited with the Exchange Agent pursuant to the Merger
Agreement to pay for Shares for which appraisal rights have been perfected
shall be returned to Zeneca (with respect to the Cash Consideration only) or
the Company (with respect to the Stock Consideration only) upon demand. No
dividends, interest or other distributions with respect to the Stock
Consideration will be paid to a holder of unsurrendered certificates for Shares
until such certificates are surrendered. Thereafter, the Company will pay,
without interest, all dividends, interest or other distributions payable in
respect of such securities to the person in whose name the certificates
representing the Stock Consideration into which such Shares were converted are
registered.
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FRACTIONAL SHARES
Fractional shares of Special Common Stock will not be issued. All fractional
shares of Special Common Stock that holders of Shares would otherwise be
entitled to receive as a result of the Merger will be aggregated and, within
ten days after the Effective Time, sold by the Exchange Agent on behalf of all
such holders. Each holder that would otherwise receive a fractional share of
Special Common Stock as a result of the Merger will, in lieu thereof, be
entitled to receive from the Exchange Agent a cash amount equal to such
holder's proportionate interest in the net proceeds from such sale.
ADDITIONAL CASH CONSIDERATION
The Merger Agreement provides that, as additional consideration for the
Shares to be converted in the Merger, the Company will make a distribution (the
"Distribution") out of funds legally available therefor to all holders of
Shares of record immediately prior to the Effective Time in an aggregate amount
of $0.625 per Share payable in two equal installments of $0.3125 each. The
first payment is to be paid on the date which is 180 days after the Closing
Date (or, if such day is not a business day, the next succeeding business day)
and the second payment is to be paid on the date which is 360 days after the
Closing Date (or if such day is not a business day, the next succeeding
business day).
OBLIGATIONS OF ZENECA PLC REGARDING PUT
Section 1.10 of the Merger Agreement requires Zeneca to, or to cause one or
more of its affiliates to, pay to the Company immediately prior to the time
that such amounts become due and payable all amounts, if any, that, assuming
that such payments could be made without violating Section 160 of the Delaware
Law, any bankruptcy or insolvency law or other law or regulation for the
protection of creditors, will be due and payable to the holders of the Special
Common Stock pursuant to the Put feature of the Special Common Stock. In
exchange for such payment, the Company will issue to Zeneca (or to its
designated affiliates) a number of shares of Common Stock equal to the number
of shares of the Special Common Stock acquired thereby by the Company. Section
160 of the Delaware Law provides that a Delaware corporation may not purchase
any shares of its capital stock when the capital of the corporation is impaired
or when such purchase would cause any impairment of the capital of the
corporation. The maximum amount Zeneca is obligated to pay to the Company is
the product of the Put Price multiplied by the total number of shares of the
Special Common Stock with respect to which the Put is exercised. If the Company
consummates the purchase of the Special Common Stock in contravention of
Section 160 of the Delaware Law or any other law for the protection of
creditors, Zeneca will indemnify and hold harmless the directors of the Company
against any liabilities arising out of such purchase. If Zeneca or the Company
determines that the Company may be unable to consummate the purchase of all of
the Special Common Stock at the Put Price per share in accordance with the
Certificate of Incorporation or the Company is unable to pay the Put Price with
respect to all such shares in accordance with the Certificate of Incorporation,
in either case, without violating Section 160 of the Delaware Law, any
bankruptcy or insolvency law or other law or regulation for the protection of
creditors, then the obligation of Zeneca to pay, or cause one or more of its
affiliates to pay, the amounts set forth above will terminate. In lieu thereof,
Zeneca will (or will cause one of its affiliates to) purchase, and make all
arrangements necessary to purchase, during the Put Period, directly from the
holders of the Special Common Stock at the Put Price, the Special Common Stock
which such holders elect or have elected to require the Company to purchase. As
permitted under the Merger Agreement, Zeneca has assigned to Zeneca PLC all of
the obligations of Zeneca to purchase Special Common Stock described in the
preceding sentence. The holders of the Special Common Stock will have the right
to enforce against Zeneca PLC the obligation of Zeneca (or its affiliates) to
pay the amounts set forth above.
CONVERTIBLE SUBORDINATED DEBENTURES
The Merger Agreement required the Company to call for redemption and redeem
all of its outstanding 7 1/4% Convertible Subordinated Debentures Due 2001 (the
"Debentures") not converted into Shares. The Debentures were called in December
1994 and all outstanding Debentures were converted into Shares.
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APPRAISAL RIGHTS
The Merger Agreement provides that notwithstanding the conversion and
exchange provisions of the Merger Agreement, Shares outstanding immediately
prior to the Effective Time and held by a holder who has not voted in favor of
the Merger or consented thereto in writing and who has demanded appraisal for
such Shares in accordance with the Delaware Law will not be converted into a
right to receive the Merger Consideration, unless such holder fails to perfect
or withdraws or otherwise loses his, her or its right to appraisal. If after
the Effective Time such holder fails to perfect or withdraws or loses his, her
or its right to appraisal, such Shares will be treated as if they had been
converted as of the Effective Time into a right to receive the Merger
Consideration. The Company will give Zeneca prompt notice of any demands
received by the Company for appraisal of Shares, and Zeneca will have the right
to participate in all negotiations and proceedings with respect to such
demands. The Company will not, except with the prior written consent of Zeneca,
make any payment with respect to, or settle or offer to settle, any such
demands. Zeneca will reimburse the Company for one-half of any payment the
Company makes with respect to such demands or on account of Shares for which
appraisal rights have been perfected. See "APPRAISAL RIGHTS."
TREATMENT OF STOCK OPTIONS
All of the Company Options outstanding at the Effective Time shall remain
outstanding following the Effective Time. At the Effective Time, the Company
Options will, by virtue of the Merger and without any further action on the
part of the Company or the holder thereof, be assumed by the Company in such
manner that the Company is a corporation "assuming a stock option in a
transaction to which Section 424(a) applies" within the meaning of Section 424
of the Code or, to the extent Section 424 of the Code does not apply to any
such Company Options, would be such a corporation were Section 424 of the Code
applicable to such Company Options. Each Replacement Option will be fully
exercisable as of the Effective Time, will be exercisable for that whole number
of shares of the Special Common Stock (rounded downward to the nearest whole
share) equal to the number of Shares subject to such Company Option immediately
prior to the Effective Time multiplied by a ratio equal to the quotient
obtained by dividing (A) the average of the highest bid price of Shares on each
of the ten trading days immediately preceding the day in which the Effective
Time occurs by (B) the average of the highest bid price of the Special Common
Stock on each of the ten trading days immediately following the day in which
the Effective Time occurs (the "Ratio"). Additionally, the Replacement Option
will have an option price per share of the Special Common Stock in an amount
equal to the option price per Share applicable to such Company Option in effect
immediately prior to the Effective Time divided by the Ratio (the option price
per share, as so determined, being rounded upward to the nearest full cent).
However, in no event will the number of shares of the Special Common Stock
covered by a Replacement Option be increased above the number of Shares subject
to the Company Option to which the Replacement Option relates nor will the
option price per share under the Replacement Option be decreased below the
option price of the Company Option to which the Replacement Option relates
pursuant to the foregoing adjustments. Since holders of Company Options will
not be record holders of Shares immediately prior to the Effective Time, they
will not be entitled to receive the Distribution. Persons exercising their
stock options prior to the Effective Time will be entitled to receive the
Distribution with respect to Shares received upon exercise of such options. The
Replacement Options will, by their terms, provide that upon exercise by the
Company of the Call, all of the Replacement Options, to the extent not
previously exercised, will be deemed exercised by the holder thereof, the
Replacement Options will be cancelled and the holders thereof will be paid in
cash the amount determined by multiplying (i) the excess (if any) of the Call
Price per share over the option price by (ii) the number of shares of the
Special Common Stock covered by such Replacement Options.
Prior to the Closing, the Company will obtain any consents from holders of
Company Options and make any amendments to the terms of the Plans that are
necessary to give effect to the transactions contemplated by the Merger
Agreement. Payment may be withheld in respect of any Company Option until
necessary consents are obtained.
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This Proxy also constitutes the prospectus of the Company with respect to the
Replacement Options and the shares of Special Common Stock issuable upon
exercise thereof.
COVENANTS; REPRESENTATIONS AND WARRANTIES
Pursuant to the Merger Agreement, the Company has agreed that from the date
thereof until the Effective Time (the "Interim Period"), except as contemplated
by the Merger Agreement, the Company and its subsidiaries will conduct their
business in the ordinary course substantially consistent with past practice and
will use their best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees to the end that their goodwill and ongoing
businesses will not be impaired in any material respect. During the Interim
Period, except as disclosed to Zeneca or pursuant to the Real Property
Agreement, the Company has further agreed that, among other things, (i) it will
not adopt or propose any change in the certificate of incorporation or in its
by-laws, except as required pursuant to the Merger Agreement; (ii) it will not
merge or consolidate with any other person or, except in the ordinary course of
business or pursuant to existing commitments or agreements, acquire a material
amount of assets in any other person; (iii) it will not sell, lease, license or
otherwise dispose of any assets or property material to the business of the
Company and its subsidiaries taken as a whole, except (1) pursuant to existing
contracts or commitments, (2) in the ordinary course consistent with past
practices or (3) the liquidation of marketable securities under specified
circumstances; (iv) it will not take or agree or commit to take any action that
it reasonably expects would make any representation or warranty of the Company
under the Merger Agreement inaccurate in any material respect at the Effective
Time; (v) it will not declare or pay any dividend or other distribution with
respect to the Shares, or subdivide, reclassify, recapitalize, split, combine
or exchange any of the Shares (other than in connection with the exercise of
Company Options); (vi) it will not incur any material amount of indebtedness
for borrowed money or make any loans or advances, except in the ordinary course
of business or as required to comply with existing agreements or commitments;
except that the Company may renew or replace all or a part of its existing line
of credit on substantially similar terms; (vii) except for the Employment
Agreements, it will not increase the compensation payable or to become payable
to any of Dr. Salick or Messrs. Bell or Fiore (the "Executive Officers"), or
grant any severance or termination pay to, or enter into any employment or
severance agreement with any director or Executive Officer of the Company, or
establish, adopt, enter into or amend in any material respect or take action to
accelerate any rights or benefits under any collective bargaining agreement or
any employee benefit plan, agreement or policy; and (viii) it will not encumber
or subject to any lien any of its properties or assets that are material to it
and its subsidiaries taken as a whole, except for liens in connection with
certain specified transactions. Furthermore, the Company has agreed that it
will not permit any of its subsidiaries to take any of the actions described in
clauses (i) through (iv) or (vi) through (viii) of the preceding sentence nor
permit any of its subsidiaries which are not wholly owned by the Company to
take any of the actions described in clause (v) of the preceding sentence.
Pursuant to the Merger Agreement, the Company has also agreed that, from
December 22, 1994 until the termination of the Merger Agreement, the Company
and its subsidiaries and the directors, Executive Officers and vice presidents
of the Company will not, directly or indirectly, (i) take any action to
solicit, initiate or (except as set forth in clause (ii) following) encourage
any Acquisition Proposal (as defined below) or (ii) subject to the fiduciary
duties of the Board of Directors as advised by counsel, engage in negotiations
concerning an Acquisition Proposal with or disclose any nonpublic information
relating to the Company or any of its subsidiaries or afford access to the
properties, books or records of the Company or any of its subsidiaries to any
person that may be considering making, or has made, an Acquisition Proposal.
The Company's agreement will not prohibit it from complying with its
obligations under Rule 14e-2 promulgated under the Exchange Act. The Merger
Agreement further provides that the Company will promptly notify Zeneca after
receipt of any Acquisition Proposal or any indication that any person is
considering making an Acquisition Proposal or any request for nonpublic
information relating to the Company or any of its subsidiaries or for access to
the properties, books or records of the Company or any of its subsidiaries by
any person that may be considering making, or has made, an Acquisition Proposal
and will keep Zeneca informed
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of any such Acquisition Proposal, indication or request. The term "Acquisition
Proposal" as used in the Merger Agreement means any offer or proposal for, or
any indication of interest in, a merger or other business combination involving
the Company or certain of its subsidiaries or the acquisition of more than 10%
of the outstanding voting securities in, or a substantial portion of the assets
of, the Company or certain of its subsidiaries, other than the transactions
contemplated by the Merger Agreement.
The Company will promptly notify Zeneca of: (i) any written notice or other
written communication to any Executive Officer from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by the Merger Agreement; (ii) any written notice or
other written communication to any Executive Officer from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by the Merger Agreement; and (iii) any actions, suits, claims, investigations
or proceedings commenced or threatened against, relating to or involving or
otherwise affecting the Company or any of its subsidiaries of which any
Executive Officer has knowledge and which, if pending on the date of the Merger
Agreement, would have been required to have been disclosed pursuant to the
Merger Agreement or which relate to the consummation of the transactions
contemplated by the Merger Agreement.
During the Interim Period (and subject to restrictions contained in
agreements with third parties, prohibitions required by law or privileged
communications), the Company will give Zeneca, its counsel, financial advisors,
auditors and other authorized representatives full access within normal
business hours to the offices, properties, books and records of the Company and
will furnish to Zeneca and such representatives such financial and operating
data and such other information as such persons may reasonably request.
The Merger Agreement provides that (i) the Company will take certain actions
with respect to the preparation of this Proxy Statement and the convening of
the Annual Meeting and (ii) subject to their fiduciary duties, the directors of
the Company will recommend approval and adoption of the Merger Agreement and
the Merger by the Company's stockholders and use best efforts to obtain the
necessary approvals by its stockholders of the Merger Agreement and the
transactions contemplated thereby. Additionally, the Company has agreed to
indemnify the present officers and directors of the Company (and its former
officers and directors) in respect of acts or omissions prior to the Effective
Time and to obtain an extension of the Company's existing officers' and
directors' liability policy (or a replacement therefor) in respect of such acts
or omissions. See "MERGER PROPOSAL--Interest of Certain Persons in the Merger."
The Merger Agreement contains certain representations and warranties of the
parties. Zeneca has made representations regarding its organization and
qualification, authority relative to the Merger Agreement, information in this
Proxy Statement, finder's fees, certain reports filed by Zeneca PLC with the
Commission, financial statements of Zeneca and Zeneca PLC, absence of any
material adverse events, occurrences or developments, litigation and regulatory
compliance. Zeneca has also represented to the Company that it has or will
have, prior to the Closing, sufficient funds, investments and credit facilities
available to it to pay the Cash Consideration and all related fees and
expenses. Zeneca has also made representations and warranties regarding Merger
Subsidiary's organization, capitalization and authority relative to the Merger
Agreement.
The Company has made representations regarding, among other things, its
organization and qualification, its capitalization, its subsidiaries and
investments, its authority relative to the Merger Agreement, certain reports
filed with the Commission, its financial statements, absence of certain
material adverse events, occurrences or developments, litigation, information
in this Proxy Statement, taxes, employee benefits plans, employee options,
finder's fees, environmental matters, regulatory compliance and certain
intellectual property.
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CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of the Company, Zeneca and Merger Subsidiary to consummate
the Merger are subject to the satisfaction of certain conditions, including (i)
the approval and adoption of the Merger Proposal by the stockholders of the
Company in accordance with the Delaware Law; (ii) the expiration or termination
of any applicable waiting period (including any extensions thereof) under the
HSR Act relating to the Merger; (iii) the absence of any provision of any
applicable law or regulation or judgment, injunction, order or decree
prohibiting the consummation of the Merger; and (iv) the making or obtaining of
all actions by or in respect of, or filings with, any governmental body,
agency, official, or authority required to permit the consummation of the
Merger.
The obligation of the Company to consummate the Merger is also subject to the
satisfaction of other conditions, including without limitation the following:
(i) the performance by Zeneca and Merger Subsidiary in all material respects of
all their respective obligations under the Merger Agreement required to be
performed by them at or prior to the Closing, and the representations and
warranties of Zeneca and Merger Subsidiary contained in the Merger Agreement
and any officer's certificate delivered by Zeneca or Merger Subsidiary pursuant
thereto being true in all material respects at and as of the Effective Time as
if made at and as of such time (except to the extent such representations and
warranties speak only as of an earlier date); (ii) the deposit by Zeneca of the
Cash Consideration with the Exchange Agent; and (iii) the receipt by the
Company's Board of Directors of an updated opinion from each of Goldman Sachs
and Lazard Freres as of the date of mailing of this Proxy Statement and as of
the Closing Date reaffirming its opinion to the Company's Board of Directors
that the consideration to be paid in the Merger is fair to the Company's
stockholders.
The obligations of Zeneca and Merger Subsidiary to consummate the Merger are
also subject to the satisfaction of other conditions including without
limitation the following: (i) the performance by the Company in all material
respects of all its obligations under the Merger Agreement required to be
performed by it at or prior to the Effective Time, and the representations and
warranties of the Company contained in the Merger Agreement and in any
officer's certificate delivered by the Company pursuant thereto being true in
all material respects at and (except to the extent that such representations
and warranties speak only as of an earlier date) as of the Effective Time as if
made at and as of such time; (ii) there not being issued any order by any
court, arbitrator or governmental body, agency or official nor there being any
statute, rule or regulation, restraining or prohibiting the consummation of the
Merger or the effective operation of the business of the Company and its
subsidiaries, taken as a whole, after the Effective Time; (iii) there being no
proceeding (1) challenging the Merger Agreement or the transactions
contemplated thereby or seeking to prohibit, alter, prevent or materially delay
the Merger; (2) seeking to restrain or prohibit Zeneca's ownership or operation
(or that of its respective subsidiaries or affiliates) of all or any material
portion of the business or assets of the Company and its subsidiaries, taken as
a whole, or of Zeneca and its subsidiaries, or to compel Zeneca or any of its
subsidiaries or affiliates to dispose of or hold separate all or any material
portion of the business or assets of the Company and its subsidiaries, (3)
seeking to impose or confirm material limitations on the ability of Zeneca or
any of its subsidiaries or affiliates effectively to exercise full rights of
ownership of the shares of Common Stock, including, without limitation, the
right to vote any shares of Common Stock owned by Zeneca or any of its
subsidiaries or affiliates on all matters properly presented to the Company's
stockholders, or (4) seeking to require divestiture by Zeneca or any of its
subsidiaries or affiliates of any shares of Common Stock; (iv) there being no
action taken, or any statute, rule, regulation, injunction, order or decree
proposed, enacted, enforced, promulgated, issued or deemed applicable to the
Merger, by any court, government or governmental authority or agency, domestic
or foreign, other than the application of the waiting period provisions of the
HSR Act (including any extensions thereof), in effect at the Closing that is
likely, directly or indirectly, to result in any of the consequences referred
to in clauses (1) through (4) of clause (iii) of this sentence; (v) Zeneca or
Merger Subsidiary not having received any communication from the Department of
Justice or Federal Trade Commission (each, an "HSR Authority") (which
communication shall be confirmed to the other parties to the Merger Agreement
by the HSR Authority) that causes Zeneca
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or Merger Subsidiary reasonably to believe that any HSR Authority has
authorized the institution of litigation challenging, impairing or diminishing
the benefits with respect to any of the transactions contemplated by the Merger
Agreement; (vi) Zeneca having received or being satisfied that it or the
Company will receive all consents and approvals contemplated by the Merger
Agreement or otherwise material in connection with the consummation of the
Merger or to enable the Company to continue to carry on the business of the
Company and its subsidiaries as presently conducted in all material respects;
and (vii) the Company having entered into the Employment Agreements and
agreements not to compete with each of Dr. Salick, Leslie F. Bell and Michael
T. Fiore. The Company and Dr. Salick entered into the required agreements on
December 22, 1994. See "MERGER PROPOSAL--Agreements Ancillary to Merger
Agreement" above.
TERMINATION; AMENDMENTS; ASSIGNMENT
The Merger Agreement provides that it may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of the Merger Proposal by the stockholders of the Company) (i) by mutual
written consent of the Company and Zeneca, (ii) by either the Company or
Zeneca, if the Merger has not been consummated by June 30, 1995, (iii) by
either the Company or Zeneca, if there is any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Zeneca or the Company from consummating
the Merger becomes final and nonappealable, (iv) by either Zeneca or the
Company, if the Annual Meeting has been held and the stockholders of the
Company have failed to approve and adopt the Merger Agreement and the Merger,
(v) by the Company, on the one hand, or by Zeneca, on the other hand, if any
representation or warranty made by the other in the Merger Agreement was not
true and correct in all material respects when made or such party has failed to
observe or perform in any material respect any of its agreements or obligations
under the Merger Agreement (and such breach of any representation, warranty,
agreement or obligation is not timely cured), (vi) by Zeneca, if (1) the
Company has entered into, or has publicly announced its intention to enter into
an agreement or agreement in principle with respect to any Acquisition
Proposal, (2) any person or group (as defined in Section 13(d)(3) of the
Exchange Act), other than Dr. Salick, Zeneca or any of their affiliates, has
become the beneficial owner (as defined in Rule 13d-3 promulgated under the
Exchange Act) of at least forty percent of the outstanding Shares or has
acquired, directly or indirectly, at least forty percent of the assets of the
Company or (3) the Board of Directors of the Company has withdrawn or
materially modified its approval or recommendation of the Merger Agreement or
the transactions contemplated thereby (the events specified in clause (1)
through (3) of this clause (vi) are hereinafter referred to as the "Termination
Fee Events").
If the Merger Agreement is terminated in accordance with its terms, the
Merger Agreement will be null and void and of no effect with no liability on
the part of the Company, Zeneca or Merger Subsidiary. However, the agreements
regarding confidentiality and the parties' agreements regarding fees (see
"Expenses; Termination Fee" below) will survive such termination of the Merger
Agreement. Additionally, if the Merger Agreement is terminated because the
representations or warranties of a party were not true in all material respects
when made or a party failed to observe or perform in any material respect any
of its agreements or obligations under the Merger Agreement (and any such
breach of representation, warranty, agreement or obligation, to the extent
curable, was not timely cured), then the party entitled to terminate is also
entitled to liquidated damages in an amount (not to exceed $1,000,000) equal to
the reasonable fees and expenses incurred by that party in connection with the
Merger Agreement and the transactions contemplated thereby; provided, however,
that if the other party wilfully breached its material agreements or
obligations, the terminating party is, in lieu of liquidated damages, entitled
to such legal remedies as are available to it.
Any provision of the Merger Agreement may be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Zeneca and Merger
Subsidiary, or in the case of a waiver, by the party against whom the waiver is
to be effective; provided that after the adoption of the Merger Agreement by
the stockholders of the Company, no such amendment or waiver will, without the
further approval of such stockholders, alter or change (1) the
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amount or kind of consideration to be received in exchange for any shares of
the capital stock of the Company, (2) any term of the Certificate of
Incorporation of the Company as the surviving corporation in the Merger or (3)
any of the terms or conditions of the Merger Agreement if such alteration or
change would adversely affect the holder of any shares of the capital stock of
the Company. The Company intends to notify stockholders in the event that any
material provision of the Merger Agreement is amended or waived in any material
respect, independent of whether such amendment or waiver occurs prior to or
after stockholder approval of the Merger Agreement. The Company expects that
any such notification would be given through issuance of a press release or, if
appropriate, a supplement to this Proxy Statement.
Zeneca may transfer its rights and obligations under the Merger Agreement or
assign its rights and obligations, in whole or from time to time in part, to
one or more of its wholly owned subsidiaries (whether direct or indirect) or to
Zeneca PLC but any such transfer or assignment will not relieve Zeneca of its
obligations under the Merger Agreement.
EXPENSES; TERMINATION FEE
All costs and expenses incurred in connection with the Merger Agreement are
to be paid by the party incurring such costs or expenses, except as described
below.
As a condition to Zeneca's willingness to enter into the Merger Agreement,
the Company agreed to pay to Zeneca a fee, in immediately available funds, in
the event the Merger Agreement is terminated for certain reasons described
below. The fee will be equal to the sum of $11,000,000 plus (if no liquidated
damages, as described above, were previously paid) up to an additional
$1,000,000 reimbursement for all reasonable fees payable and expenses incurred
by Zeneca or any of its affiliates (including, without limitation, the fees and
expenses of its financial advisors, auditors and counsel) in connection with
the Merger Agreement and the transactions contemplated thereunder. The fee will
become payable, if at all, promptly, but in no event later than two business
days, after the termination of the Merger Agreement as a result of the
occurrence of any of the following:
(i) the occurrence of any of the Termination Fee Events (see
"Termination; Amendments; Assignment" above);
(ii) Zeneca terminates the Merger Agreement because a representation or
warranty of the Company was not true in all material respects at the time
made or because the Company failed to observe or perform in any material
respect any of its agreements or obligations under the Merger Agreement and
within nine months of the termination of the Merger Agreement (A) the
Company enters into, or publicly announces its intention to enter into, an
agreement or an agreement in principle providing for merger of the Company
or (B) any person or group (as defined in Section 13(d)(3) of the Exchange
Act), other than Dr. Bernard Salick, Zeneca or any of their affiliates,
shall have become the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act) of at least forty percent of the
outstanding Shares or shall have acquired, directly or indirectly, at least
forty percent of the assets of the Company; or
(iii) the Company elects not to consummate the Merger on account of not
receiving updated opinions from Goldman Sachs or Lazard Freres reaffirming
their opinions to the Company's Board of Directors that the consideration
to be paid in connection with the Merger is fair to the Company's
stockholders.
DESCRIPTION OF THE SPECIAL COMMON STOCK
In the Merger, each outstanding Share will be converted into the right to
receive $18.875 in cash and, although no fractional shares will be issued, one-
half share of Special Common Stock. Pursuant to the Merger Agreement and
effective upon consummation of the Merger, the Company's certificate of
incorporation will be amended by operation of the Merger to, among other
things, authorize the issuance of the Special Common Stock and establish the
terms thereof. Under Article FOURTH of the Certificate of Incorporation
("Article
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Fourth"), effective upon the Merger, the preferences, rights and
qualifications, limitations, and restrictions of the Special Common Stock and
the Common Stock will be identical in all respects, except as specifically set
forth in Article Fourth and except for the right of each class to elect five
directors as provided in Article FIFTH of the Certificate of Incorporation. Set
forth below is a description of the terms of the Special Common Stock,
including the differences between such terms and the terms of the Common Stock
as set forth in Article Fourth. The following description of the terms of the
Special Common Stock does not purport to be complete and is qualified in its
entirety by reference to the text of the Certificate of Incorporation which is
attached to this Proxy Statement as Annex B and is incorporated herein by
reference.
AUTHORIZED SHARES
The Company's certificate of incorporation currently provides for authorized
capital of 30,000,000 shares, consisting of 25,000,000 shares of Common Stock,
$.001 par value per share, and 5,000,000 shares of Preferred Stock, $.001 par
value per share. By operation of the Merger, Article Fourth of the Certificate
of Incorporation will provide for authorized capital of 27,500,000 shares, of
which 15,000,000 shares will be designated Common Stock, 7,500,000 shares will
be designated Callable Puttable Common Stock and 5,000,000 shares will be
designated Preferred Stock, each with a par value of $.001 per share. There are
no shares of the Preferred Stock presently issued or outstanding and there will
not be any shares thereof issued or outstanding immediately following the
Merger.
CALL AND PUT FEATURES OF THE SPECIAL COMMON STOCK
The Company has no right to redeem the Common Stock. The Company will not
have the right to call or redeem any shares of the Special Common Stock and
will not purchase or otherwise acquire for value any outstanding shares of the
Special Common Stock, except as provided in the Certificate of Incorporation.
Call. The Company will have the option (the "Call") to purchase, subject to
having available funds therefor as described herein, effective as of a date
(the "Call Date") fixed by the Company within a period commencing with the
Effective Time and ending on the close of business on the last day of the
forty-eighth month thereafter (the "Call Period"), at the applicable price per
share (the "Call Price"), all, but not less than all, of the outstanding shares
of Special Common Stock by (1) giving written notice of the exercise of the
Call (the "Call Notice") in accordance with the terms of the Certificate of
Incorporation at any time during the Call Period and (2) making the deposit
described below with a bank or trust company meeting certain criteria (the
"Depositary"), prior to the Call Date, with irrevocable instructions to the
Depositary to pay the Call Price for all shares of Special Common Stock
surrendered. The Call Notice will set forth, among other things, the Call Date
and instructions as to how to obtain the Call Price for the Special Common
Stock and will be accompanied by a letter of transmittal for use by a holder of
Special Common Stock in surrendering certificates for the Special Common Stock
and obtaining the Call Price therefor. The Call may only be exercised by the
Company upon the affirmative vote (or written consent) of a majority of the
holders of the shares of Common Stock, voting separately as a class; provided,
however, that, regardless of such vote, the Company will only exercise the Call
if the purchase of all of the shares of Special Common Stock pursuant to the
exercise of the Call would not be in violation of Section 160 of the Delaware
Law or any other law for the protection of creditors.
The Call Price is the market price of the Special Common Stock, subject,
during the first two years and seven months after the Effective Time, to a
minimum and maximum price therefor. The maximum price per share is $50.00. The
minimum price is $42.00 per share, discounted from the date which is two and
one-half years from the Effective Time at a rate which, when compounded on a
daily basis, is equal to four percent on an annualized basis if the Call is
made before two and one-half years from the Effective Time. By way of
illustration, assuming that the Company calls the Special Common Stock on the
date which is (a) 183 days after the Effective Time, the minimum Call Price
would be $38.77 per share, (b) 365 days after the Effective Time, the minimum
Call Price would be $39.55 per share, (c) 548 days (or approximately one and
one-half years) after the Effective Time, the minimum Call Price would be
$40.35 per share and (d) 730 days (or two years) after the Effective Time, the
minimum Call Price would be $41.17 per share.
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At least ten and no more than fifteen days prior to the Call Date (which
period may be extended if required under the Exchange Act or the regulations
promulgated thereunder), the Company will mail the Call Notice to each holder
of Special Common Stock at such holder's address as it appears on the transfer
books of the Company and to each holder of a Replacement Option at the address
for such holder set forth in the records of the Company. On the date of mailing
of the Call Notice, the Company will give a similar notice by publication in a
newspaper of general circulation in Los Angeles, California.
Put. Unless the Call has been previously exercised, during a period
commencing with the date which is the earlier of thirty calendar months from
the Effective Time or the date upon which there is a change in control (defined
as a transfer or other disposition of shares by Zeneca PLC or its affiliates or
the issuance of additional shares, the result of which is that Zeneca PLC or
its affiliates no longer own, directly or indirectly, more than fifty percent
of the outstanding shares of Common Stock or voting equity securities of the
Company) and ending on the close of business on the twentieth business day
after the date which is thirty calendar months from the Effective Time (or such
later date as may be required under the Exchange Act and the rules and
regulations promulgated thereunder) (the "Put Period"), each holder of the
Special Common Stock shall have the option (the "Put") to require the Company
to purchase all or a part of the shares of the Special Common Stock held by
such holder at a purchase price of $42.00 per share (the "Put Price"), subject
to having funds legally available therefor as described herein. If such funds
are not legally available to the Company as set forth in the Merger Agreement,
Zeneca PLC will assume the obligations of the Company with respect to the Put.
See "THE MERGER AGREEMENT--Obligations of Zeneca PLC Regarding Put." Holders
who desire to exercise their Put must deliver written notice thereof (the "Put
Notice") during the Put Period to the Company or the Depositary electing to
have shares of Special Common Stock purchased by the Company and specifying
therein the whole number of shares of Special Common Stock which such holder
has elected to cause the Company to purchase, together with a certificate or
certificates representing such shares. At least ten and not more than thirty
days prior to the beginning of the Put Period, the Company will mail a written
notice (the "Put Notification") to each holder of Special Common Stock at such
holder's address as it appears on the transfer books of the Company and to each
holder of an option to purchase shares of the Special Common Stock at the
address for such holder set forth in the records of the Company informing each
such holder of his, her or its right to exercise the Put, the date of the
commencement and termination of the Put Period, the Put Price, the identity and
address of the Depositary and instructions as to how to exercise their Put. A
notice similar to the Put Notification will be given by the Company by
publication in a newspaper of general circulation in Los Angeles, California at
least ten and not more than thirty days prior to the beginning of the Put
Period. If the Company fails to give the Put Notification to the holders of
Special Common Stock at least ten days prior to the beginning of the Put Period
as provided herein, the rights of the holders of the Special Common Stock will
not be prejudiced thereby and the Put will nevertheless become exercisable at
the beginning of the Put Period as herein provided but the expiration of the
Put Period will be extended to that date which is twenty-five business days
from the date the Put Notification is given to holders of the Special Common
Stock.
Surrender and Payment. Prior to the date the Company gives the Put
Notification (or prior to the beginning of the Put Period, if the Company does
not timely give the Put Notification) or the Call Notice, as the case may be,
the Company will appoint the Depositary. Prior to the Call Date, the Company
will deposit with the Depositary an amount of cash sufficient to pay in full
the Company's obligations pursuant to the Call, assuming for purposes thereof
that all outstanding shares of Special Common Stock are to be purchased
pursuant to the Call. In the case of the exercise of the Call, each holder of
shares of Special Common Stock and, in the case of the exercise of the Put,
each holder who has exercised the Put, will be paid, within two business days
following the surrender of the certificate or certificates representing such
shares to the Depositary or the Company together with a properly executed
letter of transmittal, in the case of the exercise of the Call, or the Put
Notice, in the case of the exercise of the Put, covering such shares of stock,
the Call Price or the Put Price for such shares, as the case may be. In no
event, however, will the Call Price be payable prior to the Call Date. As
certificates representing shares of Special Common Stock with respect to which
the Put has been properly exercised are surrendered to the Depositary or the
Company, the Company will
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immediately deposit with the Depositary cash necessary to pay in full the Put
Price for such shares. Upon such payment, each surrendered certificate so paid
for will be transferred to the Company, canceled and retired. In the event of
the exercise of the Put for less than all of the shares of Special Common Stock
represented by a certificate, a new certificate representing the shares of
Special Common Stock not purchased pursuant to the exercise of the Put will be
issued to the holder of such shares. Following the Put Period, any monies
deposited by the Company with the Depositary for purchases of shares upon
exercise of the Put which are not required to be used for the purchase of
shares of Special Common Stock pursuant to the exercise of the Put will revert
to the general funds of the Company. Any monies deposited with the Depositary
for purchase of shares pursuant to the exercise of the Call and unclaimed at
the end of two years from that date which is twenty-one business days following
the Call Date will revert to the general funds of the Company. After such
reversion of funds, any holder of shares of Special Common Stock may look only
to the Company for the payment of the Call Price. If the Call Notice is given
and funds are deposited (together with irrevocable instructions to the
Depositary to pay the Call Price) as set forth in the Certificate of
Incorporation, from and after the Call Date, all of the shares of Special
Common Stock, other than the shares issued upon the exercise of certain
Replacement Options (as described below), will no longer be deemed outstanding
and all rights of the holders of such shares will cease and terminate.
If the Call Date occurs prior to the date which is fourteen months from the
Closing (the "Option Share Termination Date") and the Company has complied with
all of the requirements with respect to the exercise of the Call, the holders
of shares of Special Common Stock acquired within two months after the
Effective Time upon the exercise of Replacement Options which are incentive
stock options within the meaning of Section 424 of the Code, which shares have
not been disposed by the person who exercised such Replacement Option prior to
the Call Date (the "Option Shares"), will be required to surrender the
certificates therefor to the Company or the Depositary on the Option Share
Termination Date together with a properly executed letter of transmittal. Upon
such surrender, such holders will be paid the Call Price for the Option Shares.
Upon payment in full of the Call Price for the Option Shares, the surrendered
certificates will be transferred to the Company, canceled and retired. From and
after the Option Share Termination Date, the Option Shares will no longer be
deemed outstanding and all rights of the holders of the Option Shares will
cease and terminate.
If the Company fails to make the deposit or promptly pay the purchase price
for shares of the Special Common Stock as provided in Article Fourth, the Call
Price or Put Price, as the case may be, for such shares will thereafter be
increased by an amount equal to interest thereon (the "Default Interest") from
the date of surrender of the certificates pursuant to Article Fourth at an
annual rate equal to two percentage points in excess of the rate of interest
publicly announced from time to time by the Bank of America NT&SA in San
Francisco, California, as its reference rate until the purchase price therefor,
together with the Default Interest, is paid in full and, until such payment in
full, the shares of Special Common Stock will continue to be outstanding and
owned by the record owner thereof. The right of the holders of the Special
Common Stock to exercise the Put will accelerate and the Put will be
exercisable immediately upon the occurrence of certain specified insolvency
events and until the end of the Put Period (without giving effect to
acceleration of the commencement date thereof) and, immediately upon the
occurrence of such acceleration, the Call will be null and void and of no
further force or effect.
VOTING RIGHTS
Except as may be required by law and as described below, the holders of
record of shares of Common Stock and the holders of record of the Special
Common Stock will be entitled to one vote per share for all purposes and will
vote together on all matters and not as a separate class or series. For matters
to be voted on by the Common Stock and the Special Common Stock together and
not as a separate class or series, the presence in person or by proxy of the
holders of record as of the applicable record date of a majority of the total
number of shares of Common Stock and shares of the Special Common Stock will
constitute a quorum. For matters to be voted on by the Common Stock as a
separate class, the presence in person or by proxy of
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the holders of record of a majority of the total number of shares outstanding
as of the applicable record date will constitute a quorum of the Common Stock
voting separately as a class. For matters to be voted on by the Special Common
Stock as a separate class, the presence in person or by proxy of the holders of
record of shares of Special Common Stock representing a majority of all of the
votes entitled to be cast by the holders of the Special Common Stock
outstanding as of the applicable record date will constitute a quorum of the
Special Common Stock voting separately as a class.
For matters to be voted on by the Special Common Stock as a separate class,
and only on such matters, consistent with the rights of the present holders of
Shares, a holder of record of a share of the Special Common Stock will be
entitled to ten votes on each matter submitted to a vote (whether at a meeting
or by written consent) by holders of the Special Common Stock, voting
separately as a class, for each such share thereof held of record by such
holder on a record date if, with respect to such share, each and every
beneficial owner thereof was (1) the beneficial owner of the Shares exchanged
therefor in the Merger (the "Premerger Shares") on August 27, 1991, the date of
the reincorporation of the Company in the State of Delaware (the
"Reincorporation Date"), and at all times until exchanged for shares of Special
Common Stock pursuant to the Merger and (2) the beneficial owner of such share
of Special Common Stock immediately following the Effective Time and at all
times since the Effective Time, subject to certain presumptions set forth in
Article Fourth. Although the number of votes to which a present holder of
Shares entitled to ten votes cannot exceed that percentage of the votes
entitled to be cast which is equal to that percentage of the total outstanding
Shares which such Shares represented on August 27, 1991, there is no such limit
on the votes entitled to be cast by the holders of the Special Common Stock
which has the effect of increasing the percentage of votes to which holders of
Premerger Shares beneficially owned as of the Reincorporation Date, including
Dr. Salick, are entitled. See "INTRODUCTION--Record Date; Voting Rights;
Proxies." Consistent with the Company's certificate of incorporation, the
holders entitled to ten votes per share of Special Common Stock will be
entitled to make certain transfers thereof without losing the ten-vote right.
Holders of shares of the Special Common Stock not entitled to ten votes per
share on matters to be voted on by the holders of the Special Common Stock,
voting separately as a class, are entitled to one vote per share.
Additionally, a beneficial owner of any share of the Special Common Stock
beneficially owned by reason of participation in any employee stock option or
employee stock purchase plan or other similar individual account employee
benefit plan or arrangement of the Company will be deemed for purposes of the
ten-vote rights to have been the beneficial owner of the Premerger Shares at
the Reincorporation Date and such share of Special Common Stock at the
Effective Time if (a) as of the Reincorporation Date, the Premerger Shares for
which the Special Common Stock were exchanged, and as of the Effective Time
such share of Special Common Stock, was allocated to the account of such
beneficial owner under such plan or arrangement, or (b) at the Reincorporation
Date and the Effective Time such beneficial owner was the holder, as the case
may be, of an option or right to acquire Premerger Shares and the Replacement
Option substituted therefor in the Merger, respectively. The distribution of
such share to such beneficial owner pursuant to such plan or arrangements, or
the purchase by such beneficial owner of such share upon the exercise of an
option or a right, as the case may be, will not be deemed to be a change in
beneficial ownership and such beneficial owner will be entitled to ten votes
per share.
Each share of Special Common Stock, whether at any particular time the
beneficial owner thereof is entitled to ten votes or less, will be identical to
all other shares of Special Common Stock in all other respects and together all
shares of Special Common Stock will constitute a single class of shares of the
Company.
ELECTION OF DIRECTORS
From the Closing Date until the Termination Date, the holders of shares of
Common Stock, voting separately as a class, will be entitled to elect five
Common Stock Directors and the holders of the Special Common Stock, voting
separately as a class, will be entitled to elect five Special Common Stock
Directors. The absence of a quorum of the holders of the shares of Common Stock
will not prevent the election of the Special Common Stock Directors.
Conversely, the absence of a quorum of the holders of the Special Common Stock
will not prevent the election of the Common Stock Directors. In the absence of
either or both quorums,
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a majority of the holders present in person or by proxy of the class which
lacks a quorum will have the power to adjourn for a period of up to thirty days
the meeting for the election of the directors which they are entitled to elect
from time to time without notice other than announcement at the meeting until a
quorum of such class shall be present. From and after the Termination Date, the
holders of the Common Stock and the holders of the Special Common Stock will
vote together for the election of directors and not as a separate class or
series and the right of a holder of Special Common Stock to be entitled to ten
votes per share as described above will be of no further force or effect.
If the Company fails to deposit funds with the Depositary and promptly pay
the purchase price for shares of Special Common Stock upon exercise of the Put
or Call, as the case may be, or upon the occurrence of certain insolvency
events specified in Article Fourth, then the authorized number of directors
constituting the Board, immediately and automatically, without further action
of the Board or the stockholders of the Company, will be increased by a number
which will, together with the number of Special Common Stock Directors,
represent a majority of the authorized number of directors of the Company. In
such event, the Special Common Stock Directors then in office will have the
sole and exclusive right to elect to the Board the persons to fill all of the
new directorships created by such increase in the authorized number of
directors. Thereafter, the holders of the Special Common Stock will be entitled
to elect, at all subsequent meetings of stockholders at which directors are
elected, a number of directors representing a majority of then authorized
number of directors of the Company. Such rights of the holders of the Special
Common Stock will continue until such time as the aggregate Put Price and/or
the Call Price, as the case may be, together with the Default Interest thereon
has been paid in full to the holders of Special Common Stock. However, such
rights will be of no force or effect if Zeneca or Zeneca PLC purchases and pays
for, in accordance with the Merger Agreement, all of the shares of Special
Common Stock with respect to which the Put has been exercised. See "THE MERGER
AGREEMENT--Obligations of Zeneca PLC Regarding Put" above.
SPECIAL VOTING RIGHTS
Except as otherwise required by law, until the Termination Date, without (1)
the affirmative vote (or written consent) of holders of record of a majority of
all of the votes entitled to be cast by the holders of the outstanding Special
Common Stock, voting separately as a class, and (2) the affirmative vote (or
written consent) of holders of record of a majority of the total number of
outstanding shares of Common Stock, voting separately as a class, the Company
will not take certain actions including, without limitation, the issuance of
securities senior to, or on parity with, the Special Common Stock or the Common
Stock, or any securities convertible or exercisable therefor; any merger,
consolidation, or recapitalization of the Company; any sale, transfer or other
disposition of all or substantially all of the Company's assets to any person;
any liquidation, dissolution, winding up or other cessation of the business or
operations of the Company; or any amendments to certain provisions of the
Certificate of Incorporation (including Article Fourth).
LIQUIDATION
Upon any liquidation, dissolution or winding up of the Company, prior to any
distributions to holders of Common Stock, the holders of shares of Special
Common Stock will be entitled to receive, out of the assets of the Company,
$42.00 per share or, if appropriate, following a default in payment of the Call
Price or the Put Price, the amount of the Call Price or the Put Price, as the
case may be, increased by an amount equal to the Default Interest. If the
assets of the Company are insufficient to permit the payment to the holders of
the Special Common Stock of the full preferential amounts to which they are
entitled, then the entire assets will be distributed ratably among the holders
of the Special Common Stock then outstanding until payment in full of such
amount per share.
After payment or distribution to the holders of the Special Common Stock of
the full liquidation preference to which they are entitled, the holders of
shares of Common Stock will be entitled to receive out of the assets of the
Company an amount equal to $42.00 per share thereof before any further payment
is made or assets are distributed to the holders of Special Common Stock. If
the assets distributable to the holders of shares of Common Stock will be
insufficient to permit the payment to them of $42.00 per share, such assets
will be distributed ratably among the holders of shares of Common Stock then
outstanding until
50
<PAGE>
payment in full of such amount per share. After the payment to the holders of
shares of Common Stock of $42.00 per share, the remaining assets of the Company
available for distribution to stockholders shall be distributed ratably to the
holders of shares of the Special Common Stock and the holders of shares of
Common Stock then outstanding.
APPRAISAL RIGHTS
Holders of record of Shares who comply with the applicable statutory
procedures summarized herein will be entitled to appraisal rights under Section
262 of the Delaware Law ("Section 262"). A person having a beneficial interest
in the Common 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 appraisal
rights.
The following discussion is not a complete statement of the law pertaining to
appraisal rights under the Delaware Law and is qualified in its entirety by the
full text of Section 262 which is reprinted in its entirety as Annex D to this
Proxy Statement. All references in Section 262 and in this summary to a
"stockholder" are to the record holder of Shares as to which appraisal rights
are asserted.
The failure of a stockholder to vote against the Merger will not, in and of
itself, constitute a waiver of such stockholder's appraisal rights under
Section 262.
Under the Delaware Law, holders of Shares who follow the procedures set forth
in Section 262 will be entitled to have their Shares appraised by the Delaware
Chancery Court (the "Chancery Court") and to receive payment in cash of the
"fair value" of such shares at the Effective Time, exclusive of any element of
value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, if any, as determined by such court.
Stockholders who desire to exercise their appraisal rights must deliver to
the Company, before the taking of the vote on the Merger Proposal, a written
demand for appraisal of their Shares. This written demand for appraisal of
Shares must be in addition to and separate from any proxy vote abstaining from
or voting against the Merger Proposal. Voting against, abstaining from voting
or failing to vote on the Merger Proposal will not constitute a demand for
appraisal within the meaning of Section 262.
Stockholders electing to exercise their appraisal rights under Section 262
must not vote for approval of the Merger Proposal. If a stockholder returns a
signed proxy but does not specify a vote against approval of the Merger
Proposal or a direction to abstain, the proxy will be voted for approval of the
Merger Proposal, which will have the effect of waiving that stockholder's
appraisal rights.
A demand for appraisal must be executed by or for the stockholder of record,
fully and correctly, as such stockholder's name appears on the Share
certificate. If the Shares are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, such demand must be executed by or for the
fiduciary. If the Shares are owned of record by or for more than one person, as
in a joint tenancy or tenancy in common, such demand must be executed by or for
all joint owners. An authorized agent, including an agent for two or more joint
owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, he is acting as agent for the record
owner.
A record owner, such as a broker, who holds Shares as a nominee for others
may exercise his right of appraisal with respect to the Shares for all or less
than all beneficial owners of Shares as to which he or she is the record owner.
In such case, the written demand must set forth the number of Shares covered by
such demand. Where the number of Shares is not expressly mentioned, the demand
will be presumed to cover all Shares outstanding in the name of such record
owner.
51
<PAGE>
A stockholder who elects to exercise appraisal rights should mail or deliver
his, her or its written demand to Leslie F. Bell, Secretary, Salick Health
Care, Inc., 8201 Beverly Boulevard, Los Angeles, California 90048. The written
demand for appraisal should specify the stockholder's name and mailing address,
and that the stockholder is thereby demanding appraisal of his, her or its
Shares. Within ten days after the Effective Time, the Company must notify each
stockholder of the Company who has complied with Section 262 and has not voted
in favor of or consented to the Merger Proposal of the date upon which the
Effective Time occurred.
Within 120 days after the Effective Time, any stockholder who has satisfied
the requirements of Section 262 may deliver to the Company a written demand for
a statement listing the aggregate number of Shares not voted in favor of the
Merger Proposal and with respect to which demands for appraisal have been
received and the aggregate number of holders of such Shares. Such statement
must be mailed within 10 days after the written request therefor has been
received by the Company or within 10 days after expiration of the time for
delivery of demands for appraisal under Section 262, whichever is later.
Within 120 days after the Effective Time, either the Company or any
stockholder who has complied with the required conditions of Section 262 may
file a petition in the Chancery Court demanding a determination of the value of
the Shares of all stockholders demanding appraisal rights. The Company has no
present intention to file such a petition if demand for appraisal is made.
Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the Company 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
Company. If the petition shall be filed by the Company, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Chancery Court, shall give notice of the time and place fixed
for the hearing of such petition by registered or certified mail to the Company
and to the stockholders shown on the list at the address therein stated. Such
notice shall also be given by one or more publications at least one 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 Chancery Court deems
advisable. The forms of the notices by mail and by publication shall be
approved by the Chancery Court and the costs thereof shall be borne by the
Company.
If a petition for an appraisal is filed in a timely fashion, after a hearing
on such petition, the Chancery Court shall determine the stockholders who have
complied with Section 262 and who have become entitled to appraisal rights. The
Chancery Court may require the stockholders who have demanded an appraisal for
their Shares represented by certificates to submit such certificates to the
Register in Chancery for notation thereon of the pendency of the appraisal
proceeding. If any stockholder fails to comply with such direction, the
Chancery Court may dismiss the proceeding as to such stockholder.
After determining the stockholders entitled to an appraisal, the Chancery
Court shall appraise the Shares owned by such stockholders, determining their
fair value, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining the
fair rate of interest, the Chancery Court may consider all relevant factors,
including the rate of interest the Company would have had to pay to borrow
money during the pendency of the proceeding. In determining fair value of such
shares, the Court is to take into account all relevant factors. In Weinberger
v. UOP, Inc. et al., the Delaware Supreme Court 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,
and that "fair price obviously requires consideration of all relevant factors
involving the value of the Company. . . ." The Delaware Supreme Court stated
that in making this determination of fair value the Court must consider market
value, asset value, dividends, earnings prospects, the nature of the enterprise
and any other facts which could be ascertained as of the date of the merger
which throw any light on future prospects of the merged corporation. Section
262 provides that fair value is to be "exclusive of any element of value
arising from the accomplishment or
52
<PAGE>
expectation of the merger." In Weinberger, the Delaware Supreme Court held that
the "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered."
The Chancery Court shall direct payment of the fair value of the Shares,
together with interest, if any, by the Company to the stockholders entitled
thereto.
Stockholders considering seeking appraisal of their Shares should note that
the fair value of their Shares determined under Section 262 could be more, the
same or less than the consideration they would receive pursuant to the Merger
Agreement if they did not seek appraisal of their Shares. The costs of the
appraisal proceeding may be determined by the Chancery Court and taxed upon the
parties as the Chancery Court deems equitable in the circumstances. Upon
application of a stockholder, the Chancery Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, be charged pro rata against the value of all
Shares entitled to an appraisal. In the absence of such a determination or
assessment, each party bears his, her or its own expenses.
From and after the Effective Time, no stockholder who has demanded appraisal
rights as provided in Section 262 shall be entitled to vote such Shares for any
purpose or to receive payment of dividends or other distributions on such
Shares, except for dividends or distributions payable to stockholders of record
at a date which is prior to the Effective Time.
Notwithstanding the foregoing, at any time within 60 days after the Effective
Time, any stockholder shall have the right to withdraw his, her or its demand
for appraisal and to accept the terms offered in the Merger Agreement. After
this period the stockholder may withdraw his, her or its demand for appraisal
and receive payment for his, her or its Shares as provided in the Merger
Agreement only with the written approval of the Company. If no petition for
appraisal is filed with the Chancery Court within 120 days after the Effective
Time, stockholders' rights to appraisal will cease and stockholders will be
entitled to receive the Merger Consideration as provided for in the Merger
Agreement. Inasmuch as the Company has no obligation to file such a petition,
any stockholder who desires such a petition to be filed is advised to file it
on a timely basis. No petition timely filed in the Chancery Court demanding
appraisal shall be dismissed as to any stockholder without the approval of the
Chancery Court, and such approval may be conditional upon such terms as the
Chancery Court deems just.
Zeneca has agreed in the Merger Agreement to reimburse the Company for one-
half of any payment made in respect to any demand received by the Company for
the appraisal of Shares. Pursuant to the Merger Agreement, the Company will
give Zeneca prompt notice of any such demands received by the Company, and
Zeneca will have the right to participate in all negotiations and proceedings
with respect to such demands. The Company will not, except with the prior
written consent of Zeneca, make any payment with respect to, or settle or offer
to settle, any such demands.
There will be no appraisal rights arising as a result of exercise of the Call
of the Special Common Stock.
53
<PAGE>
DESCRIPTION OF AMENDMENTS TO THE
CHARTER DOCUMENTS OF THE COMPANY
The Merger Agreement requires that, as of the Effective Time, the certificate
of incorporation and by-laws of the Company be revised to read in the form
attached hereto as Annex B and C, respectively. In addition to the
authorization of the Special Common Stock and the establishment of the
preferences, rights and qualifications, limitations and restrictions thereon
which are described above, including without limitation the Put and Call
features and special voting requirements, the Certificate of Incorporation
revises certain other provisions of the existing certificate of incorporation
of the Company. The following description of the amendments which will be
effected to the Company's existing certificate of incorporation and by-laws by
virtue of the Merger does not purport to be complete and is qualified in its
entirety by reference to the Certificate of Incorporation and By-Laws attached
to this Proxy Statement as Annex B and C, respectively, each of which is
incorporated herein by reference. See "DESCRIPTION OF THE SPECIAL COMMON
STOCK."
CERTIFICATE OF INCORPORATION
The existing certificate of incorporation of the Company provides for a Board
of Directors divided into three classes, each consisting of approximately one-
third of the members of the Board. The term of office of each director is for
three years. The Merger amends the Company's existing certificate of
incorporation to delete the Board classification requirements and to provide
for a one year term for directors. Until the Termination Date, the holders of
the Common Stock are entitled to elect five directors and the holders of the
Special Common Stock are entitled to elect five directors. In case any vacancy
occurs among the Common Stock Directors, that vacancy will be filled by the
remaining Common Stock Directors. Likewise, if a vacancy occurs among the
Special Common Stock Directors, that vacancy will be filled by the remaining
Special Common Stock Directors.
The certificate of incorporation of the Company provides for a vote of 66
2/3% of all votes entitled to be cast for the approval of certain extraordinary
transactions to be taken by the Company with interested persons, as therein
defined, and for amendments to certain provisions of the certificate of
incorporation. The Certificate of Incorporation does not contain any provisions
regarding interested party transactions or require a supermajority vote for
certain amendments to the Certificate of Incorporation but does require until
the Termination Date the affirmative vote of a majority of the shares of Common
Stock, voting separately as a class, and a majority of the votes entitled to be
cast by the holders of the Special Common Stock, voting separately as a class,
to approve certain extraordinary transactions, including amendments to certain
provisions of the Certificate of Incorporation.
The certificate of incorporation prohibits the taking of any action by
written consent of the stockholders of the Company, limits the calling of
special meetings of the stockholders to only the Board of Directors or the
Chairman of the Board and requires advance notice (in the manner provided in
the by-laws) of stockholder nominations for the election of directors and of
business to be brought by stockholders before any meeting. The Certificate of
Incorporation does not contain any of such restrictions.
BY-LAWS
The existing by-laws of the Company set forth specific notice and other
requirements that stockholders must comply with in respect of the nomination of
persons to stand for election of directors and proposals of business to be
considered by stockholders at an annual meeting. Special meetings of the
stockholders may only be called by the Board of Directors or the Chairman of
the Board.
The By-Laws do not contain specific requirements with respect to nominations
and proposals to be considered by the stockholders. Special meetings of the
holders of the Common Stock, voting separately as a class, may be called by the
holders of at least twenty-five percent of the then outstanding shares of the
54
<PAGE>
Common Stock. Special meetings of the holders of the Special Common Stock,
voting separately as a class, may be called by the holders of shares of the
Special Common Stock representing at least twenty-five percent of the votes of
the then outstanding shares of the Special Common Stock. Special meetings of
the holders of the Common Stock and the Special Common Stock, voting together
as a class, may be called by the Board of Directors or the Chairman of the
Board.
The By-Laws set forth a list of actions that may only be taken by the Board
by action of a majority thereof, including at least one Common Stock Director
who is at the time an employee of Zeneca or certain affiliates thereof and one
Special Common Stock Director who was an executive officer of the Company prior
to the Merger. The existing by-laws of the Company do not contain any such
provisions.
The existing by-laws have no restrictions on the directors who may serve on
committees of the Board. The By-Laws require that any committee be made up of
an equal number of Common Stock Directors and Special Common Stock Directors.
In case any vacancy occurs on any committee among the members thereof who are
Common Stock Directors, such vacancy will be filled only by a majority of the
Common Stock Directors who are then in office. In case any vacancy occurs on
any committee among the members thereof who are Special Common Stock Directors,
such vacancy shall be filled only by a majority of the Special Common Stock
Directors.
ZENECA
Zeneca is a wholly owned subsidiary of Zeneca PLC. Zeneca holds substantially
all of the operating assets of Zeneca Group including, directly or indirectly,
the interest in other Zeneca Group companies. Zeneca is an English company
formed in 1992. Merger Subsidiary is a Delaware corporation and an indirect
wholly owned subsidiary of Zeneca.
Zeneca Group was created by separating the pharmaceuticals, agricultural
chemicals, specialty chemicals, seeds and biological products businesses of
Imperial Chemical Industries PLC ("ICI") from ICI's other chemical operations,
with effect from January 1, 1993.
Zeneca Group is a major international bioscience business engaged in the
research, development, manufacture and marketing of ethical (prescription)
pharmaceuticals, agricultural chemicals, specialty chemicals, seeds and
biological products. These business classes are research and technology
intensive and have extensive international development and marketing skills and
a strong common science base.
Zeneca Group's pharmaceuticals business is a large innovative ethical
pharmaceuticals business with an established record of new product invention
and commercialization. It has leading positions in the sale of products in the
cardiovascular and anti-cancer therapy areas and intravenous anaesthetics, as
well as a strong presence in hospital antiseptics.
Zeneca Group's agrochemicals business is one of the world's largest suppliers
of agricultural chemicals. Its products comprise mainly herbicides,
insecticides and fungicides; other products include rodenticides and plant
growth regulators. The agrochemicals class of business also includes the seeds
business which aims to produce new products that are effective in increasing
crop yields, quality or flavor, or overcoming unfavorable growing conditions
such as disease, drought or adverse temperatures.
Zeneca Group's specialties' businesses are grouped by core technical
competencies in organic chemistry, coatings and biotechnology. The organic
chemicals businesses include colors, biocides and fine chemicals. The coatings
businesses consist mainly of Stahl leather products, resins, specialty inks and
certain other small businesses. The biotechnology products include food
ingredients, biodegradable polymers, and certain genetic diagnostic technology.
The principal executive offices of Zeneca and Zeneca PLC are located at 15
Stanhope Gate, London W1Y 6LN, United Kingdom, and the telephone number is 011-
44-171-304-5000. The principal executive offices of Merger Subsidiary are
located at 1800 Concord Pike, Wilmington, Delaware 19897 and the telephone
number is (302) 886-3000.
55
<PAGE>
SELECTED FINANCIAL DATA OF THE COMPANY
The following table sets forth selected consolidated financial information
regarding the Company's operating results and financial position for each of
the five fiscal years in the period ended August 31, 1994 and for each of the
three month periods ended November 30, 1993 and 1994. The selected consolidated
financial information for the Company for the five years shown below has been
derived from the audited consolidated financial statements of the Company. The
interim unaudited financial information for the Company for the three months
ended November 30, 1993 and 1994 reflect, in the opinion of the Company's
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the information provided for such interim
periods. The results of operations of such interim periods are not necessarily
indicative of results which may be expected for any other interim period or for
the year as a whole. The historical data are not necessarily indicative of
results to be expected after consummation of the Merger and should be read in
conjunction with the Consolidated Financial Statements and Notes thereto of the
Company incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED AUGUST 31, NOVEMBER 30,
------------------------------------------ --------------------
1990 1991 1992 1993 1994 1993 1994
------- ------- -------- -------- -------- ------------ -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues, net. $64,775 $73,773 $ 95,056 $115,893 $131,529 $ 29,463 $35,965
Operating income........ $ 7,420 $ 9,134 $ 11,686 $ 14,418 $ 16,679 $ 3,658 $ 4,606
Income before taxes and
extraordinary item..... $ 6,100 $ 7,236 $ 11,252 $ 14,387 $ 16,882 $ 3,797 $ 4,890
Extraordinary item, net
of income tax effect... $ 528
Net income.............. $ 4,150 $ 4,518 $ 6,920 $ 8,976 $ 10,380 $ 2,392 $ 2,960
Earnings per share:
Primary:
Income before
extraordinary item... $ 0.65 $ 0.80 $ 0.94 $ 1.05 $ 1.19 $ 0.28 $ 0.34
Extraordinary item.... $ 0.09 -- -- -- -- -- --
------- ------- -------- -------- -------- -------- -------
Net earnings per
share................ $ 0.74 $ 0.80 $ 0.94 $ 1.05 $ 1.19 $ 0.28 $ 0.34
======= ======= ======== ======== ======== ======== =======
Fully diluted:
Income before
extraordinary item... $ 0.65 $ 0.75 $ 0.88 $ 0.98 $ 1.10 $ 0.26 $ 0.31
Extraordinary item.... 0.07 -- -- -- -- -- --
------- ------- -------- -------- -------- -------- -------
Net earnings per
share................ $ 0.72 $ 0.75 $ 0.88 $ 0.98 $ 1.10 $ 0.26 $ 0.31
======= ======= ======== ======== ======== ======== =======
<CAPTION>
AUGUST 31, NOVEMBER 30,
------------------------------------------ ------------
1990 1991 1992 1993 1994 1994
------- ------- -------- -------- -------- ------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital......... $28,866 $26,719 $ 58,732 $ 63,503 $ 67,940 $ 65,331
Total assets............ $77,858 $87,819 $131,018 $146,401 $166,082 $173,039
Long-term debt and
capitalized leases..... $32,393 $32,541 $ 33,676 $ 37,231 $ 39,548 $ 38,414
Stockholders' equity.... $34,690 $39,262 $ 82,214 $ 91,431 $102,295 $105,282
</TABLE>
56
<PAGE>
MARKET PRICES FOR SHARES
The Shares are traded on the Nasdaq National Market under the symbol "SHCI."
The following table sets forth, for the periods indicated, the high and low
closing prices of the Shares on the Nasdaq National Market as reported by
NASDAQ:
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1st quarter ended November 30, 1992......................... $14 3/4 $ 9 3/4
2nd quarter ended February 28, 1993......................... $16 $10 3/4
3rd quarter ended May 31, 1993.............................. $13 3/8 $10 1/2
4th quarter ended August 31, 1993........................... $14 1/4 $11 3/4
1st quarter ended November 30, 1993......................... $16 1/2 $13
2nd quarter ended February 28, 1994......................... $17 1/4 $14
3rd quarter ended May 31, 1994.............................. $19 $15 1/2
4th quarter ended August 31, 1994........................... $18 1/2 $14 1/4
1st quarter ended November 30, 1994......................... $25 1/4 $17 3/4
2nd quarter ended February 28, 1995......................... $35 3/8 $23 1/2
</TABLE>
On December 21, 1994, the last full trading day prior to the public
announcement that the Merger Agreement had been executed, the closing price per
Share, as reported on the Nasdaq National Market , was $29.25. On March 10,
1995, the last full trading day for which quotations were available at the time
of printing of this Proxy Statement, the closing sale price per Share, as
reported on the Nasdaq National Market, was $35 1/2.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE SHARES.
No shares of Preferred Stock have been issued.
Based upon security position listings and the Company's belief, it is
estimated there were approximately 1,500 holders of the Shares as of March 3,
1995.
The Company has not declared any cash dividends on the Shares in the past
five years and has no present intention to pay cash dividends in the
foreseeable future.
57
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Financial Statements of the Company give
effect to the Merger and the conversion of the Debentures. The unaudited Pro
Forma Financial Statements are based on the assumptions and adjustments
described in the accompanying notes and should be read in conjunction therewith
and in conjunction with the historical financial statements of the Company,
including the notes thereto, incorporated by reference herein. The unaudited
Pro Forma Financial Statements do not purport to present the financial position
or the results of operations of the Company had the transactions assumed
therein occurred on the dates indicated, nor are they necessarily indicative of
the results of operations which may be achieved in the future.
SALICK HEALTH CARE, INC.
UNAUDITED PRO FORMA BALANCE SHEET
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash........................... $ 1,456,000 $ 1,456,000
Marketable securities.......... 45,073,000 $ 5,010,000 (b) 50,083,000
Accounts receivable, net....... 33,075,000 33,075,000
Other current assets........... 10,107,000 10,107,000
------------ ------------
Total current assets......... 89,711,000 94,721,000
Property and equipment, net...... 64,486,000 64,486,000
Other long-term assets........... 18,842,000 (90,000)(d) 18,345,000
(407,000)(e)
------------ ------------ ------------
$173,039,000 $ 4,513,000 $177,552,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities.............. $ 24,380,000 $ 1,600,000 (a) $ 35,779,000
3,600,000 (g)
6,815,000 (c)
(616,000)(f)
Long-term debt, less current
portion......................... 34,306,000 (25,005,000)(h) 9,301,000
Other long-term liabilities...... 9,071,000 9,071,000
------------ ------------
Total liabilities............ 67,757,000 54,151,000
Stockholders' equity Common
stock........................... 9,000 1,000 (h) 10,000
(10,000)(i)
10,000 (i)
Additional paid in capital..... 54,827,000 (500,000)(a) 77,735,000
25,004,000 (h)
(407,000)(e)
5,010,000 (b)
205,865,000 (i)
616,000 (f)
(205,865,000)(i)
(6,815,000)(c)
Unrealized holding losses...... (1,226,000) (1,226,000)
Retained earnings.............. 51,672,000 (1,100,000)(a) 46,882,000
(90,000)(d)
(3,600,000)(g)
------------ ------------ ------------
Total stockholders' equity... 105,282,000 123,401,000
------------ ------------
$173,039,000 $ 4,513,000 $177,552,000
============ ============ ============
</TABLE>
58
<PAGE>
SALICK HEALTH CARE, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
THREE MONTHS ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Operating revenues, net...... $35,965,000 $35,965,000
Expenses:
Medical supplies and
services.................... 6,321,000 6,321,000
Salaries and related costs... 14,102,000 14,102,000
Other administrative
expenses.................... 5,012,000 5,012,000
Contract and occupancy costs. 3,683,000 3,683,000
Depreciation and
amortization................ 2,241,000 2,241,000
----------- -----------
Total expenses............... 31,359,000 31,359,000
----------- -----------
Operating income............... 4,606,000 4,606,000
Net interest income............ 20,000 $ 16,000 (a) 454,000
462,000 (b)
(44,000)(c)
Net investment losses.......... (61,000) (61,000)
Minority interest.............. 325,000 325,000
----------- -----------
Income before income taxes..... 4,890,000 5,324,000
Provision for income taxes..... 1,930,000 174,000 (d) 2,104,000
----------- -------- -----------
Net income..................... $ 2,960,000 $260,000 (e)(f) $ 3,220,000
=========== ======== ===========
Earnings per share:
Primary...................... $ 0.34 $ 0.30
=========== ===========
Fully diluted................ $ 0.31 $ 0.30
=========== ===========
Weighted average number of
shares used in computing
earnings per share:
Primary...................... 8,830,000 10,904,000 (g)
=========== ===========
Fully diluted................ 10,650,000 10,904,000 (g)
=========== ===========
</TABLE>
59
<PAGE>
SALICK HEALTH CARE, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED AUGUST 31, 1994
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ----------- ------------
<S> <C> <C> <C>
Revenues:
Operating revenues, net.... $131,529,000 $131,529,000
Expenses:
Medical supplies and serv-
ices...................... 20,121,000 20,121,000
Salaries and related costs. 54,497,000 54,497,000
Other administrative ex-
penses.................... 17,851,000 17,851,000
Contract and occupancy
costs..................... 13,867,000 13,867,000
Depreciation and amortiza-
tion...................... 8,514,000 8,514,000
------------ ------------
Total expenses............. 114,850,000 114,850,000
------------ ------------
Operating income............. 16,679,000 16,679,000
Net interest income (ex-
pense)...................... (663,000) $ 66,000 (a) 1,257,000
1,949,000 (b)
(95,000)(c)
Net investment income........ 219,000 219,000
Minority interest............ 647,000 647,000
------------ ------------
Income before income taxes... 16,882,000 18,802,000
Provision for income taxes... 6,502,000 768,000 (d) 7,270,000
------------ ---------- ------------
Net income................... $ 10,380,000 $1,152,000 (e)(f) $ 11,532,000
============ ========== ============
Earnings per share:
Primary.................... $ 1.19 $ 1.06
============ ============
Fully diluted.............. $ 1.10 $ 1.06
============ ============
Weighted average number of
shares used in computing
earnings per share:
Primary.................... 8,709,000 10,904,000(g)
============ ============
Fully diluted.............. 10,576,000 10,904,000(g)
============ ============
</TABLE>
60
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(1) The unaudited Pro Forma Balance Sheet presents the Company's historical
balance sheet as of November 30, 1994 and the pro forma balance sheet as if
the Merger and conversion of the Debentures had occurred on November 30,
1994.
(2) The unaudited Pro Forma Statement of Income for the three months ended
November 30, 1994 presents the historical operations of the Company and the
pro forma operations as if the Merger and conversion of the Debentures had
occurred on September 1, 1994.
(3) The unaudited Pro Forma Statement of Income for the fiscal year ended
August 31, 1994 presents the historical operations of the Company and the
pro forma operations as if the Merger and conversion of the Debentures had
occurred on September 1, 1993.
(4) Pro Forma Balance Sheet adjustments are as follows:
(a) Represents adjustment to accrue transaction expenses incurred by the
Company estimated at $1.6 million, including $500,000 relating to
registration of newly issued Special Common Stock.
(b) Represents adjustment to record the exercise of outstanding stock
options.
(c) Represents adjustment to record the payable from the Company to
stockholders of record for the $0.625 per share payable in two equal
installments at six and twelve months after the Closing.
(d) Represents adjustment to charge deferred Merger costs to expense.
(e) Represents adjustment to charge the deferred financing costs associated
with the Debentures to additional paid-in capital upon conversion of
the Debentures into Common Stock of the Company.
(f) Represents adjustment to credit interest payable on the Debentures of
$616,000 to additional paid-in capital upon conversion of the
Debentures into Common Stock of the Company.
(g) Represents adjustment to accrue transaction fee estimated at $3.6
million owed to the Company's financial advisors at the close of the
transaction. Additional fees will be paid upon the exercise of the Put
and Call rights of the Special Common Stock which have not been
included in these statements.
(h) Represents adjustment to record the conversion of the Debentures into
shares of Common Stock.
(i) Represents adjustment to record the conversion of Common Stock, the
issuance of shares of Common Stock to Zeneca and the issuance of shares
of Special Common Stock to the existing stockholders of the Company.
Pro Forma Common Stock includes 5,452,000 shares of $.001 par value
Common Stock issued to Zeneca and 5,452,000 shares of $.001 par value
Special Common Stock issued to existing stockholders.
(5) Pro Forma Statement of Income adjustments are as follows:
(a) Represents adjustment to eliminate the amortization of debt issue costs
associated with the Debentures.
(b) Represents adjustment to eliminate the interest expense associated with
the Debentures.
(c) Represents adjustment to net interest income which would have been
earned on the estimated $5.2 million paid for transaction expenses and
the $6.8 million future distribution to stockholders, offset by the
interest which would have been earned on the $5 million received from
the exercise of outstanding stock options.
(d) Represents the tax effect of the pro forma adjustments, using the
marginal tax rate.
(e) The Pro Forma Statement of Income does not include any adjustments to
reflect the impact of the "change of control" clause in the lease of
the Company's corporate headquarters by the Company from Dr. and Mrs.
Salick, as the definitive outcome of such clause is not known at this
time.
(f) The Pro Forma Statement of Income does not include the charge for
transaction expenses incurred by the Company estimated at $4,790,000 as
these expenses are considered to be nonrecurring.
(g) The pro forma earnings per share assumes that outstanding stock options
have been exercised as of the Effective Time.
61
<PAGE>
SELECTED FINANCIAL DATA OF ZENECA PLC
The selected financial data set out below for each of the years in the four-
year period ended December 31, 1993 has been extracted or derived from the
audited Financial Statements of Zeneca Group for the purposes of this Proxy
Statement. The selected financial data for the year ended December 31, 1989 is
unaudited, but has been derived from the audited financial statements of ICI
and, in the opinion of the Zeneca Group, have been prepared on a basis
substantially consistent with that for subsequent years.
The selected consolidated financial data set forth below are presented on the
basis that ICI's pharmaceuticals, agricultural chemicals, specialty chemicals,
seeds and biological products businesses and subsidiaries are assumed to have
been businesses or subsidiaries of Zeneca PLC for all years presented or from
the date of acquisition by ICI or to the date of disposal by ICI, as
appropriate. As a consequence, adjustments have been made to, among other
items, historical indebtedness, net interest and tax amounts, as further
described in Note 1 of Notes to Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" set forth in Zeneca PLC's Form 20-F for the fiscal year ended
December 31, 1993 incorporated by reference herein, in accordance with the
principles of merger accounting under accounting principles generally accepted
in the United Kingdom ("UK GAAP").
Significant changes have been made to Zeneca PLC's capital structure as a
result of the spin-off of Zeneca, a wholly owned subsidiary of ICI
("Demerger"), and Zeneca PLC's issuance of new ordinary shares of 25 pence each
in the capital of the Zeneca Group ("Ordinary Shares") to holders of Ordinary
Shares immediately following the Demerger ("Rights Offering") and these are
reflected in the Consolidated Financial Statements for the year ended December
31, 1993 and accompanying Notes set forth in Zeneca PLC's Form 20-F for the
fiscal year ended December 31, 1993 incorporated by reference herein. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" set forth in Zeneca PLC's Form 20-F for the fiscal year ended
December 31, 1993 incorporated by reference herein.
The selected financial data should be read in conjunction with, and are
qualified in their entirety by reference to, the Consolidated Financial
Statements of Zeneca Group and the Notes thereto set forth in Zeneca PLC's Form
20-F for the fiscal year ended December 31, 1993 incorporated by reference
herein and the unaudited Interim Financial Statements and the Notes thereto set
forth in Zeneca PLC's Form 6-K for the six months ended June 30, 1994 at
September 8, 1994 incorporated by reference herein.
62
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
--------------------------------- -------------
1989 1990 1991 1992 1993 1993 1994
----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
((Pounds) MILLION, EXCEPT PER
SHARE AMOUNTS)
CONSOLIDATED INCOME STATEMENT
DATA (1)
AMOUNTS IN ACCORDANCE WITH UK
GAAP (2)
Sales........................ 3,754 3,810 3,929 3,979 4,440 2,316 2,384
Cost of sales................ 1,540 1,629 1,549 1,617 1,885 1,007 1,060
R&D expense (including tech-
nical service).............. 372 396 416 457 519 242 255
Operating income before ex-
ceptional items (3)......... 610 600 682 587 713 407 473
Exceptional items before tax-
ation (4)................... 218 (77) 4 (340) 15 18 (100)
Net interest expense (5)..... 213 171 166 152 88 65 25
Income from ordinary activi-
ties before taxation........ 617 354 531 102 642 362 351
Net income................... 405 222 345 80 440 246 240
Net income before exceptional
items per Ordinary
Share (6)................... 37p 38p 46p 46p 50p 30p 33p
Net Income per Ordinary
Share (6).................... 55p 30p 46p 11p 52p 33p 25p
Dividends (7)................ -- -- -- -- 27.5p 10.5p 10.75p
APPROXIMATE AMOUNTS IN ACCOR-
DANCE WITH US GAAP (2)
Net income (8)............... 229 314 306 11 356 190 199
Net income per Ordinary
Share....................... 32p 44p 43p 2p 42p 26p 21p
RATIO OF EARNINGS TO FIXED
CHARGES (9) For the
Group....................... 2.9 2.2 2.8 1.4 4.9 4.4 8.8
For the Group with estimated
material adjustments to ac-
cord with US GAAP........... 2.1 2.8 2.5 1.1 4.4 3.9 8.1
CONSOLIDATED BALANCE SHEET
DATA (1)
AMOUNTS IN ACCORDANCE WITH UK
GAAP (2)
Total assets (10)............ 3,594 3,241 3,468 4,080 4,962 4,497 4,510
Short-term debt (including
the current portion of
long-term debt)............. 125 90 104 160 106 165 195
Amounts due to the ICI Group
within one year............. -- -- -- 1,064 575 -- --
Amounts due to the ICI Group
within one year
capitalized pre-demerger.... -- -- -- 157 -- -- --
Long-term debt............... 126 97 94 36 556 161 539
Amounts due to the ICI Group
after one year.............. 1,963 1,610 1,626 859 -- 564 --
Amounts due to the ICI Group
after one year capitalized
pre-demerger................ 157 157 157 -- -- -- --
Shareholders' equity (1)..... (1) 139 261 55 1,602 1,491 1,667
APPROXIMATE AMOUNTS IN ACCOR-
DANCE WITH US GAAP (2)
Total assets (10)............ 4,438 3,994 4,199 4,826 5,741 5,239 5,238
Shareholders' Equity (8)..... 593 784 863 756 2,396 2,328 2,447
CONSOLIDATED CASH FLOW
DATA (1)
AMOUNTS IN ACCORDANCE WITH UK
GAAP (2)
Net cash inflow from operat-
ing activities.............. 573 779 726 682 833 304 271
Net cash inflow (outflow)
from returns on investments
and servicing of
finance (11)................ 8 (150) (326) (472) (240) (119) (198)
Net tax paid................. (144) (211) (130) (74) (116) (29) (74)
Net cash outflow from invest-
ing activities.............. (326) (34) (109) (176) (263) (95) (180)
Net cash inflow (outflow) be-
fore financing.............. 111 384 161 (40) 214 61 (181)
Net cash (outflow) inflow
from financing.............. (134) (288) (140) 60 454 67 (520)
(Decrease)/increase in cash
and cash equivalents......... (23) 96 21 20 668 128 (701)
</TABLE>
63
<PAGE>
NOTES:
1. BASIS OF PREPARATION
The transfer of Zeneca to the Zeneca Group has been accounted for in
accordance with the principles of merger accounting set out in Statement of
Standard Accounting Practice No. 23 (SSAP23) and Schedule 4(A) to the
United Kingdom Companies Act 1985. The financial statements are therefore
presented as if Zeneca PLC and its subsidiaries had been owned and
controlled by the Zeneca PLC throughout.
The unaudited results for the half year to June 30, 1994 have been prepared
in accordance with UK GAAP. The accounting policies applied are those set
out in Zeneca PLC's Form 20-F for the fiscal year ended December 31, 1993,
incorporated by reference herein with the exception of UITF Abstract 6
"Accounting for post-retirement benefits other than pensions" which was
adopted on January 1, 1994. The obligation relating to these benefits has
been treated as a prior period adjustment and the comparative figures for
1993 restated accordingly. The effect of this change in accounting policy
was to reduce operating income in the first six months of both 1993 and
1994 by (Pounds)5 million. Shareholders' equity at January 1, 1993 was
reduced by (Pounds)94 million. In addition, a number of figures in the 1993
half year comparatives have been restated from a presentational point of
view and to make them consistent with the annual accounts form and content,
but these have no effect on aggregate profits or net assets.
2. SUMMARY US GAAP INFORMATION
The consolidated financial statements of the Zeneca Group are prepared in
accordance with UK GAAP. UK GAAP differs in certain respects from those
generally accepted in the United States ("US GAAP"). See Note 4 to the
Consolidated Financial Statements of Zeneca Group set forth in Zeneca PLC's
Form 20-F for the fiscal year ended December 31, 1993 incorporated by
reference herein for a description of the significant differences between
UK GAAP and US GAAP affecting the Zeneca PLC's net income for the three
years ended December 31, 1993 and shareholders' equity as of December 31,
1992 and 1993.
3. OPERATING INCOME
Operating income shown above consists of sales, royalty income, government
grants and other income, less related costs of sales, distribution,
research and development, technical service, administrative and other
expenses. Depreciation is included in each category, as appropriate, in the
Consolidated Statements of Income of Zeneca Group set forth in Zeneca PLC's
Form 20-F for the fiscal year ended December 31, 1993 incorporated by
reference herein.
4. EXCEPTIONAL ITEMS
Under US GAAP, items which are regarded as exceptional items under UK GAAP
would be included in operating income.
See Note 5 to the Consolidated Financial Statements of Zeneca Group set
forth in Zeneca PLC's Form 20-F for the fiscal year ended December 31, 1993
incorporated by reference herein.
5. NET INTEREST EXPENSE
Net interest expense for the years 1989 through 1992 includes both interest
on actual inter-company loans existing between the ICI Group and the Zeneca
Group and interest on the indebtedness arising on the reorganization of the
ICI Group prior to demerger, as if the indebtedness arising on the
reorganization of the ICI Group prior to demerger had existed since January
1, 1989.
6. NET INCOME PER ORDINARY SHARE
See Note 12 of Notes to Consolidated Financial Statements of Zeneca Group
set forth in Zeneca PLC's Form 20-F for the fiscal year ended December 31,
1993 incorporated by reference herein for the basis of
64
<PAGE>
calculation of per Ordinary Share data for the three years ended December
31, 1993. Per Ordinary Share data for years ended December 31, 1989 and
1990 are calculated on the same basis as years ended December 31, 1991 and
1992 (743 million shares).
7. DIVIDENDS
Zeneca declared and paid a dividend to ICI of (Pounds)70 million (net of
tax credit) on May 27, 1993. Zeneca declared and paid a dividend in respect
of 1993 of 27.5p per Ordinary Share (net of tax credit) which represents
$1.53 per American Depositary Share representing three underlying Ordinary
Shares ("ADS") (including tax credit) if translated at (Pounds)1 = $1.48.
8. EFFECT OF SFAS NO. 106 AND SFAS NO. 109
The Zeneca Group adopted SFAS No. 106--Employers' Accounting for Post-
retirement Benefits Other than Pensions-- for US GAAP purposes with effect
from January 1, 1993 as a change in accounting on a cumulative basis. The
unprovided obligation before tax for the Zeneca Group at January 1, 1993,
amounted to (Pounds)130 million and this amount has been taken as a one-
time charge to income in the period. The related deferred taxation credit
amounted to (Pounds)49 million. Prior years' financial statements have not
been restated to apply the provisions of SFAS No. 106. The pre-tax charge
to income in respect of post-retirement benefits for the year ended
December 31, 1993 was (Pounds)19 million.
The Zeneca Group adopted SFAS No. 109 for US GAAP purposes with effect from
January 1, 1993 as a change in accounting on a cumulative basis. The one-
time cumulative effect adjustment to the income statement resulted in a
credit to income of (Pounds)76 million. Prior years' financial statements
have not been restated to apply the provisions of SFAS No. 109.
9. RATIO OF EARNINGS TO FIXED CHARGES
For the purpose of computing these ratios, earnings consist of the income
from ordinary activities before taxation of Group companies and income
received from companies owned 50% or less, plus fixed charges (excluding
capitalized interest). Fixed charges consist of interest (including
capitalized interest) on all indebtedness, amortization of debt discount
and expense and that portion of rental expense representative of the
interest factor.
10. EFFECT OF SFAS NO. 113
SFAS No. 113--Accounting and Reporting for Reinsurance of Short-Duration
and Long-Duration Contracts
The Zeneca Group adopted SFAS No. 113 for US GAAP purposes with effect from
January 1, 1993 and adopted similar treatment for insurance liabilities and
reinsurance recoveries for UK GAAP purposes with effect from the same date.
Prior year figures have been restated accordingly. SFAS No. 113 eliminates
the reporting of assets and liabilities relating to reinsurance contracts
net of the effects of reinsurance.
11. NET CASH OUTFLOW
Net cash outflow from returns on investments and servicing of finance
includes net interest, distributions and transfers paid to the ICI Group by
the Zeneca Group prior to demerger on June 1, 1993. These payments are not
indicative of the dividends and interest the Zeneca Group would have paid
as an independently managed and financed entity.
65
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 2 ON PROXY CARD)
The Company's certificate of incorporation provides that the directors of the
Company shall be divided into three classes, designated as Class I, Class II
and Class III, and that at each Annual Meeting of Stockholders of the Company
successors of the class of directors whose term expires at that annual meeting
will be elected for a three-year term. The classes are staggered so that the
term of one class expires each year. The terms of the Class I directors expires
in 1995, and each third year thereafter, those of the Class II directors expire
in 1996 and each third year thereafter, and those of the Class III directors
expire in 1997 and each third year thereafter. Accordingly, it is the Class I
directors who are to be elected at the Annual Meeting. If the Merger is
approved, the term of the Class I directors elected at the Annual Meeting (as
well as the classification of the Company's Board of Directors) will terminate
upon the consummation thereof.
The number of directors constituting the entire Board of Directors is
determined by the Board of Directors and is presently fixed at eight members.
The authorized number of Class I directors to be elected at the Annual Meeting
is two. The Board of Directors has nominated Dr. Salick and Leslie F. Bell for
election as Class I directors. Each is an incumbent director. All proxies will
be voted for the election of Dr. Salick and Mr. Bell unless authority to vote
for the election of directors is withheld. In the event any nominee should
unexpectedly decline or be unable or unwilling to serve as a director, the
proxies may be voted for a substitute nominee designated by the present Board
of Directors. The Board of Directors has no reason to believe that either
nominee will be unable or unwilling to serve as a director if elected and has
no present intention to nominate persons in addition to or in lieu of Dr.
Salick and Mr. Bell. The candidates receiving the highest number of affirmative
votes of the Shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors are the directors elected.
Any votes against the candidates or withheld from voting (whether by
abstention, broker non-votes or otherwise) will not be counted and will have no
legal effect on the vote with respect to the election of directors. In respect
of such nominees and each other director of the Company, the following
information is furnished:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION HELD WITH COMPANY SINCE
---- --- -------------------------- --------
<C> <C> <S> <C>
CLASS I DIRECTORS:
Bernard Salick, M.D. 55 Chairman of the Board of Directors, 1983(1)
Chief Executive Officer and
President
Leslie F. Bell 54 Executive Vice President, Chief 1983(1)
Financial Officer, Secretary and
Director
CLASS II DIRECTORS:
Michael T. Fiore 40 Executive Vice President, Chief 1994(2)
Operating Officer and Director
Barbara Bromley-Williams 55 Senior Vice President-Professional 1983(2)
Services and Director
Thomas Mintz, M.D. 63 Director 1985(2)
CLASS III DIRECTORS:
Sheldon S. King 63 Executive Vice President and Director 1994(3)
Paul G. Rogers 73 Director 1985(3)
Regina E. Herzlinger 50 Director 1989(3)
</TABLE>
- --------
(1) Term ends in 1995.
(2) Term ends in 1996.
(3) Term ends in 1997.
Dr. Salick, founder of the Company, has been Chairman of the Board of
Directors and Chief Executive Officer of the Company since its organization. He
also served as President and Chief Operating Officer until May 1, 1985 and
reassumed these positions in October 1988. In November 1993, Mr. Fiore assumed
the
66
<PAGE>
position of Chief Operating Officer. Dr. Salick has been the Medical Director
of the Company's subsidiaries, USHAWL, Inc. ("USHAWL") and Century Dialysis
Corporation ("Century"), for more than the past five years. Dr. Salick is an
Assistant Clinical Professor of Medicine at UCLA and on the medical staff of
Cedars-Sinai Medical Center and other hospitals. He also has been a member of
the National Advisory Board of the National Kidney Foundation, the American
Society of Nephrology and the American Society of Clinical Oncology.
Mr. Bell has served as Secretary and a Director of the Company since its
organization in 1983. He served as Senior Vice President from 1983 until
November 1989 when he became Executive Vice President. He became Chief
Financial Officer in January 1985. From 1976 through May 1983, Mr. Bell was
managing partner in the law firm of Katz, Hoyt, Bell & Siegel and its
predecessor firms and served as general counsel to the Company. Mr. Bell is a
Director of NATSA, a not-for-profit entity, and serves on the Board of
Advisors of the Community for Education Foundation, a not-for-profit entity.
Mr. Fiore joined the Company in May 1986 as Vice President and Director of
Operations. Prior to joining the Company, he was employed in various
capacities by American Medical International, Inc. for more than six years,
where he was a Corporate Vice President. Mr. Fiore, a CPA, was employed by
Peat, Marwick, Mitchell & Co. from 1976 to 1978. He received his MBA from the
Harvard Business School in 1980. Mr. Fiore became a Senior Vice President of
the Company in 1990 and assumed the position of Chief Operating Officer in
1993. In 1994 Mr. Fiore became Executive Vice President and a Director of the
Company.
Ms. Bromley-Williams has served as Vice President-Professional Services and
a Director of the Company since its organization. She has been employed as
Head Nurse and Director of Professional Services of the Company's
subsidiaries, USHAWL since 1972 and Century and its predecessor since 1977.
Ms. Bromley-Williams became a Senior Vice President in November 1989.
Dr. Mintz has been a Director of the Company since March 1985. He has been
providing consulting services to the Company on a part-time basis for the past
nine years. He has been a board certified practicing adult and child
psychiatrist and psychoanalyst for more than the past five years. Dr. Mintz
has been an Assistant Clinical Professor of Psychiatry at the UCLA Medical
Center since 1970 and is on the staff at several major medical centers. Dr.
Mintz is also an attorney with a limited private practice.
Mr. King joined the Company in February 1994 as Executive Vice President and
was appointed a Director of the Company in June 1994. Most recently, he was
President of Cedars-Sinai Medical Center in Los Angeles from May 1989 to
February 1994. Prior to that, he had been at Stanford University Medical
Center since 1981, and its President since 1986. Mr. King has also served as
Director of the University of California Medical Center, San Diego, and
Executive Director of the Bronx Municipal Hospital Center in New York.
Mr. Rogers has been a Director of the Company since 1986. Mr. Rogers was a
member of the United States Congress from 1955 to 1979 and Chairman of the
House of Representatives Sub-Committee on Health and the Environment. He is a
member of the law firm of Hogan & Hartson, Washington, D.C. Hogan & Hartson
has been retained by the Company as special counsel during the past and
current fiscal years. Mr. Rogers is on the Board of Directors of Marion
Merrell Dow, The Cleveland Clinic Foundation, The American Cancer Society, The
American Federation of Aging Research, The Foundation for Biomedical Research
and The National Rehabilitation Hospital. He is also a member of the Board of
Trustees of The University of Pennsylvania Medical Center, The Washington
University National Council of the School of Medicine, the Advisory Council of
The Johns Hopkins School of Medicine, the Dean's Council and the Committee to
Visit the Harvard School of Public Health, The University of Chicago Council
for the Division of the Biological Sciences and the Pritzker School of
Medicine. Mr. Rogers is Chairman of the Scripps Research Institute, The
National Foundation for Infectious Diseases, The University of Virginia Health
Sciences Council, The National Osteoporosis Foundation, The Friends of the
National Library and The National Council of Patient Information and
Education. Mr. Rogers is Co-Chairman of The National Coalition for Health Care
Reform. Mr. Rogers is a member of The Institute of Medicine of The National
Academy of Sciences.
67
<PAGE>
Professor Herzlinger became a Director of the Company in March 1989. For the
past fourteen years she has been a full professor and tenured member of the
faculty of the Harvard Business School. Professor Herzlinger is the first
holder of the Nancy R. McPherson Professor of Business Administration Chair at
the Harvard Business School. Professor Herzlinger presently teaches in the
School's MBA and Executive Programs, specializing in the health care system and
management control systems. Professor Herzlinger is a member of the Board of C.
R. Bard, John Deere, Manor Care, Inc., Schering Plough, the Visiting Committee
of the MIT Corporation, and the Audit Committee of the town of Belmont,
Massachusetts.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE DIRECTORS NOMINATED.
STOCK OWNERSHIP
PRINCIPAL STOCKHOLDERS
The following table sets forth information as to the beneficial ownership of
each person known to the Company to beneficially own more than five percent of
the outstanding Shares as of February 15, 1995, based (except with respect to
Dr. Salick) on copies received by the Company of the most recent Schedule 13D
or 13G filings with the Commission pursuant to the rules and regulations
promulgated under the Exchange Act.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED OF CLASS
- ---------------- ------------ --------
<S> <C> <C>
Bernard Salick, M.D. (1)................................ 2,249,804 21.6%
8201 Beverly Boulevard
Los Angeles, California 90048
Invesco MIM PLC (2)..................................... 799,100 7.7%
11 Devonshire Square
London EC2M 4YR, England
Clover Capital Management, Inc. (3) .................... 654,178 6.3%
11 Tobey Village Office Park
Pittsford, New York 14534
</TABLE>
- --------
(1) Dr. Salick claims sole voting and dispositive power over 2,158,307 Shares.
The total Shares beneficially owned includes 34,830 Shares held by Dr.
Salick, in trust, for his minor children and 56,667 Shares which he has the
right to purchase pursuant to a currently exercisable option. See footnotes
3 and 4 of table under "Management" below.
(2) Voting and dispositive power relating to these Shares are as follows: sole
voting and dispositive power--0, shared voting power--799,100, and shared
dispositive power--799,100. Invesco MIM PLC is the parent holding company
reporting on the Shares. The subsidiaries which acquired the Shares are as
follows: INVESCO North American Group, Ltd., INVESCO, Inc., INVESCO North
American Holdings, Inc., INVESCO Funds Group Inc., MIM Holdings, Ltd., and
INVESCO MIM Asset Management (Japan) Ltd.
(3) Voting and dispositive power relating to these Shares are as follows: sole
voting and dispositive power--639,078 and shared voting and dispositive
power--15,100.
68
<PAGE>
MANAGEMENT
The following table sets forth, as of February 15, 1995, certain information
regarding the beneficial ownership of Shares by the directors of the Company,
each of the executive officers named in the Summary Compensation Table under
the heading "EXECUTIVE COMPENSATION" below, and all executive officers and
directors of the Company as a group. Except as otherwise indicated, each person
has sole investment and voting powers with respect to the Shares shown. The
information with respect to each person specified is as supplied or confirmed
by such person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF INDIVIDUAL OR IDENTITY OF GROUP BENEFICIAL OWNERSHIP OF CLASS
--------------------------------------- -------------------- --------
<S> <C> <C>
Bernard Salick, M.D..................... 2,249,804(1)(3-4) 21.6%
Leslie F. Bell.......................... 130,474(2)(3-4) 1.3%
Barbara Bromley-Williams, R.N........... 48,747(3-4) *
Michael T. Fiore........................ 46,594(4) *
Sheldon S. King......................... -0- *
Thomas Mintz, M.D....................... 36,250(2-4)(6) *
Paul G. Rogers.......................... 10,700(4)(6) *
Regina E. Herzlinger.................... 9,000(4-6) *
All executive officers and directors as
a group (11 Persons)................... 2,584,114(1-7) 24.4%
</TABLE>
- --------
(1) Includes 34,830 Shares held by Dr. Salick, as trustee in trust for his
minor children.
(2) Includes 17,000 Shares owned by Dr. Mintz's Pension Plan and 2,396 Shares
owned by Mr. Bell's Individual Retirement Account.
(3) Excludes, to the best of the Company's knowledge, any Shares owned by
immediate relatives of Dr. Mintz or Ms. Bromley-Williams, 14,000 Shares
owned by the spouse, children and immediate relatives of Mr. Bell, 136,360
Shares held by Mr. Bell and an unrelated third party, as trustees in trust
for Dr. Salick's minor children, and, to the best of the Company's
knowledge, 2,325 Shares owned by immediate relatives of Dr. Salick, as to
which each of Dr. Salick, Ms. Bromley-Williams, Dr. Mintz and Mr. Bell
claims no beneficial or other ownership interest.
(4) Includes options exercisable at February 15, 1995 or within 60 days
thereafter as follows: Dr. Salick--56,667, Mr. Bell--43,333, Ms. Bromley-
Williams--46,667, Mr. Fiore--43,333, Dr. Mintz--19,250, Mr. Rogers--10,500,
Professor Herzlinger--1,000, and all others in the group--45,112.
(5) Includes 1,000 Shares owned jointly with spouse.
(6) Includes 1,000 Shares vested under the Director Option Plan.
(7) Includes 2,016 Shares as of February 15, 1995 owned by certain members of
the group resulting from their participation in the Purchase Plan.
* Represents less than one percent of the Shares outstanding.
69
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual, long-term and other compensation
for services in all capacities to the Company (and its subsidiaries) for the
fiscal years ended August 31, 1994, 1993 and 1992, of those persons who were,
at August 31, 1994 (i) Chief Executive Officer and (ii) the four most highly
compensated executive officers of the Company other than the Chief Executive
Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- -----------------------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL CASH STOCK OPTIONS COMPENSATION
POSITION YEAR SALARY($) BONUS($) AWARDS($)(1) (#)(2) ($)(3)(4)
- ------------------ ------ ---------- --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bernard Salick, M.D. ... 1994 $ 890,443 $ 585,000 -0- -0- $284,555
Chairman of the Board 1993 796,929 540,000 -0- 25,000 284,494
of Directors, Chief
Executive Officer and 1992 748,251 525,000 -0- -0-
President
Leslie F. Bell.......... 1994 $ 377,911 $ 100,000 -0- -0- $ 2,304
Executive Vice Presi-
dent, Secretary and 1993 363,217 70,000 -0- 20,000 3,009
Director 1992 347,167 52,500 -0- -0-
Sheldon S. King(5)...... 1994 $ 283,693 $ -0- -0- -0- $ -0-
Executive Vice Presi-
dent and 1993
Director 1992
Michael T. Fiore........ 1994 $ 254,431 $ 95,000 -0- -0- $ 2,472
Executive Vice Presi-
dent, Chief Operating 1993 234,375 65,000 -0- 20,000 3,480
Officer and Director 1992 220,500 30,000 $20,000 -0-
Barbara Bromley-Williams 1994 $ 227,325 $ 50,000 -0- -0- $ 2,320
Senior Vice President-- 1993 215,416 40,000 -0- 10,000 2,842
Professional Services
and Director 1992 207,096 21,000 $14,000 -0-
</TABLE>
- --------
(1) Restricted stock awards are those granted under the MICP and reflect the
value of the Shares at the time of the award. The Shares granted for fiscal
year 1992 vested one third annually with the first third vesting on
November 1, 1992. The awards for Dr. Salick and Mr. Bell for fiscal year
1992 were in cash, vesting on the same basis as the Shares awarded to the
other recipients. The number and value of the aggregate restricted stock
holdings at the end of the fiscal year ended August 31, 1993 for each of
the persons named above, valued at the closing market price of the Shares
on the date of the award, is as follows: Dr. Salick, 556 Shares valued at
$5,838; Mr. Bell, 476 Shares valued at $4,998; Mr. Fiore, 1,737 Shares
valued at $17,914; and Ms. Bromley-Williams, 1,148 Shares valued at
$11,827. The number and value of the aggregate restricted stock holdings at
the end of the fiscal year ended August 31, 1994 for each of the persons
named above, valued at the closing market price of the Shares on the date
of the award, is as follows: Dr. Salick, none; Mr. Bell, none; Mr. King,
none; Mr. Fiore, 651 Shares at $6,673; and Ms. Bromley-Williams, 455 Shares
at $4,664.
(2) There were no grants of stock options to executive officers during the
fiscal year ended August 31, 1994.
(3) The amounts for fiscal year 1992 are omitted pursuant to the transition
provisions adopted by the Commission.
(4) All other compensation includes the Company's contribution to certain life
insurance policies and the Company's matching contribution to the Salick
Health Care, Inc. Salary Savings Plan. The amount shown for Dr. Salick
includes the Company's payment of a premium of $282,245 for split-dollar
insurance.
(5) Mr. King joined the Company in February 1994.
70
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Dr. Salick, Mr. Bell, and Mr.
Fiore, each of which is for a constant five year term with one year added to
the term for each year of service completed and with the Company having the
right to cancel future accruals of additional years on advance written notice
to the employee. If the Merger is consummated, these agreements will be
superseded by Employment Agreements effective with the Merger. See "MERGER
PROPOSAL--Agreements Ancillary to Merger Agreement--Employment Agreements."
These agreements as amended and presently effective provide for base
compensation, subject to future annual cost of living increases, of $878,320,
$392,893 and $307,528 toDr. Salick, Mr. Bell and Mr. Fiore, respectively. Dr.
Salick's employment agreement also provides for an annual bonus of $300,000
including an amount equal to the first $150,000 of the pretax profits of the
Company or of the pretax profits of the Company's dialysis operations and
payment of certain medical office and other expenses incurred in activities
related to the Company's business. A portion, $60,000, of Mr. Bell's base
compensation as shown above is paid to his professional law corporation. A
wholly owned subsidiary of the Company has an employment agreement with Mr.
King for a five year term. The agreement, which is guaranteed by the Company,
provides for base compensation of $500,000 per year and an expense allowance
for specified purposes of $3,000 per month. Each of such persons are among the
eligible participants in the Company's Management Incentive Compensation Plan.
The Company provides Dr. Salick with "split-dollar" insurance policies pursuant
to which the Company pays the premiums, the policy is collaterally assigned to
the Company as security for the premium payments made by it and the Company
receives a reimbursement of its premium contributions out of the proceeds
payable upon death. During the fiscal year endedAugust 31, 1994, payments by
the Company for these policies were $282,245. In addition, the Company carries
"key man" insurance on Dr. Salick and the Company is the owner and beneficiary
of this policy. The Company's employment agreements with each of Dr. Salick,
Mr. Bell, and Mr. Fiore provide for the payment to such person of a specified
amount if, following certain changes in the ownership or control of the Company
or certain changes in ownership of a substantial portion of the assets of the
Company, there is a termination by the Company of such person's employment or
by the employee following certain demotions or other changes in the duties,
compensation or status of such individual. The amount of such payment would be
299% of the individual's "base amount" (the individual's annualized included
compensation for the five fiscal years ending before the event triggering such
payment), and may not exceed the maximum amount allowable under the Code
without the occurrence of an excise tax by the individual or loss of deduction
by the Company (or its successor). Dr. Salick and certain other physician
employees of the Company maintain limited private medical practices and retain
professional fees of those practices. Mr. Bell has a limited law practice from
which he retains professional fees.
Directors of the Company who are not full time employees receive
reimbursement for expenses incurred in attending meetings and $4,000 per
quarter for their services as directors and committee members. Professor
Herzlinger and Dr. Mintz also provide consulting services to the Company for
which they were compensated during the fiscal year in the amount of $30,666 and
$30,000, respectively. Mr. Rogers is a member of the law firm of Hogan &
Hartson, Washington, D.C., which provides legal services to the Company.
STOCK OPTION PLAN
The Company's Stock Option Plan was originally adopted in 1985, and, as
amended, covers an aggregate of 1,100,000 Shares and expires in November 2000.
Shares which are subject to options that are canceled or expire without being
exercised will again be available for the purposes of the Stock Option Plan.
Options outstanding at the Effective Time will be converted into the
Replacement Options. See "THE MERGER AGREEMENT--Treatment of Stock Options."
The purpose of the Stock Option Plan is to assist the Company in the
recruitment, retention and motivation of key employees, directors and
consultants who are in a position to make material contributions to the
Company's progress. The Stock Option Plan provides for the grant of options to
purchase shares of Common Stock. Such options may include nonqualified options
as well as incentive stock options ("ISOs")
71
<PAGE>
intended to qualify for preferential tax treatment under Section 422 of the
Code. Options may be granted to selected employees, directors and consultants
of the Company or of a subsidiary of the Company (including officers and
directors who are also employees or consultants). However, ISOs may be granted
only to employees (including officers and directors who are also employees).
There were no grants of stock options to executive officers named in the
Summary Compensation Table above during the fiscal year ended August 31, 1994.
The following table sets forth as of August 31, 1994, information as to the
number of unexercised options and the value of unexercised in-the-money options
held by each of the executive officers named in the Summary Compensation Table
above. None of such executive officers exercised any options during the fiscal
year ended August 31, 1994.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT AUGUST 31, 1994 AT AUGUST 31, 1994
-------------------------- --------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE(1) UNEXERCISABLE(2)
---- -------------------------- --------------------
<S> <C> <C>
Bernard Salick, M.D............. 48,333/16,667 $519,750/$118,500
Leslie F. Bell.................. 36,667/13,333 $411,634/$108,267
Barbara Bromley-Williams........ 43,333/ 6,667 $512,065/$ 54,136
Michael T. Fiore................ 36,667/13,333 $411,634/$108,267
Sheldon S. King................. None / None None / None
</TABLE>
- --------
(1) Certain of the Shares included in the column entitled "Unexercisable" vest
one third over three years, of which the first third vested on March 30,
1994.
(2) Dollar value is calculated by determining, with respect to each option, the
difference between the fair market value per Share as of August 31, 1994
($18.25) and the exercise price thereunder, and multiplying the difference
by the number of underlying Shares covered by such option.
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
In November 1988, the Board of Directors of the Company adopted the Purchase
Plan, which was approved by the stockholders of the Company in January 1989.
The Purchase Plan provides for the grant to eligible employees of the Company
and its subsidiaries of options to purchase up to an aggregate of 100,000
Shares. All employees who have been employed for at least one continuous year
and who are customarily employed for more than 20 hours per week and more than
five months per calendar year are eligible to participate in the Purchase Plan.
However, no eligible employee may be granted an option to purchase Shares under
the Purchase Plan if (a) immediately after the grant of such option, such
employee would own Shares possessing 5% or more of the total combined voting
power of the Company or (b) such option would permit the employee's rights to
purchase Shares under all employee stock purchase plans of the Company and its
subsidiaries to accrue at a rate which exceeds $25,000 or the fair market value
of such Shares for each calendar year in which such option is outstanding at
any time.
Options are granted under the Purchase Plan to all eligible employees in
successive monthly offering periods. The offering periods will continue until
the earlier of the date upon which all of the Shares covered by the Purchase
Plan have been sold or the date upon which the Purchase Plan is terminated. The
first such offering period commenced on July 1, 1989. An employee may elect to
exercise his or her option and participate in the Purchase Plan with respect to
each offering period and shall pay for the Shares acquired upon exercise of
such option through payroll deductions. The purchase price per Share under the
options will be equal to 85% of the fair market value per Share on the last day
of the applicable offering period.
72
<PAGE>
The Purchase Plan is administered by the Company, acting through Shearson
Lehman Hutton, Inc., 2 World Trade Center, 102nd Floor, New York, New York
10048.
SALARY SAVINGS PLAN
On July 27, 1988, the Board of Directors of the Company adopted the Salick
Health Care, Inc. Salary Savings Plan (the "401(k) Plan"). The first year of
the 401(k) Plan ended on August 31, 1989.
The 401(k) Plan permits all eligible employees to contribute up to the
maximum dollar amount allowed under federal tax law from their payroll. The
Company matches the contributions of each employee in an amount equal to 25% of
such contributions, but not in excess of 6% of such employee's salary. The
contributions made by the Company on behalf of any employee vest in such
employee in increments of 25% per year, commencing with the second year of such
participating employee's employment by the Company.
Each employee is eligible to participate in the 401(k) Plan after he or she
has been employed by the Company (or any of its subsidiaries) for 90 days and
has attained 21 years of age. Employees must enroll in the 401(k) Plan during
one of four quarterly enrollment periods. Distributions under the 401(k) Plan
are permitted only (a) upon an employee's death, permanent disability or
retirement, (b) in accordance with the hardship rules under ERISA, or (c) as
set forth in the 401(k) Plan, upon termination of employment. Requests for
distributions are processed on a quarterly basis.
The 401(k) Plan provides for investment of the employee's funds at his or her
election in a choice of five mutual funds. The funds, together with the
matching contributions, are placed in trust with, and invested in a fund
selected by the employee by, Fidelity Institutional Retirement Services
Company, 4555 Lake Forest Drive, Suite 630, Cincinnati, Ohio 45242, which
administers the 401(k) Plan on behalf of the Company. The trustees of the trust
are Dr. Salick, Mr. Bell and Janice Waterman, Vice President-Human Resources.
The amounts set forth in the Summary Compensation Table above include amounts
under the 401(k) Plan which have been deferred by the persons named in such
table. The following amounts represent the vested portion of Company
contributions under the 401(k) Plan which were accrued during the fiscal year
ended August 31, 1994 for the persons named in the Summary Compensation Table
above: Dr. Salick-$2,310; Mr. Bell-$2,304; Mr. Fiore-$2,512; Ms. Bromley-
Williams-$2,320; and Mr. King-$0.
MANAGEMENT INCENTIVE COMPENSATION PLAN
In August 1991, the Company's directors and stockholders approved the MICP.
The MICP, which expires in August 2001, provides for incentive awards to those
full-time employees of the Company and its subsidiaries designated by the MICP
Committee (as defined below) who are determined to have a direct and
significant impact on the performance of the Company. Members of the MICP
Committee are ineligible to participate in the awards. Awards are based on the
achievement of objectives established by the MICP Committee and the extent of
any award is also determined by the MICP Committee in its discretion.
The MICP Committee determines in its discretion the form of the award (cash,
Shares or a combination thereof) and whether awards of Shares may or may not be
subject to conditions or restrictions on the participant's right to transfer or
sell such Shares, which conditions and/or restrictions may be modified or
eliminated in the discretion of the MICP Committee. An award of Shares will be
at the then current market value of the Shares. Any award may be made currently
or, as the MICP Committee may determine or the participant may elect, may be
deferred. Awards deferred will be paid from the Company's general funds and
thus are subject to the claims of the Company's creditors. The MICP covers an
aggregate of 200,000 Shares.
The MICP Committee has the authority to regulate, administer and interpret
the MICP as appropriate for the proper and effective administration of the MICP
and its determinations and interpretations are final and binding.
73
<PAGE>
In the event of a "change in control" and unless the Board of Directors
otherwise provides, all restrictions and conditions on any restricted stock
awards under the MICP will be deemed satisfied as of the date of the change in
control and all other awards are fully earned as of such date (except for any
Share award outstanding less than six months). For purposes of the MICP, a
change in control will be deemed to have occurred when any person or entity
other than the Company or its subsidiaries, Dr. Salick or his heirs, any
Company employee benefit plan or person organized pursuant to such plan,
acquires twenty percent or more of the Company's outstanding Shares (unless
such acquisition has been approved by the Company's Board of Directors, a
majority of whom are not the acquiring person or an affiliate or associate
thereof). It is anticipated that the MICP will continue in effect after the
Effective Time and awards will continue to be available to be made thereunder.
Under the MICP the following cash awards were made subsequent to the fiscal
year ended August 31, 1994, to the persons named in the Summary Compensation
Table above: Dr. Salick, $120,000; Mr. Bell, $100,000; Mr. Fiore, $95,000; and
Ms. Bromley-Williams, $50,000. Under the MICP the following cash awards were
made during the fiscal year for the fiscal year ended August 31, 1993, to the
persons named in the Summary Compensation Table above: Dr. Salick, $80,000; Mr.
Bell, $70,000; Mr. Fiore, $65,000; and Ms. Bromley-Williams, $40,000. Under the
MICP the following cash and Share awards, respectively, were made during the
fiscal year ended August 31, 1992 to the persons named in the Summary
Compensation Table above: Dr. Salick, $60,000, 0; Mr. Bell, $52,500, 0; Mr.
Fiore, $30,000, 1,951; and Ms. Bromley-Williams, $21,000, 1,366. The Share and
cash awards for 1992 were forfeitable and vested one third of the total amount
shown above at the time of the award with the balance vesting ratably over each
of the succeeding two years on the anniversary date of the award, provided the
recipient of the award was then in the employ of the Company.
74
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of the
Shares for the last five fiscal years with (1) the Standard and Poor's 500
Composite Index, and (2) the NASDAQ Healthcare Composite Index.
[GRAPH]
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SALICK HEALTH CARE, INC., CRSP TOTAL RETURN INDEX FOR S&P
500 STOCKS AND CRSP INDEX FOR NASDAQ HEALTH SERVICES STOCKS
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
CRSP Total CRSP Index
Measurement Period Salick Health Returns Index for for Nasdaq Health
(Fiscal Year Covered) Care, Inc. S&P 500 Stocks Services Stocks
- --------------------- ------------- ----------------- -----------------
<S> <C> <C> <C>
Measurement Pt-08/31/89 $100.0 $100.0 $100.0
FYE 08/31/90 $ 66.7 $ 94.8 $116.2
FYE 08/30/91 $ 87.5 $120.5 $221.2
FYE 08/31/92 $ 89.6 $129.8 $251.8
FYE 08/31/93 $114.6 $149.4 $275.0
FYE 08/31/94 $152.1 $157.3 $353.5
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to 100.0 on 08/31/89.
75
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") was established in
1986 and is authorized to review and approve management's recommendations for
compensation and other benefits for certain of the Company's executive
employees. Three outside directors also serve on the Management Incentive
Compensation Plan Committee (the "MICP Committee") , which regulates,
administers, and interprets the Company's Stock Option Plan and MICP.
Compensation Objectives. The Company's executive compensation program, which
is endorsed by the Committee, is designed to meet the following objectives:
.To attract and retain key executives
.To provide key executives with incentives to achieve Company goals and
objectives
.To reward individual contributions toward meeting Company objectives
.To align the interests of management with the interests of the Company's
stockholders.
The Company's agreements achieved with the academic and other major medical
centers that the Company has focused on are reached in advance of results being
realized from the development and operation of the Company's Centers. This is
consistent with the Company's strategy of long-term investments in its
operations and facilities. The Committee, in considering compensation levels,
bonus and other incentive payments to Company executives, believes it is
important to consider, on both a current and long-term basis, the efforts of
the Company's Chief Executive Officer and the other executives involved, the
actual and projected results which can be realized from these agreements which
range to thirty-five years in duration, the credibility and excellent
reputation that the Company, under the leadership of its executives has
established, and the extensive length of time that it takes to consummate
transactions with these medical centers.
While the stock market tends to respond to short-term signals and results,
the Committee believes that it is essential, in evaluating compensation levels
and incentive payments to Company executives, to establish awards which
recognize both the current and longer range benefits anticipated to be realized
from the Company's historically successful strategy of investing and
affiliating, on a long-term basis, with major academic and other major medical
centers.
BASE SALARIES
The Company's salary levels for executive officers are intended to take into
account the experience, achievements, and contributions of employees, their
perceived value to the Company, competitive practice, and levels of
responsibility. Salary increases are designed to reflect competitive trends,
the financial performance of the Company, and the performance of the individual
executive.
Except for one executive officer who assumed greater responsibilities and
received a salary increase of 11.82%, all of the Company's executive officers
received salary increases of four percent for fiscal 1994.
Management Incentive Compensation Program. In August 1991, the Company's
directors and stockholders approved the MICP. The purposes of the MICP are
consistent with the compensation objectives. Awards are based on the
achievement of a return-on-equity employed in operations objective established
by the MICP Committee, and the size of the award pool (as a percentage of net
income) is also determined by the MICP Committee in its assessment of
performance. The pool is allocated on the basis of management's evaluation of
each participant's contribution to Company results. The MICP Committee also
determines the form of awards (cash, stock, or a combination). For fiscal 1994
the MICP awards were paid solely in cash.
76
<PAGE>
The Committee has established the objectives and formula for the size of the
MICP award pool for fiscal 1995 at twelve percent of pre-tax profits provided
that it does not reduce the Company's pre-tax income below a nine percent
return on average equity actually employed in operations.
Long-Term Compensation. To align the interests of management with those of
stockholders, the Company awards stock options to executives. A total of 5,000
shares of Common Stock covered by stock options were awarded to one person in
fiscal year 1994. The granting of options is based on a subjective assessment
of each individual's performance and level of responsibility within the
Company.
CEO Compensation. Compensation of the Company's founder, Chairman and Chief
Executive Officer, Dr. Salick, and of other senior executives is determined by
the independent non-employee members of the Committee.
The Committee is of the opinion that Dr. Salick is one of the most
experienced and successful executives in the health care field. His numerous
achievements at the Company and its predecessors have been acknowledged by
various industry groups and peers. The Committee considered Dr. Salick's
activities and his highly respected position in the industry, from which the
Committee believes the Company derives substantial benefits. Dr. Salick's
initial salary and bonus provisions were specified in his employment contract.
If the Merger is consummated, his employment contract will be replaced with the
Salick Employment Agreement. See "MERGER PROPOSAL--Agreements Ancillary to
Merger Agreement."
During fiscal 1995 and for previous years, his compensation has been
determined under the terms of his employment agreement, which was entered into
during 1985 (see "Employment Agreements"). Although in some prior years Dr.
Salick has received merit increases in his base salary, in fiscal 1994, as
provided in Dr. Salick's employment agreement, he received a salary increase
equal to the increase in the cost-of-living index. He also participates in the
MICP under the same conditions and terms as do all other participants. In
addition to participating in the MICP, the employment agreement provides for an
annual bonus of $300,000, which includes an amount equal to the first $150,000
of the pre-tax profits of the Company or of the pre-tax profits of the
Company's dialysis operations. The Committee's outside directors granted him a
special bonus for each of fiscal years 1991 through 1994 of $165,000 and during
fiscal year 1995 to date, a special bonus of $165,000. No options were granted
to Dr. Salick or any other executive officer during fiscal year 1994.
COMPENSATION COMMITTEE MANAGEMENT INCENTIVE COMPENSATION
Bernard Salick, M.D. PLAN COMMITTEE
Leslie F. Bell Regina E. Herzlinger
Paul G. Rogers Paul G. Rogers
Regina E. Herzlinger Thomas Mintz, M.D.
Thomas Mintz, M.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Although Dr. Salick and Mr. Bell, officers and directors of the Company,
served as members of the Compensation Committee of the Company's Board of
Directors during the fiscal year ended August 31, 1994, they did not
participate in discussions regarding or vote on their own compensation. The
other three directors on the Compensation Committee, none of whom is an officer
or employee of the Company, are responsible for administering and interpreting
the Stock Option Plan and the MICP and setting the compensation for Dr. Salick
and Mr. Bell. See "CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS."
77
<PAGE>
CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee, a Compensation Committee, a MICP
Committee and an Executive Committee of the Board of Directors. The Company has
no standing nominating committee of the Board of Directors.
The Compensation Committee consists of Dr. Salick, Mr. Bell, Mr. Rogers,
Professor Herzlinger and Dr. Mintz. The Committee is authorized to review and
approve management's recommendations for compensation and other benefits for
certain of the Company's executive employees. The outside directors, Mr.
Rogers, Professor Herzlinger and Dr. Mintz, serve on the Committee which
regulates, administers and interprets the Company's Stock Option Plan and the
MICP. During the past fiscal year each Committee met once and also met in
November 1994. See "EXECUTIVE COMPENSATION--Compensation Committee Report on
Executive Compensation."
The Audit Committee consists of Professor Herzlinger, Mr. Rogers and Dr.
Mintz. The Audit Committee held two meetings during the fiscal year ended
August 31, 1994. It also met in November 1994. Its functions are to nominate a
firm of certified public accountants, whose duty it is to audit the books and
accounts of the Company for the fiscal year for which they were appointed, and
to monitor the effectiveness of the audit effort and the Company's financial
and accounting organization and financial reporting.
The Executive Committee consists of Dr. Salick, Mr. Bell and Dr. Mintz. The
Executive Committee did not meet during the fiscal year ended August 31, 1994.
Its functions are to exercise the authority and powers of the Board, except as
limited by the Delaware Law.
The Company's Board of Directors met five times during the fiscal year ended
August 31, 1994. Each director attended or participated in at least seventy-
five percent of the Board meetings and meetings of all committees of the Board
on which he or she served during such year.
INTEREST OF MANAGEMENT AND OTHERS
IN CERTAIN TRANSACTIONS
In 1981, prior to the acquisition of the Company's subsidiary, USHAWL, from
Damon Corporation by the Company, Dr. and Mrs. Salick bought a chronic
outpatient dialysis facility from Damon and leased it back to USHAWL. Part of
the purchase price for the property was represented by two nonrecourse notes of
Dr. and Mrs. Salick secured by a Deed of Trust on such property. At December
31, 1984, the discounted value of these notes as shown on the books of the
Company was $953,553. The Company entered into an agreement on March 6, 1985
with Dr. and Mrs. Salick pursuant to which the notes were purchased for their
discounted value. The terms of the notes presently provide for repayment in ten
annual installments bearing interest beginning November 1, 1986 at the prime
lending rate (8.5% at December 15, 1994). As of August 31, 1994 the balance was
$191,738, all of which was paid in December 1994.
The chronic outpatient dialysis facility is leased to the Company by Dr. and
Mrs. Salick. The facility is leased on a triple net basis expiring in December
2006 at a present monthly rental rate of $51,000, subject to annual adjustment
based on increases in the cost of living index. Certain office and storage
space at the Company's former corporate headquarters is leased from Dr. and
Mrs. Salick and an unrelated third party on a gross basis under month to month
leases. The present aggregate rental under the lease is $15,448 per month.
The Company also leases the Real Property for a period expiring in 2011, in a
building developed for the Company owned by Dr. and Mrs. Salick, the present
monthly rental for which, on a triple net basis is $85,634. The lease for the
Real Property contains a provision which, in the event of certain changes of
control of the Company and the termination of Dr. Salick's employment with the
Company thereafter and prior to
78
<PAGE>
the last two years of the term of the lease, permits Dr. Salick and his spouse,
if then the lessors and at their option, to require the lessee of the Real
Property to (a) purchase the Real Property at a price equal to a capitalization
rate of six and one half percent of the then current cash flow to the lessor or
rents, whichever is higher or (b) pay an assumption fee of $250,000. Such
option would be exercisable by Dr. Salick and his spouse during a period of 120
days commencing with the date of termination of Dr. Salick's employment.
Additionally, in the event of the death of Dr. Salick, the successors to Dr.
Salick have the right to cause the Company to purchase the Real Property at a
purchase price equal to the fair market value thereof, as determined by
appraisal, as of the date of Dr. Salick's death. Dr. and Mrs. Salick also
receive income tax benefits and any appreciation in market value normally
associated with the ownership of real estate. As described elsewhere herein,
Dr. and Mrs. Salick are parties to the Real Property Agreement relating to the
sale or lease of the Real Property. See "MERGER PROPOSAL--Agreements Ancillary
to Merger Agreement" and "--Interests of Certain Persons in the Merger" above.
Michael T. Fiore, Executive Vice President and Chief Operating Officer of the
Company, has received a full recourse loan from the Company of $100,000 secured
by real property. The loan bears interest at 7.62% and was made in connection
with his relocation and acquisition of housing. The note had been due in 1996
with provisions for acceleration in the event of termination of employment or
default in interest payments. The principal amount loaned is outstanding as of
November 30, 1994. In November 1994, the terms of the loan were amended to
provide for payment of three equal annual installments of principal, the first
installment commencing on August 31, 1998, and to provide for monthly payments
of interest.
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the firm of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending August 31, 1995.
Representatives of Price Waterhouse LLP are expected to be present at the
Company's Annual Meeting with the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
To be considered for presentation to the Annual Meeting of Stockholders to be
held in January 1996, a stockholder proposal must be received by the Secretary
of Salick Health Care, Inc., 8201 Beverly Boulevard, Los Angeles, California
90048 not later than November 16, 1995.
LEGAL MATTERS
The legality of the shares of Special Common Stock to be issued in connection
with the Merger will be passed upon for the Company by Sanders, Barnet,
Goldman, Simons & Mosk, A Professional Corporation, counsel for the Company.
The validity of Zeneca PLC's contingent obligation regarding the Put will be
passed upon for Zeneca PLC by Davis Polk & Wardwell, United States counsel for
Zeneca PLC, and by G.H.R. Musker, Secretary and Solicitor of Zeneca PLC (upon
whom Davis Polk & Wardwell will rely with respect to certain matters governed
by English law).
79
<PAGE>
EXPERTS
The consolidated financial statements of the Company incorporated in this
Proxy Statement by reference to the Company's 1994 Annual Report on Form 10-K,
as amended by Form 10-K/A, Amendment No. 1, for the year ended August 31, 1994,
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements and related schedules of Zeneca PLC as
of December 31, 1993 and 1992 and for each of the years in the three year
period ended December 31, 1993 included in Zeneca PLC's Annual Report of Form
20-F for the year ended December 31, 1993 and incorporated by reference herein
have been audited by KPMG as set forth in their reports thereon and
incorporated by reference herein. Such reports are incorporated herein by
reference in reliance upon the authority of such firm as experts in accounting
and auditing.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented to
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, it is intended that proxies in the enclosed form will be used in
respect thereof in accordance with the judgments of the persons voting the
proxies. WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE
URGED TO COMPLETE, SIGN, AND RETURN YOUR PROXY PROMPTLY.
By Order of the Board of Directors
Leslie F. Bell
Secretary
80
<PAGE>
UNAUDITED CONDENSED PRO FORMA FINANCIAL INFORMATION OF ZENECA PLC
The following unaudited condensed pro forma consolidated financial
information, which is prepared under UK accounting principles, reflects the
acquisition of 50% of the outstanding Shares of the Company (recorded under the
purchase method of accounting) and the funding of such acquisition through
additional long term debt. In addition, the pro forma reflects the conversion
by the Company of the Debentures into Shares and the exercise of outstanding
stock options.
The Unaudited Condensed Pro Forma Consolidated Statement of Income for the
year endedDecember 31, 1993 is drawn up as if the above transaction occurred on
January 1, 1993 and consolidates the operating results of Zeneca Group for the
fiscal year ended December 31, 1993 with the operating results of the Company
for the twelve months ended November 30, 1993. The Unaudited Condensed Pro
Forma Consolidated Statement of Income for the six months ended June 30, 1994
consolidates the operating results of Zeneca Group for the six months ended
June 30, 1994 with the operating results of the Company for the six months
ended May 31, 1994. The Unaudited Condensed Pro Forma Consolidated Balance
Sheet as of June 30, 1994 is drawn up as if the above transaction occurred on
June 30, 1994 and consolidates the balance sheet of Zeneca Group at June 30,
1994 with the balance sheet of the Company at May 31, 1994.
The unaudited condensed pro forma financial information has been prepared for
illustrative purposes in conformity with the Commission's requirements and does
not purport to represent what Zeneca Group's results of operations and
financial position actually would have been if such transactions in fact had
occurred on such dates, or to project Zeneca Group's results of operations for
any future period. Other than the adjustments reflected herein no adjustments
have been made to conform the accounting policies of the Company to those of
Zeneca Group or to take account of any fair value adjustments at the date of
acquisition.
The unaudited condensed pro forma financial information has been prepared in
accordance with UK GAAP. A reconciliation of pro forma net income and
shareholders' equity to US GAAP is included in the notes to the unaudited
condensed pro forma financial information. This unaudited condensed pro forma
financial information should be read in conjunction with the separate
historical financial statements and notes thereto of Zeneca Group and the
Company incorporated by reference in this Proxy Statement.
F-1
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AT JUNE 30, 1994 AT MAY 31, 1994 PRO FORMA AT JUNE 30, 1994
ZENECA COMPANY ADJUSTMENTS PRO FORMA
GROUP (Pounds) (Pounds) CONSOLIDATED
(Pounds) MILLION MILLION MILLION (Pounds) MILLION
---------------- --------------- ----------- ----------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Inventories............. 799 1 800
Receivables and prepaid
expenses............... 1,537 27 1,564
Cash and short-term
deposits............... 436 33 3 (g) 472
------- ------- -------
Total current assets.... 2,772 61 2,836
Property, plant and
equipment.............. 1,701 43 (3)(c) 1,741
Non-current investments. 37 0 140 (e) 37
(140)(f)
Intangible assets....... 0 4 (4)(b) 0
105 (f)
(105)(b)
------- ------- -------
TOTAL ASSETS............ 4,510 108 4,614
======= ======= =======
LIABILITIES
LIABILITIES DUE WITHIN
ONE YEAR
Short-term borrowings... 189 7 196
Current installments of
loans.................. 6 1 7
Other creditors......... 1,489 8 4 (h) 1,505
4 (i)
------- ------- -------
TOTAL CURRENT
LIABILITIES............ 1,684 16 1,708
LIABILITIES DUE AFTER
MORE THAN ONE YEAR
Long-term debt.......... 539 21 (17)(d) 683
140 (e)
Accounts payable and
accrued liabilities.... 40 3 43
Provisions for
liabilities and
charges................ 512 512
------- ------- -------
TOTAL LIABILITIES....... 2,775 40 2,946
SHAREHOLDERS' EQUITY.... 1,667 66 (3)(c) 1,562
3 (g)
(4)(b)
(71)(f)
(105)(b)
136 (j)
(136)(j)
17 (d)
(4)(h)
(4)(i)
Minority interests...... 68 2 36 (f) 106
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY... 4,510 108 4,614
======= ======= =======
</TABLE>
F-2
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED 12 MONTHS ENDED YEAR ENDED
DECEMBER 31, 1993 NOVEMBER 30, 1993 PRO FORMA DECEMBER 31, 1993
ZENECA ADJUSTMENTS PRO FORMA
GROUP COMPANY (Pounds) CONSOLIDATED
(Pounds) MILLION (Pounds) MILLION MILLION (Pounds) MILLION
----------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
SALES................... 4,440 78 4,518
Cost of sales........... (1,885) (58) (1,943)
Distribution costs...... (160) 0 (160)
Research and develop-
ment................... (519) 0 (519)
Administrative and other
expenses............... (1,267) (10) (1,277)
Other operating income.. 104 1 105
-------- -------- ------- -------
OPERATING INCOME........ 713 11 0 724
Share of profits of as-
sociated undertakings.. 2 0 2
Income less losses on
sale or closure of
operations............. 15 0 15
Net interest payable.... (88) (1) (10)(k) (99)
-------- -------- ------- -------
INCOME FROM ORDINARY
ACTIVITIES BEFORE
TAXATION............... 642 10 (10) 642
Taxes on income from or-
dinary activities...... (189) (4) 4 (l) (189)
-------- -------- ------- -------
INCOME FROM ORDINARY
ACTIVITIES AFTER
TAXATION............... 453 6 (6) 453
Income attributable to
minority interest...... (13) 0 (3)(m) (16)
-------- -------- ------- -------
NET INCOME.............. 440 6 (9) 437
======== ======== ======= =======
Earnings per ordinary
share.................. 51.7p 51.4p
Earnings per ordinary
share before
exceptional items...... 50.0p 49.7p
</TABLE>
F-3
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED
STATEMENT OF INCOME
<TABLE>
<CAPTION>
6 MONTHS ENDED 6 MONTHS ENDED 6 MONTHS ENDED
JUNE 30, 1994 MAY 31, 1994 JUNE 30, 1994
PRO FORMA PRO FORMA
ZENECA GROUP COMPANY ADJUSTMENTS CONSOLIDATED
(Pounds) MILLION (Pounds) MILLION (Pounds) MILLION (Pounds) MILLION
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
SALES................... 2,384 45 2,429
Cost of sales........... (1,060) (34) (1,094)
Distribution costs...... (82) 0 (82)
Research and develop-
ment................... (255) 0 (255)
Administrative and other
expenses............... (664) (6) (670)
Other operating income.. 50 0 50
------ --- --- ------
OPERATING INCOME........ 373 5 0 378
Share of profits of as-
sociated undertakings.. 3 0 3
Income less losses on
sale or closure of op-
erations............... 0 0 0
Net interest payable.... (25) 0 (5)(k) (30)
------ --- --- ------
INCOME FROM ORDINARY AC-
TIVITIES BEFORE TAXA-
TION................... 351 5 (5) 351
Taxes on income from or-
dinary activities...... (106) (2) 2 (l) (106)
------ --- --- ------
INCOME FROM ORDINARY AC-
TIVITIES AFTER TAXA-
TION................... 245 3 (3) 245
Income attributable to
minority interest...... (5) 0 (2)(m) (7)
------ --- --- ------
NET INCOME.............. 240 3 (5) 238
====== === === ======
Earnings per ordinary
share.................. 25.4p 25.2p
Earnings per ordinary
share before exceptional
items................... 32.9p 32.7p
</TABLE>
F-4
<PAGE>
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(a) The Company's historical financial statements incorporated by reference
herein are presented in US dollars and prepared in accordance with US GAAP.
The Company's unaudited balance sheet at May 31, 1994 has been translated
into UK pounds sterling using (Pounds)1 to US$1.51, representing the
exchange rate at May 31, 1994. The Company's statement of income for the
twelve months ended November 30, 1993 and for the six-months ended May 31,
1994 have been translated into UK pounds sterling using a weighted average
exchange rate of (Pounds)1 to US$1.52 and (Pounds)1 to US$1.49,
respectively. Certain reclassifications have been made to the historical
financial statements of the Company to conform with Zeneca Group's
presentation. On the basis of a preliminary review by Zeneca Group, the
historical financial statements of the Company as presented on a US GAAP
basis require the adjustments detailed in (b) and (c) to conform to UK GAAP
as adopted by Zeneca Group.
(b) In accordance with Zeneca Group's accounting policies all goodwill is
written off to shareholders' equity on acquisition as follows:
<TABLE>
<CAPTION>
(Pounds) MILLION
----------------
<S> <C>
Goodwill in balance sheet of the Company................ 4
Additional goodwill arising on acquisition of the Compa-
ny..................................................... 105
------
109
======
</TABLE>
(c) In accordance with UK GAAP the Company's capitalized pre-operating costs
((Pounds)3 million) are written off to shareholders' equity.
(d) Represents the conversion of the Debentures ((Pounds)17 million) into
Shares prior to the acquisition of the Company by Zeneca.
(e) Represents the investment in the Company of (Pounds)140 million ($205
million for Shares and $7 million for investment banking and professional
fees) and its assumed funding through additional long term debt
((Pounds)140 million).
(f) The following represents the preliminary allocation of the excess of
purchase price over the historical net book values of the acquired net
assets of the Company and the elimination of the historical net equity of
the Company. This allocation is for pro forma purposes only. Actual fair
values will be based on the results of studies which have yet to be
undertaken. The preliminary allocation is as follows:
<TABLE>
<CAPTION>
(Pounds) MILLION
----------------
<S> <C>
Acquired net assets at book value........................ 71
Goodwill................................................. 105
Minority interests....................................... (36)
------
140
======
The net assets of the Company are derived as follows:
<CAPTION>
(Pounds) MILLION
----------------
<S> <C>
Net assets at book value at May 31, 1994................. 66
Goodwill written off..................................... (4)
Pre-operating costs...................................... (3)
Conversion of Debentures................................. 17
Exercise of outstanding stock options.................... 3
Dividend accrued......................................... (4)
The Company's investment banking and professional fees... (4)
------
71
======
</TABLE>
F-5
<PAGE>
(g) Represents adjustment to record the exercise of outstanding stock options.
(h) Represents the accrual for the Distribution of 62.5 cents per share payable
to all holders of Shares of record immediately prior to the Effective Time.
(i) Represents the Company's estimated investment banking and professional fees
((Pounds)4 million). The pro forma statement of income does not include the
charge for these expenses as they are considered to be non-recurring.
(j) Represents adjustment to record the conversion of Common Stock, the
issuance of shares of Common Stock to Zeneca and the issuance of shares of
Special Common Stock to the existing stockholders of the Company.
(k) Represents the net adjustment to the interest charge, including the cost of
the assumed funding of the acquisition of the Company, net of the interest
saving on the conversion of the Debentures at the estimated overall
effective rate of interest.
(l) Represents related income tax effects of the above pro forma adjustments at
the applicable statutory rate.
(m) Represents the 50% of the Company's net income attributable to the minority
interest.
(n) The pro forma statement of income does not include any adjustments to
reflect the impact of the "change of control" clause in the lease of the
Company's corporate headquarters by the Company from Dr. and Mrs. Salick,
as the definitive outcome of such clause is not known at this time.
If the clause was exercised the Company would acquire the corporate
headquarters for (Pounds)10 million. This would not have a material effect
on the pro forma statement of income.
(o) The Zeneca Group income statement for the year ended December 31, 1993 will
be restated in the 1994 annual accounts to reflect the implementation of
UITF Abstract 6 "Accounting for post-retirement benefits other than
pensions" which was adopted on January 1, 1994. The effect of this change
in accounting policy is to reduce 1993 operating income by (Pounds)9
million which is not reflected in these pro forma accounts.
(p) The accounting policies followed in the preparation of the unaudited
condensed pro forma consolidated balance sheet in accordance with UK GAAP
differ in some respects from those under US GAAP. Those differences that
have a material effect on pro forma shareholders' equity and pro forma net
income are as follows:
(i) Goodwill: Zeneca Group writes off goodwill direct to retained surplus
in the year of acquisition. Under US GAAP, these intangible assets
would be capitalized in the balance sheet and amortized through the
statement of income over a period not exceeding 40 years.
(ii) The investment in the Company does not qualify for consolidation
accounting treatment under US GAAP as Zeneca Group is not considered
to have a "controlling financial interest' over the Company. However,
consolidation treatment is required under UK GAAP in view of Zeneca's
right to require the Company to exercise the Call, as discussed in
"DESCRIPTION OF THE SPECIAL COMMON STOCK," to acquire the remaining
Special Common Stock of the Company and issue an equal number of
shares of Common Stock to Zeneca.
(iii) Other US GAAP adjustments affecting the historical financial
statements are discussed in note 4 of the consolidated financial
statements.
F-6
<PAGE>
The calculation of pro forma consolidated shareholders' equity substantially
in accordance with US GAAP is as follows:
Reconciliation of pro forma consolidated shareholders' equity:
<TABLE>
<CAPTION>
JUNE 30 1994
(Pounds) MILLION
----------------
<S> <C>
Shareholders' equity as per the pro forma consolidated
balance sheet of Zeneca Group and the Company in accordance
with UK GAAP................................................ 1,562
ESTIMATED ADJUSTMENTS
Total estimated adjustments required for Zeneca Group to con-
form with US GAAP as set out in the June 30, 1994 interim
financial statements........................................ 780
Estimated additional adjustment to goodwill required follow-
ing the acquisition of the Company.......................... 105
Other adjustments............................................ 3
-----
Approximate pro forma shareholders' equity in accordance with
US GAAP...................................................... 2,450
=====
</TABLE>
The calculation of pro forma consolidated net income substantially in
accordance with US GAAP is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 1993
(Pounds) MILLION
----------------
<S> <C>
Net income as per pro forma consolidated statements of income
in accordance with UK GAAP.................................. 437
ADJUSTMENTS IN RESPECT OF CONTINUING OPERATIONS
Total estimated adjustments required for Zeneca Group to
conform with US GAAP as set out in note 4 of the
consolidated financial statements........................... (84)
ESTIMATED ADDITIONAL ADJUSTMENTS REQUIRED FOLLOWING THE
ACQUISITION OF THE COMPANY
Amortization of goodwill..................................... (3)
---
Approximate pro forma net income in accordance with US GAAP.. 350
===
Approximate pro forma net income per ordinary share in
accordance with US GAAP..................................... 42p
<CAPTION>
SIX-MONTHS
ENDED JUNE 30
1994
(Pounds) MILLION
----------------
<S> <C>
Net income as per pro forma consolidated statements of income
in accordance with UK GAAP.................................. 238
ADJUSTMENTS IN RESPECT OF CONTINUING OPERATIONS
Total estimated adjustments required for Zeneca Group to
conform with US GAAP as set out in the June 30, 1994 interim
financial statements........................................ (41)
ESTIMATED ADDITIONAL ADJUSTMENTS REQUIRED FOLLOWING THE
ACQUISITION OF THE COMPANY
Amortization of goodwill..................................... (1)
---
Approximate pro forma net income in accordance with US GAAP.. 196
===
Approximate pro forma net income per ordinary share in
accordance with US GAAP..................................... 21p
</TABLE>
F-7
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
DECEMBER 22, 1994
AMONG
SALICK HEALTH CARE, INC.
ZENECA LIMITED
AND
ATKEMIX THIRTY-NINE INC.
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 1
THE MERGER
<C> <S> <C>
SECTION 1.1 The Merger.................................................. A-7
SECTION 1.2 Closing..................................................... A-7
SECTION 1.3 Conversion of Shares........................................ A-8
SECTION 1.4 Surrender and Payment....................................... A-8
SECTION 1.5 Dissenting Shares........................................... A-9
SECTION 1.6 Stock Options............................................... A-10
SECTION 1.7 Convertible Debt Securities................................. A-10
SECTION 1.8 Fractional Shares........................................... A-10
SECTION 1.9 Distribution................................................ A-11
SECTION 1.10 Put Obligations............................................. A-11
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.1 Certificate of Incorporation................................ A-11
SECTION 2.2 Bylaws...................................................... A-11
SECTION 2.3 Directors and Officers...................................... A-12
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Corporate Existence and Power............................... A-12
SECTION 3.2 Corporate Authorization..................................... A-12
SECTION 3.3 Governmental Authorization.................................. A-12
SECTION 3.4 Non-Contravention........................................... A-13
SECTION 3.5 Capitalization.............................................. A-13
SECTION 3.6 Subsidiaries and Investments................................ A-13
SECTION 3.7 SEC Filings................................................. A-14
SECTION 3.8 Financial Statements........................................ A-14
SECTION 3.9 Disclosure Documents........................................ A-14
SECTION 3.10 Absence of Certain Changes.................................. A-15
SECTION 3.11 Litigation.................................................. A-16
SECTION 3.12 Taxes....................................................... A-16
SECTION 3.13 ERISA....................................................... A-17
SECTION 3.14 Compliance with Laws........................................ A-18
SECTION 3.15 Finders' Fees............................................... A-18
SECTION 3.16 Environmental Matters....................................... A-18
SECTION 3.17 Regulatory Compliance....................................... A-19
SECTION 3.18 Intellectual Property....................................... A-20
SECTION 3.19 No Registration Rights...................................... A-20
SECTION 3.20 Registration Statement...................................... A-20
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
<C> <S> <C>
SECTION 4.1 Corporate Existence and Power.............................. A-20
SECTION 4.2 Corporate Authorization.................................... A-20
SECTION 4.3 Governmental Authorization................................. A-20
SECTION 4.4 Non-Contravention.......................................... A-21
SECTION 4.5 Disclosure Documents....................................... A-21
SECTION 4.6 Finders' Fees.............................................. A-21
SECTION 4.7 Capitalization of Merger Subsidiary........................ A-21
SECTION 4.8 Financing.................................................. A-22
SECTION 4.9 SEC Filings................................................ A-22
SECTION 4.10 Financial Statements....................................... A-22
SECTION 4.11 Absence of Certain Changes................................. A-22
SECTION 4.12 Litigation................................................. A-22
SECTION 4.13 Regulatory Compliance...................................... A-22
SECTION 4.14 Registration Statement..................................... A-22
ARTICLE 5
COVENANTS OF THE COMPANY
SECTION 5.1 Conduct of the Company..................................... A-23
SECTION 5.2 Stockholder Meeting; Proxy Material........................ A-24
SECTION 5.3 Access to Information...................................... A-24
SECTION 5.4 Other Offers............................................... A-24
SECTION 5.5 Notices of Certain Events.................................. A-25
SECTION 5.6 Tax Certification.......................................... A-25
SECTION 5.7 Conveyance Taxes........................................... A-25
SECTION 5.8 Rule 145 Affiliates........................................ A-25
SECTION 5.9 Registration............................................... A-25
ARTICLE 6
COVENANTS OF BUYER AND MERGER SUBSIDIARY
SECTION 6.1 Confidentiality............................................ A-25
Obligations of Merger Subsidiary and the Surviving
SECTION 6.2 Corporation................................................ A-26
SECTION 6.3 Voting of Shares........................................... A-26
SECTION 6.4 Avoidance of Breach........................................ A-26
SECTION 6.5 Notices of Certain Events.................................. A-26
ARTICLE 7
COVENANTS OF BUYER AND THE COMPANY
SECTION 7.1 Best Efforts............................................... A-27
SECTION 7.2 Certain Filings............................................ A-27
SECTION 7.3 Public Announcements....................................... A-27
SECTION 7.4 Further Assurances......................................... A-27
SECTION 7.5 Conveyance Taxes........................................... A-27
SECTION 7.6 Notification of Certain Matters............................ A-27
SECTION 7.7 Director and Officer Liability............................. A-28
SECTION 7.8 Funding of Call............................................ A-28
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 8
CONDITIONS TO THE MERGER
<C> <S> <C>
SECTION 8.1 Conditions to the Obligations of Each Party................ A-28
Conditions to the Obligations of Buyer and Merger
SECTION 8.2 Subsidiary................................................. A-28
SECTION 8.3 Conditions to the Obligations of the Company............... A-30
ARTICLE 9
TERMINATION
SECTION 9.1 Termination................................................ A-30
SECTION 9.2 Effect of Termination...................................... A-31
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Notices.................................................... A-31
SECTION 10.2 Survival of Representations and Warranties................. A-32
SECTION 10.3 Amendments; No Waivers..................................... A-32
SECTION 10.4 Fees and Expenses.......................................... A-33
SECTION 10.5 Successors and Assigns..................................... A-33
SECTION 10.6 Governing Law.............................................. A-33
SECTION 10.7 Entire Agreement........................................... A-34
SECTION 10.8 Currency................................................... A-34
SECTION 10.9 Counterparts; Effectiveness................................ A-34
</TABLE>
Annex A
Exhibit 2.1
Exhibit 2.2
Exhibit 8.2 (g) (A)
Exhibit 8.2 (g) (B)
A-4
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
SECTION
TERM -------
<S> <C>
1933 Act............................................................ 3.3
1933 Act Affiliates................................................. 5.8
1934 Act............................................................ 3.3
Acquisition Proposal................................................ 5.4
affiliate........................................................... 3.13(a)
Balance Sheet....................................................... 3.8
Balance Sheet Date.................................................. 3.8
Benefit Arrangements................................................ 3.13(e)
Buyer Officers...................................................... 4.12
Buyer............................................................... Recitations
Buyer MAE........................................................... 4.4
Cash Consideration.................................................. 1.3(c)
Certificate of Merger............................................... 1.1(b)
Closing............................................................. 1.2
Closing Date........................................................ 1.2
Code................................................................ 1.4(h)
Common Stock........................................................ 1.3(b)
Company............................................................. Recitations
Company 10-K........................................................ 3.6(c)
Company Disclosure Documents........................................ 3.9(a)
Company Options..................................................... 1.6(a)
Company Proxy Statement............................................. 3.9(a)
Company Securities.................................................. 3.5
Company Stockholder Meeting......................................... 5.2
Convertible Securities.............................................. 1.7
Delaware Law........................................................ 1.1(a)
Disclosure Letter................................................... 3.3
Distribution........................................................ 1.9
Effective Time...................................................... 1.1(b)
employee benefit plan............................................... 3.13(a)
Employee Plans...................................................... 3.13(a)
Environmental Laws.................................................. 3.16(B)
Environmental Liabilities........................................... 3.16(C)
ERISA............................................................... 3.13(a)
Exchange Agent...................................................... 1.4(a)
Executive Officers.................................................. 3.10(j)
Hazardous Substances................................................ 3.16(D)
HSR Act............................................................. 3.3
HSR Authority....................................................... 8.2(d)
Intellectual Property Right......................................... 3.18(a)
knowledge........................................................... 3.10(j)
Lien................................................................ 3.4
Material Adverse Effect............................................. 3.1
Merger Subsidiary................................................... Recitations
Merger.............................................................. Recitations
Merger Consideration................................................ 1.3(c)
multiemployer plan.................................................. 3.13(b)
NASD................................................................ 3.3
New York Courts..................................................... 10.6(b)
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
Officers............................................................ 3.10(i)
Person.............................................................. 1.4(c)
Ratio............................................................... 1.6(a)
Registration Statement.............................................. 4.14
Replacement Options................................................. 1.6(a)
SEC................................................................. 3.7(a)
Shares.............................................................. Recitations
Significant Subsidiary.............................................. 3.1
Special Common Stock................................................ 1.3(c)
Stock Consideration................................................. 1.3(c)
Subsidiary.......................................................... 3.1
Subsidiary Securities............................................... 3.6(d)
Surviving Corporation............................................... 1.1(a)
taxes............................................................... 3.12(b)
Trigger Event....................................................... 10.4(b)
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 22, 1994 among SALICK
HEALTH CARE, INC., a Delaware corporation (the "COMPANY"), ZENECA LIMITED, an
English company ("BUYER"), and ATKEMIX THIRTY-NINE INC., a Delaware corporation
and an indirect wholly-owned subsidiary of Buyer ("MERGER SUBSIDIARY").
WHEREAS, the Boards of Directors of Buyer, Merger Subsidiary and the Company
have each determined to engage in the transactions contemplated hereby,
pursuant to which (i) Merger Subsidiary will merge (the "MERGER") with and into
the Company, (ii) each share of common stock, par value $.001 per share, of the
Company (collectively, "SHARES") (except for Shares owned by the Company and
Shares as to which appraisal rights have been perfected) shall be converted
into a right to receive the cash and stock consideration set forth herein and
(iii) the capital stock of Merger Subsidiary shall be converted into common
stock of the Surviving Corporation (as defined in Section 1.1), in exchange for
which Buyer will deposit for the benefit of the holders of Shares the cash
portion of such consideration and agrees to make certain payments in respect of
the Special Common Stock referred to below, all upon the terms and subject to
the conditions set forth herein; and
WHEREAS, the Board of Directors of the Company has approved the Merger and
resolved to recommend, subject to its fiduciary duties, that stockholders of
the Company adopt this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 The Merger. (a) On the terms and subject to the conditions set
forth herein, at the Effective Time (as defined in Section 1.1(b)), Merger
Subsidiary shall be merged with and into the Company in accordance with the
General Corporation Law of the State of Delaware (the "DELAWARE LAW"),
whereupon the separate existence of Merger Subsidiary shall cease, and the
Company shall be the surviving corporation (the "SURVIVING CORPORATION").
(b) On the Closing Date (as defined in Section 1.2 hereof) the Company and
Merger Subsidiary will file a certificate of merger (the "CERTIFICATE OF
MERGER") with the Secretary of State of the State of Delaware and make all
other filings or recordings required by Delaware Law in connection with the
Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware or at
such later time as is specified in the Certificate of Merger (the "EFFECTIVE
TIME").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of the Company and Merger
Subsidiary, all as provided under Delaware Law.
SECTION 1.2 Closing. Subject to satisfaction or, to the extent permitted
hereunder, waiver of Sections 8.2 and 8.3 hereof, the closing of the Merger
(the "CLOSING") will take place at 10:00 a.m. local time on a date to be
specified by the parties, which shall be no later than the second business day
after satisfaction or, to the extent permitted hereunder, waiver of the latest
to occur of the conditions set forth in Sections 8.1 hereof (the "CLOSING
DATE"), at the offices of Sanders, Barnet, Goldman, Simons & Mosk, 1901 Avenue
of the Stars, Suite 850, Los Angeles, California 90067, unless another date or
place is agreed to in writing by the parties hereto.
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SECTION 1.3 Conversion of Shares. At the Effective Time:
(a)Each Share held by the Company as treasury stock immediately prior to
the Effective Time shall be canceled and no payment shall be made with
respect thereto;
(b)The shares of common stock, $1.00 par value, of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted into
and become the number of shares of common stock of the Surviving
Corporation (the "COMMON STOCK") equal to the sum of (i) the number of
shares of Special Common Stock (as defined in Section 1.3(c)) that will be
outstanding immediately after the Effective Time (assuming conversion of
all convertible securities outstanding at the Effective Time) plus (ii) the
number of shares of Special Common Stock issuable upon the exercise of all
Replacement Options (as defined in Section 1.6 below); and
(c)Each Share outstanding immediately prior to the Effective Time shall,
except as otherwise provided in Section 1.3(a) above or as provided in
Section 1.5 below with respect to Shares as to which appraisal rights have
been exercised, be converted into the right to receive one half share of
the Callable Puttable Common Stock, $.001 par value per share, of the
Surviving Corporation (the "SPECIAL COMMON STOCK" or "STOCK CONSIDERATION")
and $18.875 in cash, without interest (the "CASH CONSIDERATION" and,
together with the Stock Consideration, the "MERGER CONSIDERATION"). The
Special Common Stock and the Common Stock shall have the terms and
conditions set forth in Exhibit 2.1 hereto. The Special Common Stock and
the Common Stock shall constitute the only outstanding shares of capital
stock of the Surviving Corporation.
SECTION 1.4 Surrender and Payment. (a) Prior to the Effective Time, Buyer
shall appoint a bank or trust company having offices in Los Angeles, California
as agent (the "EXCHANGE AGENT") for the purpose of exchanging certificates
representing Shares for the Merger Consideration and to effect redemption
pursuant to Section 1.9 below. Prior to the Effective Time, Buyer shall deposit
with the Exchange Agent the Cash Consideration to be paid in exchange for
Shares and the Company will make available to the Exchange Agent the Stock
Consideration to be paid in exchange for Shares. For purposes of determining
the Merger Consideration to be made available, Buyer and the Company shall
assume that no holder of Shares will perfect his right to appraisal of his
Shares. Promptly after the Effective Time, Buyer and the Surviving Corporation
will send, or will cause the Exchange Agent to send, to each holder of Shares
at the Effective Time a letter of transmittal for use in such exchange (which
shall specify that the delivery shall be effected, and risk of loss and title
shall pass, only upon proper delivery of the certificates representing Shares
to the Exchange Agent).
(b) Each holder of Shares that have been converted into a right to receive
the Merger Consideration, upon surrender to the Exchange Agent of a certificate
or certificates representing such Shares, together with a properly completed
letter of transmittal covering such Shares, will be entitled to receive the
Merger Consideration payable in respect of such Shares. Until so surrendered,
each such certificate shall, after the Effective Time, represent for all
purposes, only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the registered holder of Shares represented by the certificate or
certificates surrendered in exchange therefor, it shall be a condition to such
payment that the certificate or certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the Person
requesting such payment shall pay to the Exchange Agent any transfer or other
taxes required as a result of such payment to a Person other than the
registered holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. For purposes of
this Agreement, "PERSON" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity
or organization, including a government or political subdivision or any agency
or instrumentality thereof.
(d) At the Effective Time, the stock transfer books of the Company shall be
closed with respect to the Shares issued and outstanding immediately prior to
the Effective Time, and, after the Effective Time, there shall be no further
registration of transfers of Shares. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the Merger Consideration provided for, and in
accordance with the procedures set forth, in this Article 1.
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<PAGE>
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 1.4(a) above that remains unclaimed by the holders of
Shares six months after the Effective Time shall be returned to Buyer (with
respect to Cash Consideration only) and to the Surviving Corporation (with
respect to the Stock Consideration only), in each case upon demand, and any
such holder who has not exchanged his Shares for the Merger Consideration in
accordance with this Section prior to that time shall thereafter look only to
Buyer and the Surviving Corporation, respectively, for payment of the Merger
Consideration in respect of his Shares. Notwithstanding the foregoing, neither
Buyer nor the Surviving Corporation shall be liable to any holder of Shares for
any amount paid to a public official pursuant to applicable abandoned property
laws. Any amounts remaining unclaimed by holders of Shares two years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become the property
of Buyer (with respect to the Cash Consideration only) or the Surviving
Corporation (with respect to the Stock Consideration only) free and clear of
any claims or interest of any Person previously entitled thereto.
(f) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 1.4(a) above to pay for Shares for which appraisal
rights have been perfected shall be returned to Buyer (with respect to the Cash
Consideration only) or the Surviving Corporation (with respect to the Stock
Consideration only), in each case upon demand.
(g) No dividends, interest or other distributions with respect to Stock
Consideration shall be paid to the holder of any unsurrendered certificates
representing Shares until such certificates are surrendered as provided in this
Section. Upon such surrender, there shall be paid, without interest, to the
Person in whose name the certificates representing the Stock Consideration into
which such Shares were converted are registered, all dividends, interest and
other distributions payable in respect of such securities on a date subsequent
to, and in respect of a record date after, the Effective Time.
(h) Buyer, the Surviving Corporation or the Exchange Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of the Shares such amounts as Buyer, the Surviving
Corporation or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the United States Internal Revenue
Code of 1986, as amended (the "CODE"), or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Buyer, the
Surviving Corporation or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
Shares in respect of which such deduction and withholding was made by Buyer,
the Surviving Corporation or the Exchange Agent.
(i) The Cash Consideration deposited with the Exchange Agent shall be
invested by the Exchange Agent as directed by Buyer in consultation with the
Surviving Corporation (so long as such directions do not impair the rights of
the holders of the Shares) in direct obligations of the United States of
America, obligations for which the full faith and credit of the United States
of America is pledged to provide for the payment of principal and interest,
commercial paper rated of the highest quality by Moody's Investors Services,
Inc. or Standard & Poor's Corporation or certificates of deposit issued by a
commercial bank having combined capital, surplus and undivided profits
aggregating at least $500,000,000, and any net earnings with respect thereto
shall be paid to Buyer as and when requested by Buyer.
SECTION 1.5 Dissenting Shares. Notwithstanding Section 1.3 above, Shares
outstanding immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Shares in accordance with Delaware Law shall
not be converted into a right to receive the Merger Consideration, unless such
holder fails to perfect or withdraws or otherwise loses his right to appraisal.
If after the Effective Time such holder fails to perfect or withdraws or loses
his right to appraisal, such Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Buyer prompt notice of any demands
received by the Company for appraisal of Shares, and Buyer shall have the right
to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the
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<PAGE>
prior written consent of Buyer, make any payment with respect to, or settle or
offer to settle, any such demands. Buyer shall reimburse the Company for one-
half of any payment it makes with respect to such demands or on account of
shares for which appraisal rights have been perfected.
SECTION 1.6 Stock Options. (a) All options outstanding at the Effective Time
under any of the Company's stock option plans or other compensation
arrangements (the "COMPANY OPTIONS") shall remain outstanding following the
Effective Time. At the Effective Time, the Company Options shall, by virtue of
the Merger and without any further action on the part of the Company or the
holder thereof, be assumed by the Surviving Corporation in such manner that the
Surviving Corporation (i) is a corporation "assuming a stock option in a
transaction to which Section 424(a) applies" within the meaning of Section 424
of the Code or (ii) to the extent Section 424 of the Code does not apply to any
such Company Options, would be such a corporation were Section 424 of the Code
applicable to such Company Options. All Company Options assumed by the
Surviving Corporation are hereinafter referred to as "REPLACEMENT OPTIONS."
Each Replacement Option (i) shall become fully exercisable as of the Effective
Time, (ii) shall be exercisable for that whole number of shares of the Special
Common Stock (rounded downward to the nearest whole share) equal to the number
of Shares subject to such Company Option immediately prior to the Effective
Time multiplied by the Ratio (as defined below) and (iii) shall have an option
price per share of the Special Common Stock in an amount equal to the option
price per Share subject to such Company Option in effect immediately prior the
Effective Time divided by the Ratio (the option price per share, as so
determined, being rounded upward to the nearest full cent); provided that in no
event shall the number of shares of the Special Common Stock referred to in
clause (ii) be increased above the number of Shares subject to the Company
Option to which the Replacement Option relates or the option price per share
referred to in clause (iii) be decreased below the option price of the Company
Option to which the Replacement Option relates pursuant to the foregoing
adjustments. For purposes of this Agreement,the "RATIO" shall be equal to the
quotient obtained by dividing (A) the average of the highest bid price of
Shares on each of the ten trading days immediately preceding the day in which
the Effective Time occurs by (B) the average of the highest bid price of the
Special Common Stock on each of the ten trading days immediately following the
day in which the Effective Time occurs. The Replacement Options shall by their
terms provide that upon exercise by the Surviving Corporation of the call
rights contained in Article Fourth, Section C(v) of its Certificate of
Incorporation, all of the Replacement Options, to the extent not previously
exercised, will be deemed exercised by the holders thereof, the Replacement
Options will be canceled and the holders thereof will be paid in cash the
amount determined by multiplying (i) the excess (if any) of the Call Price (as
defined in the Certificate of Incorporation of the Surviving Corporation) per
share over the Option Price by (ii) the number of shares of the Special Common
Stock covered by such Replacement Options.
(b) Prior to the Closing, the Company shall (i) obtain any consents from
holders of options to purchase Shares granted under the Company's stock option
or compensation plans or arrangements and (ii) make any amendments to the terms
of such stock option or compensation plans or arrangements that, in the case of
either clauses (i) or (ii), are necessary to give effect to the transactions
contemplated by Section 1.6(a). Notwithstanding any other provision of this
Section, payment may be withheld in respect of any employee stock option until
necessary consents are obtained.
SECTION 1.7 Convertible Debt Securities. Prior to the Closing, the Company
shall call for redemption and redeem all outstanding 7 1/4% Convertible
Subordinated Debentures due 2001 of the Company (the "CONVERTIBLE SECURITIES")
so that, immediately prior to the Effective Time, all such Convertible
Securities shall have been redeemed or converted for Shares.
SECTION 1.8 Fractional Shares. No fractional shares of Special Common Stock
shall be issued in the Merger. All fractional shares of the Special Common
Stock that holders of Shares would otherwise be entitled to receive as a result
of the Merger shall be aggregated and, within ten days after the Effective
Time, sold by the Exchange Agent on behalf of all such holders. Each holder
that would otherwise receive a fractional share of the Special Common Stock as
a result of the Merger shall, in lieu thereof, be entitled to receive from the
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Exchange Agent a cash amount equal to such holder's proportionate interest in
the proceeds of such sale (net of any applicable expenses and withholding as
described in Section 1.3(h)).
SECTION 1.9 Distribution. As additional consideration for Shares converted in
the Merger, the Company shall make a distribution (the "DISTRIBUTION") to all
holders of Shares of record immediately prior to the Effective Time, payable
(A) on the next date which is 180 days after the Closing Date (or, if such day
is not a business day, the next succeeding business day) in the amount of
$0.3125 per Share and (B) on the date which is 360 days after the Closing Date
(or, if such day is not a business day, the next succeeding business day) in
the amount of $0.3125 per Share. The parties agree that the obligation to pay
the Distribution shall bind the Surviving Corporation and shall be irrevocable.
SECTION 1.10 Put Obligations. Buyer agrees to, or to cause one or more of its
affiliates to, pay to the Surviving Corporation immediately prior to the time
that such amounts become due and payable all amounts, if any, that, assuming
that such payments could be made without violating Section 160 of the Delaware
Law, any bankruptcy or insolvency law or other law or regulation for the
protection of creditors, will be due and payable to the holders of the Special
Common Stock pursuant to Article Fourth, Section C(v) of the Certificate of
Incorporation of the Surviving Corporation. In exchange for such payment, the
Surviving Corporation will issue to Buyer (or to its designated affiliate) a
number of duly authorized and validly issued shares of the Common Stock equal
to the number of shares of the Special Common Stock acquired thereby by the
Surviving Corporation. Notwithstanding the foregoing, Buyer shall not be
obligated to pay to the Surviving Corporation any amount pursuant to this
Section 1.10 in excess of the product of the Put Price(as defined in the
Certificate of Incorporation of the Surviving Corporation) times the total
number of shares of the Special Common Stock with respect to which the Put is
exercised. If the Surviving Corporation consummates the purchase of the Special
Common Stock in contravention of Section 160 of the Delaware Law or any other
law for the protection of creditors, Buyer agrees to indemnify and hold
harmless the directors of the Surviving Corporation against any liabilities
arising out of such purchase. In the event (A) it is determined by Buyer or the
Surviving Corporation that the Surviving Corporation may be unable to
consummate the purchase of all of the Special Common Stock at the Put Price per
share in accordance with the Certificate of Incorporation or (B) the Surviving
Corporation is unable to pay the Put Price with respect to all such shares in
accordance with the Certificate of Incorporation, in either case, without
violatingSection 160 of the Delaware Law, any bankruptcy or insolvency law or
other law or regulation for the protection of creditors, then Buyer's
obligation to make such payment to the Surviving Corporation under this Section
1.10 shall be void and of no further force and effect and in lieu thereof Buyer
shall (or shall cause one of its affiliates to) purchase, and make all
arrangements necessary to purchase, during the Put Period (as defined in the
Certificate of Incorporation), directly from the holders of the Special Common
Stock at the Put Price the Special Common Stock which such holders elect or
have elected to require the Surviving Corporation to purchase. It is understood
and agreed that the obligation of Buyer to purchase the Special Common Stock,
as set forth in the preceding sentence, may, at the election of Buyer made
prior to the Effective Time, be assigned by Buyer to Zeneca Group PLC. The
holders of the Special Common Stock shall have the right to enforce the
obligations of Buyer under this Section 1.10 directly against Buyer, or in the
event of assignment pursuant to the preceding sentence, against Zeneca Group
PLC.
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.1 Certificate of Incorporation. The certificate of incorporation of
the Company in effect at the Effective Time, as set forth in Exhibit 2.1
hereto, shall be the certificate of incorporation of the Surviving Corporation
until amended in accordance with applicable law.
SECTION 2.2 Bylaws. The bylaws of the Company in effect at the Effective
Time, as amended as set forth in Exhibit 2.2 hereto, shall be the bylaws of the
Surviving Corporation until amended in accordance with applicable law.
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SECTION 2.3 Directors and Officers. From and after the Effective Time, until
successors are duly elected or appointed and qualified in accordance with
applicable law, (i) ten directors designated pursuant to the provisions of
Certificate of Incorporation, bylaws and Article II of the Governance Agreement
among Dr. Bernard Salick, the Company and Buyer, dated as of the date hereof,
shall be the directors of the Surviving Corporation, and (ii) the officers of
the Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Buyer that:
SECTION 3.1 Corporate Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate powers required to carry on its business as
now conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have or be reasonably
likely to have a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations of the Company and the
Subsidiaries taken as a whole (a "MATERIAL ADVERSE EFFECT"). The Company has
heretofore delivered to Buyer true and complete copies of the Company's
certificate of incorporation and bylaws as currently in effect. For purposes of
this Agreement, "SUBSIDIARY" means any corporation, partnership, joint venture
or other legal entity of which the Company (either alone or through or together
with any other subsidiary) owns, directly or indirectly, 50% or more of the
stock or other equity interests, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity and "SIGNIFICANT SUBSIDIARY" means each of
USHAWL Inc., Comprehensive Cancer Centers Inc., Century Dialysis Corporation,
INFUSX, Inc., Ambulatory Diagnostic Services Inc. and SalickNet, Inc.
SECTION 3.2 Corporate Authorization. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby are within the Company's corporate powers and,
except for any required approval by the Company's stockholders in connection
with the consummation of the Merger, have been duly authorized by all necessary
corporate action. This Agreement constitutes a valid and binding agreement of
the Company.
SECTION 3.3 Governmental Authorization. Except as disclosed in the letter
dated as of the date hereof from the Company to Buyer and Merger Subsidiary
(the "DISCLOSURE LETTER"), the execution, delivery and performance by the
Company of this Agreement, the consummation of the Merger by the Company and
the conduct of the business of the Company and the Subsidiaries as such conduct
will, as a matter of law or regulation, be affected by the consummation of the
Merger, require by or with respect to the Company or any Subsidiary, no action
by or in respect of, or filing with, any governmental body, agency, official or
authority other than (i) the filing of a certificate of merger in accordance
with Delaware Law; (ii) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"); (iii)
compliance with any applicable requirements of the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder (the "1934 ACT");
(iv) compliance with the applicable requirements of the Securities Act of 1933
and the rules and regulations promulgated thereunder (the "1933 ACT"),(v)
compliance with the applicable requirements of the National Association of
Securities Dealers, Inc. ("NASD") and (vi) compliance with any applicable
foreign or state securities or Blue Sky laws.
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SECTION 3.4 Non-Contravention. Except as disclosed in the Disclosure Letter,
the execution, delivery and performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated hereby do not
and will not (i) contravene or conflict with the certificate of incorporation
or bylaws of the Company, (ii) assuming compliance with the matters referred to
inSection 3.3 above, contravene or conflict with or constitute a violation of
any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to the Company or any Subsidiary or any of their
businesses as presently conducted, which violation would be reasonably likely
to have a Material Adverse Effect, (iii) constitute a default under or give
rise to a right of termination, cancellation or acceleration of any right or
obligation of the Company or any Subsidiary or to a loss of any benefit to
which the Company or any Subsidiary is entitled under any provision of any
agreement, contract or other instrument binding upon the Company or any
Subsidiary or any license, franchise, permit or other similar authorization
held by the Company or any Subsidiary, which default, termination,
cancellation, acceleration or loss of benefit would be reasonably likely to
have a Material Adverse Effect or (iv) result in the creation or imposition of
any Lien on any asset of the Company or any Subsidiary which creation or
imposition would be reasonably likely to have a Material Adverse Effect. For
purposes of this Agreement, "LIEN" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset.
SECTION 3.5 Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, $.001 par value, and 5,000,000
shares of Preferred Stock, $.001 par value. As of December 12, 1994, there were
outstanding 8,544,525 Shares and no shares of preferred stock of the Company,
stock options to purchase an aggregate of 582,965 Shares at a weighted average
exercise price per Share equal to $8.313 and $24,608,066 aggregate principal
amount of the Convertible Securities convertible into 1,757,719 Shares. All
outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. Other than the
Convertible Securities and options set forth in the second sentence of this
Section 3.5, (i) there are no other securities convertible into or exchangeable
for capital stock or other voting securities of the Company or any other
outstanding options or rights to acquire capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company and (ii) except as provided by this Agreement and
changes since December 12, 1994 resulting from (A) the exercise of stock
options outstanding on such date and (B) the conversion of Convertible
Securities outstanding on such date, (1) no shares of capital stock or other
voting securities of the Company have been issued and (2) no obligation of the
Company to issue any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of the Company have
been issued (the items in clauses (1) and (2) being referred to collectively as
the "COMPANY SECURITIES"). Except as provided in this Agreement or in the
Management Incentive Compensation Plan or the Stock Option Plan, copies of
which has previously been delivered to Buyer, there are no outstanding
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any Company Securities.
SECTION 3.6 Subsidiaries and Investments. (a) Each Significant Subsidiary
which is a corporation is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, has all corporate
powers to carry on its business as now conducted and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where failure to be so qualified would not, individually or in the aggregate,
have or be reasonably likely to have a Material Adverse Effect.
(b) Each Significant Subsidiary which is a partnership (whether or not a
limited partnership), and each limited partnership for which the Company or a
Subsidiary is general partner, has been duly formed and is in good standing
under the laws of its jurisdiction of formation and is duly qualified to do
business and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of
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its activities makes such qualification necessary, except for those
jurisdictions where failure to be so qualified would not, individually or in
the aggregate, have or be reasonably likely to have a Material Adverse Effect.
The Company has previously delivered to Buyer a list of all such partnerships.
(c) All Significant Subsidiaries and their respective jurisdictions of
incorporation or organization, as the case may be, are identified in the
Company's annual report on Form 10-K for the fiscal year ended August 31, 1994
(the "COMPANY 10-K").
(d) Except for restrictions imposed by federal and state securities laws or
as disclosed in the Disclosure Letter, all of the outstanding capital stock of,
or other ownership interests in, each Subsidiary, is owned by the Company,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other ownership interests). There
are no outstanding (i) securities of the Company or any Subsidiary convertible
into or exchangeable for shares of capital stock or other voting securities or
ownership interests in any Subsidiary, and (ii) options or other rights to
acquire from the Company or any Subsidiary, and no other obligation of the
Company or any Subsidiary to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or
exchangeable for any capital stock, voting securities or ownership interests
in, any Subsidiary (the items in clauses (i) and (ii) being referred to
collectively as the "SUBSIDIARY SECURITIES"). There are no outstanding
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any outstanding Subsidiary Securities.
(e) Except (i) as disclosed in the Disclosure Letter and (ii) for the
Subsidiaries, the Company does not, directly or indirectly, own the stock of,
or any interest in, any other corporation, partnership, joint venture or other
business entity (other than publicly traded securities acquired in the ordinary
course of business).
SECTION 3.7 SEC Filings. (a) The Company has delivered to Buyer (i) the
annual reports on Form 10-K for its fiscal years ended August 31, 1992, 1993
and 1994, (ii) its proxy or information statements relating to meetings of, or
actions taken without a meeting by, the stockholders of the Company held since
January 13, 1994, and (iii) except for registration statements on Form S-8, all
of its other reports, statements, schedules and registration statements filed
by the Company with the Securities and Exchange Commission (the "SEC") since
August 31, 1994.
(b) As of its filing date, each such report or statement described in Section
3.7(a) did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
SECTION 3.8 Financial Statements. The audited consolidated financial
statements of the Company included in its annual report on Form 10-K for the
fiscal year ended August 31, 1994 referred to in Section 3.7 fairly present in
all material respects, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended. For purposes
of this Agreement, "BALANCE SHEET" means the consolidated balance sheet of the
Company as of August 31, 1994 set forth in the Company 10-K and "BALANCE SHEET
DATE" means August 31, 1994. Since the Balance Sheet Date, there has been no
change in any of the significant accounting (including tax accounting)
policies, practices or procedures of the Company or any Significant Subsidiary.
SECTION 3.9 Disclosure Documents. (a) Each document required to be filed by
the Company with the SEC in connection with the transactions contemplated by
this Agreement (the "COMPANY DISCLOSURE DOCUMENTS"), including, without
limitation, the prospectus/proxy or information statement of the Company (the
"COMPANY PROXY STATEMENT"), if any, to be filed with the SEC in connection with
the Merger, and any amendments or supplements thereto will, when filed, comply
as to form in all material respects with the applicable requirements of the
1933 Act and the 1934 Act.
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(b) At the time the Company Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of the Company, at the time such
stockholders vote on adoption of this Agreement and at the Effective Time, the
Company Proxy Statement, as supplemented or amended, if applicable, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. At the time of
the filing of any Company Disclosure Document other than the Company Proxy
Statement, at the time such Company Disclosure Document is declared effective
under the 1933 Act and at the time of any distribution thereof, such Company
Disclosure Document will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section will
not apply to statements included in or omissions from the Company Disclosure
Documents based upon information furnished to the Company in writing by Buyer
specifically for use therein or which relate to Buyer and are approved in
writing by Buyer.
SECTION 3.10 Absence of Certain Changes. Since the Balance Sheet Date, the
Company and the Subsidiaries (other than any Subsidiary which is not material
to the Company and its Subsidiaries, taken as a whole) have conducted their
business in all material respects in the ordinary course consistent with past
practice and, except as set forth in the Disclosure Letter or contemplated by
this Agreement or the letter agreement attached as Annex A hereto, there has
not been:
(a) any event, occurrence or development which has had or is reasonably
likely to have a Material Adverse Effect; provided that any losses incurred
in connection with the liquidation of marketable securities where (A) such
liquidation is required to satisfy cash requirements of the Company in the
ordinary course of business and (B) the Company is unable to finance such
cash requirements with indebtedness otherwise permitted under this
Agreement, will not be considered an "event, occurrence or development"
which has or is reasonably likely to have a Material Adverse Effect under
this Section 3.10(a);
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company
(other than pursuant to Section 1.8 hereof), or any repurchase, redemption
or other acquisition by the Company or any Subsidiary of any outstanding
shares of capital stock or other securities of, or other ownership
interests in, the Company or any Subsidiary (other than conversion of
Convertible Securities or pursuant to the Company's Management Incentive
Compensation Plan);
(c) any amendment of any material term of any outstanding class of
Company Securities or any Subsidiary Securities;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money other than (i) in the
ordinary course of business and in amounts and on terms consistent with
past practices or (ii) pursuant to existing contracts or commitments,
provided that any renewal or replacement of all or a part of the Company's
existing line of credit on substantially similar terms will be considered
to be in the ordinary course of business;
(e) any creation or assumption by the Company or any Subsidiary of any
Lien on any material asset with fair market value in excess of $1,000,000
other than (i) in the ordinary course of business consistent with past
practices or (ii) pursuant to existing contracts or commitments;
(f) any making of any loan, advance or capital contributions to or
investment in any Person other than (A) loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries, (B)
investments in marketable securities made in the ordinary course of
business consistent with past practices or (C) pursuant to prior agreements
or obligations existing on the date hereof, copies of which have been made
available to Buyer at least ten days prior to the date hereof;
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(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or
any Subsidiary which, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any Subsidiary of any contract or other
right, in either case, material to the Company and the Subsidiaries taken
as a whole, other than transactions and commitments in the ordinary course
of business consistent with past practices and those contemplated by this
Agreement or except as may be contemplated by Annex A to the Governance
Agreement among the Company, Buyer and Bernard Salick;
(i) except as set forth or anticipated by the employment agreements
referred to in Section 8.2(g), any (A) grant of any severance or
termination pay to any director or officer of the Company including,
without limitation, any officer or significant employee listed in the
Company 10-K (the "OFFICERS"), (B) entering into any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any director of the Company or any Officer, (C)
increase in benefits payable under any existing severance or termination
pay policies or employment agreements with any director of the Company or
any Officer or (D) increase in compensation, bonus or other benefits
payable to directors of the Company or the Officers (other than any such
increase payable only to Officers who are not Executive Officers (as
defined in clause (j) below) in the ordinary course of business consistent
with past practices); or
(j) any labor dispute, other than routine individual grievances, which
are reasonably likely to have a Material Adverse Effect, or, to the
knowledge of the Company (for the purposes of this Agreement, the KNOWLEDGE
of the Company means actual knowledge of the Chairman of the Board, the
Chief Financial Officer and the Chief Operating Officer of the Company
(collectively, the "EXECUTIVE OFFICERS")), any activity or proceeding by a
labor union or representative thereof to organize any employees of the
Company or any Subsidiary, which employees were not subject to a collective
bargaining agreement at the Balance Sheet Date, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to such
employees which activity, proceeding or action has had or is reasonably
likely to have a Material Adverse Effect.
SECTION 3.11 Litigation. Except as set forth in the Company 10-K or the
Disclosure Letter, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of any Executive Officer of the Company
threatened against or affecting, the Company or any Subsidiary or any of their
respective properties before any court or arbitrator or any governmental body,
agency or official which is reasonably likely to have a Material Adverse Effect
or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Merger or any of the other transactions contemplated
hereby.
SECTION 3.12 Taxes. (a) The Company and each Significant Subsidiary has
timely filed all tax returns and reports required to be filed by it or requests
for extensions to file such returns or reports have been timely filed and
granted and have not expired, except to the extent that any such failure to
file or to have extensions granted that remain in effect individually and in
the aggregate would not have a Material Adverse Effect. The Company and each of
its Significant Subsidiaries have timely paid (or the Company has paid on its
behalf) all taxes shown as due on such returns, and the most recent financial
statements contained in the Company 10-K reflect, in accordance with generally
accepted accounting principles, an adequate reserve for all taxes payable by
the Company and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements. No deficiencies for any
taxes have been proposed, asserted or assessed against the Company or any of
its Subsidiaries that are not adequately reserved for, except for deficiencies
that individually or in the aggregate would not have a Material Adverse Effect,
and as of the date of this Agreement no requests for waivers of the time to
assess any such taxes have been granted and are outstanding or are pending. The
Company is not nor has it been within 5 years of the date hereof a "United
States real property holding corporation" as defined in Section 897 of the
Code.
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(b) As used in this Section 312, "TAXES" shall include all Federal, state,
local and foreign income, franchise, alternative or add-on minimum tax, gross
receipts, transfer, withholding on amounts paid to or by the Company or any of
its Subsidiaries, payroll, employment, license, property, sales, use, excise
and other taxes, tariffs or governmental charges of any nature whatsoever,
together with any interest, penalty or addition to tax attributable to such
taxes.
SECTION 3.13 ERISA. (a) At least 20 days prior to the Closing Date, the
Company will provide Buyer with a list identifying each "EMPLOYEE BENEFIT
PLAN", as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974 ("ERISA"), which (i) is subject to any provision of ERISA and (ii)
is maintained, administered or contributed to by the Company or any affiliate
(as defined below) and covers any employee or former employee of the Company or
any affiliate or under which the Company or any affiliate has any liability.
True and complete copies of such employee benefit plans (and, if applicable,
related trust agreements) and all amendments thereto and written
interpretations thereof will be made available to Buyer at least 20 days prior
to the Closing Date together with (x) the most recent annual reports (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan and (y) the most recent actuarial valuation report prepared in
connection with any such plan. Such plans are referred to collectively herein
as the "EMPLOYEE PLANS". For purposes of this Section, "AFFILIATE" of any
Person means any other Person which, together with such Person, would be
treated as a single employer under Section 414 of the Code.
(b) No Employee Plan (i) is maintained in connection with any trust described
in Section 501(c)(9) of the Code or (ii) is subject to Title IV of ERISA. If a
"complete withdrawal" by the Company and its affiliates were to occur as of the
Closing Date with respect to all "MULTIEMPLOYER PLANS" as defined in Section
3(37) of ERISA, neither the Company nor any affiliate would incur any
"withdrawal liability" within the meaning of Section 4201 of ERISA, under Title
IV of ERISA, except as would not have a Material Adverse Effect. Except as
would not have a Material Adverse Effect, no "prohibited transaction", as
defined in Section 406 of ERISA or Section 4975 of the Code, has occurred with
respect to any Employee Plan or any other employee benefit plan or arrangement
maintained by the Company or any affiliate which is covered by Title I of
ERISA, excluding transactions effected pursuant to a statutory or
administrative exemption.
(c) Each Employee Plan which is intended to be qualified under Section 401(a)
of the Code is so qualified and has been so qualified during the period from
its adoption to date, and each trust forming a part thereof is exempt from tax
pursuant to Section 501(a) of the Code. At least 20 days prior to the Closing
Date, the Company will provide to Buyer copies of the most recent Internal
Revenue Service determination letters with respect to each such Plan. Each
Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable to such
Plan, except where the failure to comply would not have a Material Adverse
Effect.
(d) Except as set forth in the Disclosure Letter, there is no contract,
agreement, plan or arrangement covering any employee or former employee of the
Company or any affiliate that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to the terms of
Sections 162(a)(1), 162(i)(2) or 280G of the Code.
(e) At least 20 days prior to the Closing Date, the Company will provide
Buyer with a list of each employment, severance or other similar contract,
arrangement or policy and each plan or arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (i)
is not an Employee Plan, (ii) is entered into, maintained or contributed to, as
the case may be, by the Company or any of its affiliates and (iii) covers any
employee or former employee of the Company or any of its affiliates. Such
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contracts, plans and arrangements as are described above, are referred to
collectively herein as the "BENEFIT ARRANGEMENTS". At least 20 days prior to
the Closing Date, the Company will make available to Buyer a true and complete
copy of each Benefit Arrangement, or where no such copy exists, a true and
accurate description of such Benefit Arrangement.
(f) Each Benefit Arrangement has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations that are applicable to such Benefit Arrangement,
except where the failure to comply would not have a Material Adverse Effect.
(g) Neither the Company nor any Subsidiary has any current or projected
liability in respect of post-employment or post-retirement health, medical or
life insurance benefits for retired or former employees of the Company and its
affiliates, except as required by applicable law. No condition exists that
would prevent the Company or any Subsidiary from amending or terminating any
Employee Plan or Benefit Arrangement providing health or medical benefits in
respect of any active employee of the Company or any Subsidiary except where
liability to amend or terminate any such plan or arrangement would not be
material.
(h) Except as disclosed in writing to Buyer prior to the date hereof, there
has been no amendment to, written interpretation or announcement (whether or
not written) by the Company or any of its affiliates relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement which would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended on the Balance Sheet Date.
(i) Except as disclosed in the Company 10-K or the Proxy Statement for its
annual meeting of stockholders held on January 13, 1994 or in the Disclosure
Letter, neither the Company nor any Subsidiary is a party to or subject to any
union contract or any employment contract or arrangement providing for annual
future compensation of $100,000 or more with any director of the Company or any
Officer.
(j) Notwithstanding anything to the contrary contained herein, the
representations and warranties contained in subparagraphs (b), (c), (d), (f),
(g), (h) and (i) of this Section 3.13 are hereby qualified in their entirety as
having been made to the knowledge of the Executive Officers.
SECTION 3.14 Compliance with Laws. Neither the Company nor any Subsidiary is
in violation of, or has violated, any applicable provisions of any laws,
statutes, ordinances or regulations except for any violations which,
individually or in the aggregate, would not have a Material Adverse Effect.
SECTION 3.15 Finders' Fees. Except for Goldman, Sachs & Co. and Lazard Freres
& Co., copies of whose engagement agreements have been provided to Buyer, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf, of the Company or any Subsidiary
who might be entitled to any fee or commission from Buyer or any of its
affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 3.16 Environmental Matters. (a) Except as set forth in the Company
10-K, (i) no notice, notification, demand, request for information, citation,
summons, complaint or order, to the knowledge of the Company has been received
or is pending or threatened by any Person against the Company or any
Significant Subsidiary, nor has any penalty been assessed against the Company
or any Subsidiary which, in any of the foregoing cases, is reasonably likely to
have a Material Adverse Effect with respect to any (A) alleged violation of any
Environmental Law or liability thereunder, (B) alleged failure to have any
permit, certificate, license, approval, registration or authorization required
under any Environmental Law, (C) generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Substance or (D) discharge,
emission or release of any Hazardous Substance and (ii) there are no
Environmental Liabilities that have or are reasonably likely to have a Material
Adverse Effect.
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(b) Neither the Company nor any Subsidiary owns or leases or has owned or
leased any real property, or conducts or has conducted any operations, in New
Jersey or Connecticut.
(c) For purposes of this Section, the following terms shall have the meanings
set forth below:
(A) "COMPANY" and "SUBSIDIARY" shall include any entity which is, in
whole or in part, a predecessor of the Company or any Subsidiary;
(B) "ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions, relating to the environment or to emissions, discharges or
releases of pollutants, contaminants or other hazardous substances or
wastes into the environment, including without limitation ambient air,
surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or other hazardous
substances or wastes or the clean-up or other remediation thereof.
(C) "ENVIRONMENTAL LIABILITIES" means any and all liabilities of or
relating to the Company and any Subsidiary, whether contingent or fixed,
actual or potential, known or unknown, which (i) arise under or relate to
matters covered by Environmental Laws and (ii) relate to actions occurring
or conditions existing on or prior to the Effective Time.
(D) "HAZARDOUS SUBSTANCES" means any toxic, radioactive, corrosive or
otherwise hazardous substance, including petroleum, its derivatives, by-
products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics, which in any
event is regulated under Environmental Laws.
SECTION 3.17 Regulatory Compliance. (a) None of the facilities owned or
operated by the Company or any Subsidiary is engaged in termination proceedings
as to its participation in Medicare or Medicaid and, to the knowledge of the
Company, no such facility has received written notice that its current
participation in any such program is subject to any termination or suspension
as a result of alleged violations or any non-compliance with participation
requirements except for any violations or non-compliance which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
(b) All facilities which participate in Medicaid or Medicare that are owned
or operated by the Company or any Subsidiary meet the conditions of
participation in Medicare and Medicaid.
(c) To the knowledge of the Company, substantially all written agreements
between or among the Company or any Subsidiary and any physician in his or her
capacity as a practicing physician have been provided to Buyer at least five
days prior to the date hereof.
(d) The description contained in section entitled "Government Regulation"
contained in the Company 10-K is accurate and complete in all material respects
and does not omit to state or misstates any material fact necessary in order to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.
(e) To the knowledge of the Company, there are no actual or threatened
uninsured claims against the Company, any Subsidiary or any facility owned or
operated by the Company or any Subsidiary relating to the alleged failure to
provide necessary treatment or negligent or inadequate treatment except for any
claims which, individually or in the aggregate, would not be reasonably likely
to have a Material Adverse Effect.
(f) The Company and its Significant Subsidiaries have all governmental
licenses and permits which are material to the operation of the business of the
Company and its Significant Subsidiaries and are in compliance in substantially
all material respects with such permits and licenses except for any non-
compliance which, individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect.
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SECTION 3.18 Intellectual Property. (a) The Company and the Subsidiaries own
or possess adequate licenses or other rights to use all Intellectual Property
Rights necessary to conduct the business now operated by them, except where the
failure to own or possess such licenses or rights would not be reasonably
likely to have a Material Adverse Effect. To the knowledge of Company, the
Company and the Subsidiaries are not in conflict with or infringe upon any
Intellectual Property Rights of others which is reasonably likely to be
sustained and, if sustained, would be reasonably likely to have a Material
Adverse Effect. For purposes of this Agreement, "INTELLECTUAL PROPERTY RIGHT"
means any trademark, service mark, trade name, copyright, patent, software
license, clinical policies and practices (including any guidelines or
protocols), patient data and related data bases, other data bases, invention,
trade secret, know-how (including any registrations or applications for
registration of any of the foregoing) or any other similar type of proprietary
intellectual property right.
(b) The Company and the Subsidiaries have taken measures to assure and
maintain the confidentiality of the processes and formulae, research and
development results, patient data and any data bases, clinical policies and
practices (including any guidelines or protocols) and other know-how of the
Company or any Subsidiary, the value of which to the Company or such Subsidiary
is contingent upon maintenance of the confidentiality thereof and the loss of
the confidentiality of which is reasonably likely to have a Material Adverse
Effect and, to the knowledge of the Company, those measures have been effective
in protecting the confidentiality thereof, except for those instances which
have not had and are not reasonably likely to have a Material Adverse Effect.
SECTION 3.19 No Registration Rights. The Company is not a party to any
agreement pursuant to which any Person has registration rights in respect of
any of the Company Securities.
SECTION 3.20 Registration Statement. The information with respect to the
Company or any Subsidiary that the Company furnishes to Buyer in writing
specifically for use in the Registration Statement (as defined in Section
4.14), or which is approved in writing by the Company, will not contain at the
time the Registration Statement is distributed or becomes effective or at the
Effective Time, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company that:
SECTION 4.1 Corporate Existence and Power. Each of Buyer and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers required to carry on its business as now conducted. Since the
date of its incorporation, Merger Subsidiary has not engaged in any activities
other than in connection with or as contemplated by this Agreement or in
connection with arranging any financing required to consummate the transactions
contemplated hereby.
SECTION 4.2 Corporate Authorization. The execution, delivery and performance
by Buyer and Merger Subsidiary of this Agreement and the consummation by Buyer
and Merger Subsidiary of the transactions contemplated hereby are within the
corporate powers of Buyer and Merger Subsidiary and have been duly authorized
by all necessary corporate action. This Agreement constitutes a valid and
binding agreement of each of Buyer and Merger Subsidiary.
SECTION 4.3 Governmental Authorization. The execution, delivery and
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated by
this Agreement require by or with respect to Buyer or any of its Subsidiaries
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no action by or in respect of, or filing with, any governmental body, agency,
official or authority other than (i) the filing of a certificate of merger in
accordance with Delaware Law, (ii) compliance with any applicable requirements
of the HSR Act; (iii) compliance with any applicable requirements of the 1934
Act; (iv) compliance with any applicable requirements of the 1933 Act, (v)
compliance with any applicable foreign or state securities or Blue sky laws and
(vi) compliance with any applicable requirements of the London Stock Exchange
or the New York Stock Exchange.
SECTION 4.4 Non-Contravention. The execution, delivery and performance by
Buyer and Merger Subsidiary of this Agreement and the consummation by Buyer and
Merger Subsidiary of the transactions contemplated hereby do not and will not
(i) contravene or conflict with the certificate of incorporation or bylaws of
Buyer or Merger Subsidiary, (ii) assuming compliance with the matters referred
to in Section 4.3 above, contravene or conflict with or constitute a violation
of any provision of any law, regulation, judgment, injunction, order or decree
binding upon, or applicable to, Buyer or Merger Subsidiary or any of their
businesses as presently conducted, which violation would be reasonably likely
to have an adverse effect on the condition (financial or otherwise), business,
assets, results of operations or prospects of Buyer and its subsidiaries taken
as a whole ("BUYER MAE"), (iii) constitute a default under or give rise to a
right of termination, cancellation or acceleration of any right or obligation
of Buyer or Merger Subsidiary or to a loss of any benefit to which Buyer or
Merger Subsidiary is entitled under any provision of any agreement, contract or
other instrument binding upon Buyer or Merger Subsidiary or any license,
franchise, permit or other similar authorization held by Buyer or Merger
Subsidiary, which default, termination, cancellation, acceleration or loss of
benefit would be reasonably likely to have a Buyer MAE or (iv) result in the
creation or imposition of any Lien on any asset of the Buyer or Merger
Subsidiary which creation or imposition would be reasonably likely to have a
Buyer MAE.
SECTION 4.5 Disclosure Documents. The information with respect to Zeneca
Group PLC, Buyer and their subsidiaries that Buyer furnishes to the Company in
writing specifically for use in any Company Disclosure Document, or which is
approved in writing by Buyer, will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading (i) in the case of the Company Proxy Statement at the
time the Company Proxy Statement or any amendment or supplement thereto, is
first mailed to stockholders of the Company, and at the time the stockholders
vote on adoption of this Agreement and at the Effective Time, and (ii) in the
case of any Company Disclosure Document other than the Company Proxy Statement,
at the time of the filing thereof, at the time such Company Disclosure Document
is declared effective under the 1933 Act and at the time of any distribution
thereof.
SECTION 4.6 Finders' Fees. Except for Kidder, Peabody & Co. and S.G. Warburg
& Co., whose fees will be paid by Buyer, there is no investment banker, broker,
finder or other intermediary who might be entitled to any fee or commission
from the Company or any of its affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 4.7 Capitalization of Merger Subsidiary. The authorized capital stock
of Merger Subsidiary consists of 1,000 shares of common stock, par value $1.00
per share, 100 shares of which are outstanding. All the issued and outstanding
capital stock of Merger Subsidiary is owned, directly or indirectly, by Buyer.
Except for such common stock, there are outstanding (i) no shares of capital
stock or other voting securities of Merger Subsidiary, (ii) no securities of
Merger Subsidiary convertible into or exchangeable for shares of capital stock
or voting securities of Merger Subsidiary and (iii) no options or other rights
to acquire from Merger Subsidiary, and no obligation of Merger Subsidiary to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Merger Subsidiary.
Merger Subsidiary has not conducted any business prior to the date hereof and
has no assets, liabilities or obligations of any nature other than those
incident to its formation and pursuant to this Agreement.
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SECTION 4.8 Financing. Buyer has or will have, prior to the Closing,
sufficient funds, investments and credit facilities available to it to pay the
Cash Consideration payable in the Merger and to pay all related fees and
expenses.
SECTION 4.9 SEC Filings. (a) Buyer has delivered to the Company (i) Zeneca
Group PLC annual report on Form 20-F for its fiscal year ended December 31,
1993 and (ii) all of Zeneca Group PLC's reports on Form 6-K filed with the SEC
since December 31, 1993.
(b) As of its filing date, each such report or statement filed pursuant to
the 1934 Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
SECTION 4.10 Financial Statements. The audited consolidated financial
statements of Buyer for the fiscal year ended December 31, 1993 and Zeneca
Group PLC's interim unaudited consolidated financial statements, previously
delivered to the Company, fairly present in all material respects, in
conformity with generally accepted accounting principles in the United Kingdom
(except as may be indicated in the notes thereto), the consolidated financial
position of Buyer or Zeneca Group PLC, respectively, as of the dates thereof
and the respective consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of the
unaudited consolidated financial statements).
SECTION 4.11 Absence of Certain Changes. Except as disclosed in writing to
the Chief Financial Officer of the Company, as disclosed on Zeneca Group PLC's
reports on Form 6-K referred to in Section 4.9(a) above or as contemplated by
this Agreement, since December 31, 1993 there has not been any event,
occurrence or development which has had or is reasonably likely to have a Buyer
MAE.
SECTION 4.12 Litigation. Except as disclosed in writing to the Chief
Financial Officer of the Company or as set forth in Form 20-F and Forms 6-K
referred to in Section 4.9, as of the date of this Agreement there is no
action, suit, investigation or proceeding pending against, or to the actual
knowledge of members of the board of directors of Buyer, a list of whom has
been supplied to the Company (the "BUYER OFFICERS") threatened against or
affecting, Buyer or any of its subsidiaries or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official which is reasonably likely to have a Buyer MAE.
SECTION 4.13 Regulatory Compliance. Buyer and its subsidiaries have all
governmental licenses and permits which are material to the operation of the
business of Buyer and its subsidiaries and are in compliance in substantially
all material respects with such permits and licenses except for such non-
compliance which is not reasonably likely to have a Buyer MAE.
SECTION 4.14 Registration Statement. The Registration Statement, if any, to
be filed by Buyer or Zeneca Group PLC with the SEC with respect to the
contingent obligation with respect to the purchase of the Special Common Stock
as provided in Section 1.10 hereof (the "REGISTRATION STATEMENT") and any
amendment or supplements thereto will, when filed comply as to form in all
material respects with the requirements of the 1933 Act and will not contain,
at the time the Registration Statement is distributed or becomes effective or
at the Effective Time, any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements contained therein not misleading; provided that the foregoing
representation shall not apply to statements or omissions in the Registration
Statement based upon information furnished to Buyer or Merger Subsidiary in
writing by the Company specifically for use therein or which relate to the
Company and are approved in writing by the Company.
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ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1 Conduct of the Company. From the date hereof until the Effective
Time, except as contemplated by this Agreement, the Company and the
Subsidiaries shall conduct their business in the ordinary course substantially
consistent with past practice and shall use their best efforts to preserve
intact their business organizations and relationships with third parties and to
keep available the services of their present officers and employees to the end
that their goodwill and ongoing businesses shall not be impaired in any
material respect. Without limiting the generality of the foregoing, except as
set forth in Section 3.10 of the Disclosure Letter or pursuant to the letter
attached as Annex A hereto, from the date hereof until the Effective Time
without Buyer's prior written consent:
(a) the Company will not adopt or propose any change in its certificate
of incorporation or bylaws, except as required by Article 2 of this
Agreement;
(b) the Company will not, and will not permit any Subsidiary to, merge or
consolidate with any other Person or, except in the ordinary course of
business or pursuant to existing commitments or agreements, acquire a
material amount of assets of any other Person;
(c) the Company will not, and will not permit any Subsidiary to, sell,
lease, license or otherwise dispose of any assets or property material to
the business of the Company and the Subsidiaries taken as a whole, except
(i) pursuant to existing contracts or commitments, (ii) in the ordinary
course consistent with past practices or (iii) the liquidation of
marketable securities in the circumstances set forth in Section 3.10(a);
(d) the Company will not, and will not permit any Subsidiary to take or
agree or commit to take any action that it reasonably expects would make
any representation and warranty of the Company hereunder inaccurate in any
material respect at the Effective Time;
(e) the Company will not, and will not permit any Subsidiary, which is
not wholly-owned, to declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, or subdivide, reclassify, recapitalize, split,
combine or exchange any of its shares of capital stock (other than in
connection with the exercise of currently outstanding options or warrants);
(f) the Company will not, and will not permit any Subsidiary to, incur
any material amount of indebtedness for borrowed money or make any loans or
advances, except in the ordinary course of business or as required to
comply with existing agreements or commitments; provided that the Company
may renew or replace all or a part of its existing line of credit on
substantially similar terms;
(g) except for the employment agreements referred to in Section 8.2(g)
hereof, the Company will not, and will not permit any Subsidiary to,
increase the compensation payable or to become payable to Executive
Officers of the Company, or grant any severance or termination pay to, or
enter into any employment or severance agreement with any director or
Executive Officer of the Company, or establish, adopt, enter into or amend
in any material respect or take action to accelerate any rights or benefits
under any collective bargaining agreement or any employee benefit plan,
agreement or policy;
(h) the Company will not, and will not permit any Subsidiary to, take any
action, other than actions in the ordinary course of business and
consistent with past practice, with respect to accounting policies or
procedures (including tax accounting policies and procedures);
(i) the Company will not, and will not permit any Subsidiary to, mortgage
or otherwise encumber or subject to any lien any of its properties or
assets that are material to it and its subsidiaries taken as a whole,
except for liens in connection with loans or advances permitted by clause
(f) above or representing the whole or part of the purchase price (and
interest thereon) for any property or assets; and
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(j) the Company will not, and will not permit any Subsidiary to, agree or
commit to do any of the foregoing.
SECTION 5.2 Stockholder Meeting; Proxy Material. The Company shall cause a
meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING") to be duly
called and held as soon as reasonably practicable for the purpose of voting on
the approval and adoption of this Agreement and the Merger. The Directors of
the Company shall, subject to their fiduciary duties as advised by counsel,
recommend approval and adoption of this Agreement and the Merger by the
Company's stockholders. In connection with such meeting, the Company (i) will
promptly prepare and file with the SEC, will use its best efforts to have
cleared and declared effective by the SEC and will thereafter mail to its
stockholders as promptly as practicable the Company Proxy Statement and all
other proxy materials for such meeting, (ii) subject to compliance with the
provisions of any applicable state and federal laws and the fiduciary duties of
the directors, will use its best efforts to obtain the necessary approvals by
its stockholders of this Agreement and the transactions contemplated hereby and
(iii) will otherwise comply in all material respects with all legal
requirements applicable to such meeting.
SECTION 5.3 Access to Information. From the date hereof until the Effective
Time, subject to the restrictions contained in agreements with third parties
(if the Company has used its reasonable efforts to obtain the consent of such
third party), prohibitions required by law or privileged communications, the
disclosure of which would result in a loss of such privilege, the Company will
give Buyer, its counsel, financial advisors, auditors and other authorized
representatives full access within normal working hours, to the offices,
properties, books and records of the Company and the Subsidiaries, will furnish
to Buyer, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and will instruct the Company's employees,
counsel and financial advisors to cooperate with Buyer in its investigation of
the business of the Company and the Subsidiaries; provided that no
investigation pursuant to this Section shall affect any representation or
warranty given by the Company to Buyer hereunder. Any meeting conducted
pursuant to this Section 5.3 shall be on the conditions that Buyer shall (i)
prior thereto furnish to the Company a written agenda for such meeting and (ii)
allow an officer of the Company, upon request of the Company, to participate in
such meeting, provided that no such meeting shall be unreasonably delayed or
denied to satisfy these conditions. Any written communication with third
parties by Buyer, its counsel, financial advisors, auditors or other authorized
representatives shall be made only with the prior consent of the Company, such
consent not to be unreasonably withheld or delayed.
SECTION 5.4 Other Offers. From the date hereof until the termination hereof,
the Company and the Subsidiaries, the directors of the Company, the Executive
Officers and all Vice-Presidents will not, directly or indirectly, (i) take any
action to solicit, initiate or (other than as permitted under clause (ii)
below) encourage any Acquisition Proposal or (ii) subject to the fiduciary
duties of the Board of Directors under applicable law as advised by the
Company's outside counsel or by the outside counsel to the independent
directors of the Company, engage in negotiations concerning an Acquisition
Proposal with, or disclose any nonpublic information relating to the Company or
any Subsidiary or afford access to the properties, books or records of the
Company or any Subsidiary to, any Person that may be considering making, or has
made, an Acquisition Proposal; provided that nothing contemplated herein shall
prohibit the Company from complying with its obligations under Rule 14e-2
promulgated under the 1934 Act. The Company will promptly notify Buyer after
receipt of any Acquisition Proposal or any indication that any Person is
considering making an Acquisition Proposal or any request for nonpublic
information relating to the Company or any Subsidiary or for access to the
properties, books or records of the Company or any Subsidiary by any Person
that may be considering making, or has made, an Acquisition Proposal and will
keep Buyer fully informed of the status and details of any such Acquisition
Proposal, indication or request. For purposes of this Agreement, "ACQUISITION
PROPOSAL" means any offer or proposal for, or any indication of interest in, a
merger or other business combination involving the Company or any Significant
Subsidiary or the acquisition of more than 10% of the outstanding voting
securities in, or a substantial portion of the assets of, the Company or any
Significant Subsidiary, other than the transactions contemplated by this
Agreement.
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SECTION 5.5 Notices of Certain Events. The Company shall promptly notify
Buyer of:
(i) any written notice or other written communication to any Executive
Officer of the Company from any Person alleging that the consent of such
Person is or may be required in connection with the transactions
contemplated by this Agreement;
(ii) any written notice or other written communication to any Executive
Officer of the Company from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this
Agreement; and
(iii) any actions, suits, claims, investigations or proceedings commenced
or threatened against, relating to or involving or otherwise affecting the
Company or any Subsidiary of which any Executive Officer has knowledge and,
which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 3.13 or which relate to the
consummation of the transactions contemplated by this Agreement.
The Company shall instruct its officers to promptly notify any of the
Executive Officers of the Company of any notice, other communication, actions,
suits, claims, investigations or proceedings described in clauses (i), (ii) or
(iii) above.
SECTION 5.6 Tax Certification. At any time during the period beginning on the
date hereof and ending on the Effective Time, the Company shall provide to
Buyer, within two business days of a request by Buyer, a certificate signed by
the Company to the effect that the Company is not, nor has it been within 5
years of the date thereof, a "United States real property holding corporation"
as defined in Section 897 of the Code.
SECTION 5.7 Conveyance Taxes. The Company shall pay any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions contemplated
hereunder that are required or permitted to be paid in connection therewith.
SECTION 5.8 Rule 145 Affiliates. Prior to the Closing, the Company shall
cause to be delivered to Buyer a list of all persons who might, at the time of
the Company Stockholder Meeting, be deemed to be "affiliates" of the Company
for purposes of Rule 145 under the 1933 Act (the "1933 ACT AFFILIATES"). The
Company shall use reasonable efforts to cause each person who is identified as
a possible 1933 Act Affiliate to enter into, prior to the Effective Time, an
agreement, in form and substance reasonably acceptable to Buyer, pursuant to
which each such person acknowledges his responsibilities as such an
"affiliate".
SECTION 5.9 Registration. Promptly after the date hereof, the Company shall
file (or provide evidence of prior filing of) applications for registration of
its trademarks and trade names, as appropriate, in (i) "Salick Health Care,
Inc." and (ii) "SalickNet" and the Company shall use its reasonable efforts to
prosecute any such applications to the full extent permitted by law.
ARTICLE 6
COVENANTS OF BUYER AND MERGER SUBSIDIARY
Buyer and Merger Subsidiary, jointly and severally, agree that:
SECTION 6.1 Confidentiality. Prior to the Effective Time and after any
termination of this Agreement, each of Buyer and Merger Subsidiary will hold,
and will use its best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Company and the Subsidiaries furnished to Buyer or Merger
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Subsidiary in connection with the transactions contemplated by this Agreement,
except to the extent that such information can be shown to have been (i)
previously known on a nonconfidential basis by Buyer, (ii) in the public domain
through no fault of Buyer or (iii) later lawfully acquired by Buyer or Merger
Subsidiary from sources other than the Company who, to actual knowledge of the
recipient, are not subject to a confidentiality agreement; provided that each
of Buyer and Merger Subsidiary may disclose such information to its officers,
directors, employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement and to its
lenders in connection with obtaining the financing for the transactions
contemplated by this Agreement so long as such Persons are informed by Buyer or
Merger Subsidiary of the confidential nature of such information and are
directed by Buyer or Merger Subsidiary to treat such information
confidentially. Buyer's and Merger Subsidiary's respective obligation to hold
any such information in confidence shall be satisfied if it exercises the same
care with respect to such information as it would take to preserve the
confidentiality of its own similar information. If this Agreement is
terminated, each of Buyer and Merger Subsidiary, upon request, will, and will
use its best efforts to cause its officers, directors, employees, accountants,
counsel, consultants, advisors and agents to, at Buyer's option, destroy or
deliver to the Company all documents and other materials, and all copies
thereof, obtained by Buyer or Merger Subsidiary or on their behalf from the
Company in connection with this Agreement that are subject to such confidence
and if destroyed, will so certify in writing to the Company at the Company's
request.
SECTION 6.2 Obligations of Merger Subsidiary and the Surviving
Corporation. Buyer will take all action necessary to cause Merger Subsidiary to
perform its obligations under this Agreement and to consummate the Merger on
the terms and conditions set forth in this Agreement and to cause the Surviving
Corporation to perform its obligations under Article Fourth, C(v) of the
Certificate of Incorporation of the Surviving Corporation.
SECTION 6.3 Voting of Shares. Buyer agrees to vote all Shares beneficially
owned by it in favor of adoption of this Agreement at the Company Stockholder
Meeting.
SECTION 6.4 Avoidance of Breach. Buyer will not, and will not permit any of
its subsidiaries, to take or agree or commit to take any action that it
reasonably expects would make any representation and warranty of Buyer or of
Merger Subsidiary hereunder inaccurate in any material respect at the Effective
Time.
SECTION 6.5 Notices of Certain Events. Buyer shall promptly notify the
Company of:
(i) any notice to any Buyer Officer or any written notice or other
communication from any Person alleging that the consent of such Person is
or may be required in connection with the transactions contemplated by this
Agreement;
(ii) any notice to any Buyer Officer or any written notice or other
communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings commenced
or, to the knowledge of the Buyer Officers threatened against, relating to
or involving or otherwise affecting Buyer which, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 4.12 or which relate to the consummation of the transactions
contemplated by this Agreement.
Buyer shall instruct officers of Zeneca Holdings Inc. and Zeneca Limited
directly involved in the transaction contemplated hereby to notify Buyer
Officers promptly of any notice, other communication, action, suit, claim,
investigation or proceeding described in clauses (i), (ii) and (iii) above.
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ARTICLE 7
COVENANTS OF BUYER
AND THE COMPANY
The parties hereto agree that:
SECTION 7.1 Best Efforts. Subject to the terms and conditions of this
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement.
SECTION 7.2 Certain Filings. The Company and Buyer shall cooperate with one
another (a) in connection with the preparation of the Company Disclosure
Documents, (b) to promptly make application to the NASD for the listing of the
Special Common Stock to be issued in the Merger or initially reserved for
issuance pursuant to the transactions contemplated by this Agreement and use
their respective best efforts to cause such stock to be included in the
National Market System of NASDAQ, (c) promptly make their respective filings
and any other required or requested submissions under the HSR Act, and (d) in
determining whether any action by or in respect of, or filing with, any
governmental body, agency or official, or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (e) in seeking any such
actions, consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the Company Disclosure
Documents and seeking timely to obtain any such actions, consents, approvals or
waivers.
SECTION 7.3 Public Announcements. Buyer and the Company will consult with
each other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with any national
securities exchange or the NASDAQ, will not issue any such press release or
make any such public statement prior to such consultation.
SECTION 7.4 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or Merger Subsidiary, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Merger Subsidiary, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
SECTION 7.5 Conveyance Taxes. Buyer and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereunder that are required or
permitted to be filed on or before the Effective Time.
SECTION 7.6 Notification of Certain Matters. The Company shall give prompt
notice to Buyer, and Buyer shall give prompt notice to the Company, of (a) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause (i) any representation or warranty contained
in this Agreement to be untrue or inaccurate or (ii) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(b) any failure of the Company or Buyer, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.6 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
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SECTION 7.7 Director and Officer Liability. For six years after the Effective
Date, the Surviving Corporation will indemnify and hold harmless the present
and former officers and directors of the Company in respect of acts or
omissions occurring prior to the Effective Time to the extent provided under
the Company's certificate of incorporation and bylaws in effect on the date
hereof or indemnification agreements in the form set forth as Exhibit 10(bb) to
the Company 10-K; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. The Surviving
Corporation will procure an extension of the existing officers' and directors'
liability policy (or a replacement) in respect of acts or omissions occurring
prior to the Effective Time (commonly known as "tail" or "run-off insurance")
which extension or replacement will permit claims to be made under such policy
for two years from the Effective Time; provided that if the aggregate cost of
obtaining such insurance is greater than $300,000 for such two-year extension,
the amount of coverage obtained thereby will be reduced, so that the aggregate
cost of obtaining coverage does not exceed $300,000. Buyer agrees to guarantee
the performance of the obligations of the Surviving Corporation arising under
this Section 7.7.
SECTION 7.8 Funding of Call. Buyer agrees that it will not cause the
Surviving Corporation to exercise the call of the Special Common Stock pursuant
to Article Fourth, Section C(v)(a) of the Certificate of Incorporation of the
Surviving Corporation unless the funds available to the Surviving Corporation,
together with any funds to be made available to the Surviving Corporation by
Buyer, are adequate to pay for the Special Common Stock pursuant to such call
without violating Section 160 of the Delaware Law, any bankruptcy or insolvency
law or other law or regulation for the protection of creditors.
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.1 Conditions to the Obligations of Each Party. The obligations of
the Company, Buyer and Merger Subsidiary to consummate the Merger are subject
to the satisfaction prior to the Closing of the following conditions:
(i) this Agreement shall have been adopted by the stockholders of the
Company in accordance with Delaware Law;
(ii) any applicable waiting period under the HSR Act (including any
extensions thereof) relating to the Merger shall have expired or shall have
been terminated;
(iii) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger,
provided that the party seeking to terminate this Agreement pursuant to
this Section 8.1(iii) shall have used all reasonable efforts to remove such
judgment, injunction order or decree; and
(iv) all actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation of
the Merger shall have been made or obtained.
SECTION 8.2 Conditions to the Obligations of Buyer and Merger Subsidiary. The
obligations of Buyer and Merger Subsidiary to consummate the Merger are subject
to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, the representations and warranties of the Company contained
in this Agreement and in any officer's certificate delivered by the Company
pursuant hereto shall be true in all material respects at and (except to
the extent that such representations and warranties speak only as of an
earlier date) as of the Effective Time as if made at and as of such time
and Buyer shall have received a certificate signed by any Executive Officer
of the Company to the foregoing effect;
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(b) no court, arbitrator or governmental body, agency or official shall
have issued any order, and there shall not be any statute, rule or
regulation, restraining or prohibiting the consummation of the Merger or
the effective operation of the business of the Company and the
Subsidiaries, taken as a whole, after the Effective Time, and no proceeding
(i) challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the Merger; (ii)
seeking to restrain or prohibit Buyer's ownership or operation (or that of
its respective subsidiaries or affiliates) of all or any material portion
of the business or assets of the Company and the Subsidiaries, taken as a
whole, or of Buyer and its subsidiaries, or to compel Buyer or any of its
subsidiaries or affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company and the
Subsidiaries, (iii) seeking to impose or confirm material limitations on
the ability of Buyer or any of its subsidiaries or affiliates effectively
to exercise full rights of ownership of the Common Stock, including,
without limitation, the right to vote any Common Stock owned by Buyer or
any of its subsidiaries or affiliates on all matters properly presented to
the Company's stockholders, or (iv) seeking to require divestiture by Buyer
or any of its subsidiaries or affiliates of any Common Stock;
(c) there shall be no action taken, or any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated,
issued or deemed applicable to the Merger, by any court, government or
governmental authority or agency, domestic or foreign, other than the
application of the waiting period provisions of the HSR Act (including any
extensions thereof), in effect at the Closing that is likely, directly or
indirectly, to result in any of the consequences referred to in clauses (i)
through (iv) of paragraph (b) above;
(d) Buyer or Merger Subsidiary shall not have received any communication
from the Department of Justice or Federal Trade Commission (each, an "HSR
AUTHORITY") (which communication shall be confirmed to the other parties by
the HSR Authority) that causes such party reasonably to believe that any
HSR Authority has authorized the institution of litigation challenging,
impairing or diminishing the benefits with respect to any of the
transactions contemplated by this Agreement;
(e) the Company shall have delivered to Buyer at the Closing (i) a
certificate of the good standing of the Company from the Secretary of State
of the State of Delaware and each state in which the Company is qualified
to do business, in each case dated as of a reasonably recent date, and (ii)
a certified copy of resolutions adopted by the Board of Directors of the
Company authorizing the Agreement and the transactions contemplated hereby;
(f) Buyer shall have received or be satisfied that it, the Company or the
Surviving Corporation will receive all consents and approvals contemplated
by the Disclosure Letter and related to Section 3.4 above (other than the
Business Loan Agreement between the Company and Bank of America National
Trust & Savings Association, dated January 1, 1993, as amended) or
otherwise material in connection with the consummation of the Merger or to
enable the Surviving Corporation to continue to carry on the business of
the Company and the Subsidiaries as presently conducted in all material
respects, including, without limitation, to the extent applicable, (A) The
South Florida Comprehensive Cancer Center Network Agreement among American
Medical International, Inc. and Salick Health Care, Inc. effective as of
March 13, 1987; (B) The Agreement Between Mount Sinai Medical Center of
Greater Miami, Inc. and Comprehensive Cancer Centers, Inc. for the
Comprehensive Cancer; and (C) The Management Agreement By and Among Temple
University of The Commonwealth System of Higher Education, Comprehensive
Cancer Centers, Inc. and Salick Health Care, Inc., as surety, entered into
September 30, 1988; and the Development Agreement By and Among Temple
University of The Commonwealth System of Higher Education, Comprehensive
Cancer Centers, Inc. and Salick Health Care, Inc., as surety, entered into
September 30, 1988, as well as consents under every other material contract
with a hospital or other health care institution required pursuant to
assignment, merger, change of control or change of management clauses in
such contracts;
(g) the Company shall have entered into employment and non-compete
agreements with (i) Bernard Salick, substantially in the form of Exhibit
8.2(g)(A), and (ii) with Leslie F. Bell and Michael T. Fiore,
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in substantially the same form as the employment and non-compete agreements
of Bernard Salick but with such changes as are set forth in Exhibit
8.2(g)(B); and
(h) the Company shall have executed the Certificate of Merger (and any
other documents required to be filed in connection with the Merger) and,
prior to the Closing, all necessary arrangements shall have been made for
the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with Delaware Law.
SECTION 8.3 Conditions to the Obligations of the Company. The obligations of
the Company to consummate the Merger are subject to the satisfaction of the
following further conditions:
(i) Buyer and Merger Subsidiary shall have performed in all material
respects all of their respective obligations hereunder required to be
performed by them at or prior to the Closing, the representations and
warranties of Buyer and Merger Subsidiary contained in this Agreement and
any officer's certificate delivered by Buyer or Merger Subsidiary pursuant
hereto shall be true in all material respects at and as of the Effective
Time as if made at and as of such time (except to the extent that such
representations and warranties speak only as of an earlier date) and the
Company shall have received a certificate signed by a member of the board
of directors of Buyer to the foregoing effect;
(ii) Merger Subsidiary shall have delivered to the Company at the Closing
(a) a certificate of the good standing of Merger Subsidiary from the
Secretary of State of the State of Delaware dated as of a reasonably recent
date and (b) a certified copy of resolutions adopted by its board of
directors and its stockholders authorizing the Agreement and the
transactions contemplated thereby;
(iii) Merger Subsidiary shall have executed the Certificate of Merger
(and any other documents required to be filed in connection with the
Merger) and, prior to the Closing, all necessary arrangements shall have
been made for the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware in accordance with Delaware Law;
(iv) Buyer shall have delivered to the Company at the Closing a certified
copy of resolutions adopted by its board of directors authorizing the
agreement and the transactions contemplated thereby;
(v) Buyer shall have deposited the Cash Consideration with the Exchange
Agent; and
(vi) the Board of Directors of the Company shall have received, in a form
reasonably satisfactory to the Board of Directors of the Company, updated
opinions as of the time of the mailing of the Company Disclosure Materials
and as of the Closing Date, reaffirming the earlier received opinions from
Goldman, Sachs & Co. and Lazard Freres & Co. that the Merger Consideration
to be paid in connection with the Merger is fair to the stockholders of the
Company.
ARTICLE 9
TERMINATION
SECTION 9.1 Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):
(i) by mutual written consent of the Company and Buyer;
(ii) by either the Company or Buyer, if the Merger has not been
consummated by June 30, 1995;
(iii) by either the Company or Buyer, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining Buyer
or the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable;
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(iv) by Buyer, upon the occurrence of any Trigger Event described in
clauses (i), (ii) and (v) of Section 10.4(b);
(v) by Buyer, if any representation or warranty made by the Company in
this Agreement shall not be true and correct in all material respects when
made, or the Company shall have failed to observe or perform in any
material respect any of its agreements or obligations under this Agreement,
and any such breach of any such representation, warranty, agreement or
obligation, to the extent curable, has not been cured within ten days after
written notice from Buyer to the Company specifying with particularity the
representation, warranty, agreement or obligation which has been breached;
(vi) by the Company, if any representation or warranty made by Buyer or
Merger Subsidiary in this Agreement shall not be true and correct in all
material respects when made, or Buyer or Merger Subsidiary shall have
failed to observe or perform in any material respect any of its agreements
or such obligation under this Agreement, and any such breach of any such
representation, warranty, agreement or obligation, to the extent curable,
has not been cured within ten days after written notice from the Company to
Buyer, specifying with particularity the representation, warranty,
agreement or obligations which has been breached; and
(vii) by either the Company or Buyer, if the stockholder meeting of the
Company shall have been held and the stockholders of the Company shall have
failed to approve and adopt this Agreement and the Merger in accordance
with Delaware Law.
The party desiring to terminate this Agreement pursuant to clauses (ii), (iii),
(iv), (v), (vi) or (vii) shall give written notice of such termination to the
other party in accordance with Section 10.1.
SECTION 9.2 Effect of Termination. If this Agreement is terminated pursuant
to Section 9.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that:
(i) the agreements contained in Sections 6.1 and 10.4 shall survive the
termination hereof;
(ii) if this Agreement is terminated pursuant to Sections 9.1(v) or
9.1(vi), then the party entitled to terminate shall also be entitled to
receive (unless Section 9.2(iii) is applicable), as liquidated damages for
such breach, an amount (not to exceed $1,000,000) equal to the reasonable
fees and expenses incurred by such party or any of its affiliates
(including, without limitation, the fees and expenses of its financial
advisors, auditors and counsel) in connection with this Agreement and the
transactions contemplated hereby; and
(iii) if this Agreement is terminated by a party hereto pursuant to
Sections 9.1(v) or 9.1(vi) as a result of the other party hereto having
wilfully breached any of its material agreements or obligations under this
Agreement, in lieu of damages set forth in Section 9.2(ii) the terminating
party shall be entitled to such legal remedies as are available to it.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given,
if to Buyer or Merger Subsidiary, to:
Zeneca Limited
15 Stanhope Gate
London W1Y 6LN
United Kingdom
Telecopy: 011-44-71-304-5196
Attention: Group Solicitor
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<PAGE>
with a copy to:
Atkemix Thirty-nine Inc.
c/o Zeneca Holdings Inc.
1800 Concord Pike
Wilmington, Delaware 19897
Telecopy: (302) 886-1889
Attention: General Counsel
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Attention: Peter R. Douglas, Esq.
if to the Company, to:
Salick Health Care, Inc.
8201 Beverly Boulevard
Los Angeles, California 90048
Telecopy: (213) 966-3444
Attention: Leslie F. Bell
with a copy to:
Sanders, Barnet, Goldman, Simons & Mosk
1901 Avenue of the Stars, Suite 850
Los Angeles, California 90067
Telecopy: (310) 553-2435
Attention: Irwin G. Barnet, Esq.
or such other address or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified in this
Section and the appropriate telecopy confirmation is received or (ii) if given
by any other means, when delivered at the address specified in this Section.
SECTION 10.2 Survival of Representations and Warranties. The representations
and warranties and agreements contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement except that (i) the representations, warranties
and agreements set forth in Sections 6.1 and 10.4 shall survive the termination
of this Agreement and (ii) all of the agreements and covenants of the Company,
the Surviving Corporation and Buyer (or any of its permitted assignees
hereunder) applicable to periods after the Effective Time shall survive the
Effective Time.
SECTION 10.3 Amendments; No Waivers. (a) Any provision of this Agreement may
be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Company, Buyer and Merger Subsidiary or in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after the
adoption of this Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
alter or change (i) the amount or kind of consideration to be received in
exchange for any shares of capital stock of the Company, (ii) any term of the
certificate of incorporation of the Surviving Corporation or (iii) any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of the Company.
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(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.4 Fees and Expenses. (a) Except as otherwise provided in this
Section, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
(b) The Company agrees to pay Buyer a fee in immediately available funds
equal to the sum of (i) $11,000,000 plus (ii) if not previously paid by the
Company pursuant to Section 9.2(ii) hereof, up to an additional $1,000,000
reimbursement for all reasonable fees payable and expenses incurred by Buyer or
any of its affiliates (including, without limitation, the fees and expenses of
its financial advisors, auditors and counsel) in connection with this Agreement
and the transactions contemplated hereunder promptly, but in no event later
than two business days, after the termination of this Agreement as a result of
the occurrence of any of the events set forth below (each, a "TRIGGER EVENT"):
(i) the Company shall have entered into, or shall have publicly announced
its intention to enter into, an agreement or an agreement in principle with
respect to any Acquisition Proposal;
(ii) any person or group (as defined in Section 13(d)(3) of the 1934 Act)
(other than Dr. Bernard Salick, Buyer or any of their affiliates) shall
have become the beneficial owner (as defined in Rule 13d-3 promulgated
under the 1934 Act) of at least 40% of the outstanding Shares or shall have
acquired, directly or indirectly, at least 40% of the assets of the
Company;
(iii) Buyer terminates this Agreement pursuant to Section 9.1(v) and
within nine months of the termination of this Agreement (A) the Company
enters into, or publicly announces its intention to enter into, an
agreement or an agreement in principle providing for merger of the Company
or (B) any of the events described in clause (ii) above occur;
(iv) the Company elects not to consummate the Merger on account of
failure of the condition set forth in Section 8.3(vi); or
(v) The Board of Directors of the Company shall have withdrawn or
materially modified its approval or recommendation of this Agreement or the
transactions contemplated by this Agreement.
SECTION 10.5 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Buyer may transfer
such rights and obligations or assign, in whole or from time to time in part,
to one or more of its wholly-owned subsidiaries (whether direct or indirect) or
to Zeneca Group PLC, but any such transfer or assignment will not relieve Buyer
of its obligations hereunder.
SECTION 10.6 Governing Law. (a) This Agreement shall be construed in
accordance with and governed by the law of the State of New York, except to the
extent that any provision hereof shall be governed by the mandatorily
applicable law of the State of Delaware.
(b) Any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement shall
only be brought in the United States District Court for the Southern District
of New York or any court of the State of New York in New York County
(collectively, the "NEW YORK COURTS") and each of the parties to this Agreement
hereby, and, to the extent that any assignment is made by Buyer pursuant to
Section 1.10 above to Zeneca Group PLC, as a condition to such assignment
Zeneca Group PLC shall, irrevocably and unconditionally (i) consent to submit
to the jurisdiction of the New York Courts, (ii) agree, to the extent such
party is not otherwise subject to service of process in the
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State of New York, to appoint and maintain an agent in the State of New York as
such party's agent for acceptance of legal process in any such legal proceeding
against such party with the same legal force and validity as if served upon
such party personally within the State of New York, and to notify promptly each
other party hereto of the name and address of such agent, (iii) waive any
objection to the laying of venue of any such legal proceeding in the New York
Courts, and (iv) waive, and agree not to plead or to make, any claim that any
such legal proceeding brought in any New York Court has been in an improper or
otherwise inconvenient form.
(c) For purposes of implementing the parties' agreement to appoint and
maintain an agent for service of process in the State of New York, each of the
Company, Buyer and Merger Subsidiary hereby and, to the extent that any
assignment is made by Buyer pursuant to Section 1.10 above to Zeneca Group PLC
as a condition to such assignment Zeneca Group PLC shall, appoint CT Service
Corp. as such agent.
SECTION 10.7 Entire Agreement. This Agreement, including the exhibits and
schedules, contains the entire agreement of the parties hereto with respect to
the transactions contemplated hereby, and supersedes all prior understandings
and agreements (oral or written) of the parties with respect to the subject
matter hereof. The parties expressly represent and warrant that in entering
into this Agreement they are not relying on any prior representations made by
any other party concerning the terms, conditions, or effects of this Agreement
which terms, conditions or effects are not expressly set forth herein. Any
reference herein to this Agreement shall be deemed to include the exhibits and
schedules.
SECTION 10.8 Currency. All monetary amounts set forth herein, unless
otherwise expressly stated, shall mean and refer to the lawful currency of the
United States of America.
SECTION 10.9 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective duly authorized officers as of the day and year
first above written.
SALICK HEALTH CARE, INC.
By /s/ Bernard Salick
-----------------------------------
Title: Chairman of the Board
& Chief Executive Officer
ZENECA LIMITED
By /s/ William C. Lucas
-----------------------------------
Title: Attorney-in-Fact
ATKEMIX THIRTY-NINE INC.
By /s/ Glenn Engelmann
-----------------------------------
Title: Vice President
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<PAGE>
ANNEX B
CERTIFICATE OF INCORPORATION
OF
SALICK HEALTH CARE, INC.
FIRST: The name of the corporation is Salick Health Care, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the State
of Delaware is 1201 North Market Street, in the City of Wilmington, County of
New Castle. The name of the Corporation's registered agent at such address is
Delaware Corporate Organizers, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: A. The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is Twenty-Seven Million Five
Hundred Thousand (27,500,000), consisting of:
(i) Fifteen Million (15,000,000) shares of Common Stock, $.001 par value
per share (the "Common Stock");
(ii) Seven Million Five Hundred Thousand (7,500,000) shares of Callable
Puttable Common Stock, $.001 par value per share (the "Special Common
Stock"); and
(iii) Five Million (5,000,000) shares of Preferred Stock, $.001 par value
per share (the "Preferred Stock").
B. Shares of the Preferred Stock may be issued from time to time in one or
more classes or series. The Board is expressly authorized, subject to any
limitations herein set forth or as prescribed by law, to provide for the
issuance of the shares of Preferred Stock in one or more classes or series by
filing a certificate pursuant to the applicable laws of the State of Delaware,
to establish from time to time the number of shares to be included in each such
class or series, and to fix the designation, powers, preferences, and rights of
the shares of each such class or series and any qualifications, limitations or
restrictions thereof; provided, however, that the number of votes to which a
share of any class or series of Preferred Stock may be entitled shall not
exceed one vote per share. The number of authorized shares of Preferred Stock
may be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of shares representing at
least a majority of all of the outstanding shares of Common Stock and Special
Common Stock, voting together as a class, on the applicable Record Date,
without a vote of the holders of the Preferred Stock, or of any series thereof,
unless a vote of any such holders is required pursuant to the certificate or
certificates establishing any series of Preferred Stock.
C. The Common Stock shall be identical in all respects to the Special Common
Stock, except as specified in this Section C:
(i) Number of Votes; Quorum.
(a) Except as otherwise provided in this Certificate of Incorporation
and as may be required by law, the holders of record of Common Stock
and the holders of record of the Special Common Stock shall be entitled
to one vote per share for all purposes and shall vote together on all
matters and not as a separate class or series. For matters to be voted
on by the Common Stock and the Special Common Stock together and not as
a separate class or series, the presence in person or by proxy of the
holders of record as of the applicable Record Date of a majority of the
total number of shares of Common Stock and shares of the Special Common
Stock shall be necessary and sufficient
B-1
<PAGE>
to constitute a quorum. For matters to be voted on by the Common Stock
as a separate class (including, without limitation, the election of
Directors as provided in subsection (ii) below and on the matters
specified in subsection (iii) below), the presence in person or by
proxy of the holders of record of a majority of the total number of
shares of the Common Stock outstanding as of the applicable Record Date
shall be necessary and sufficient to constitute a quorum of the Common
Stock voting separately as a class. For matters to be voted on by the
Special Common Stock as a separate class (including, without
limitation, for the election of Directors to be elected by the Special
Common Stock as provided in subsection (ii) below and on the matters
specified in subsection (iii) below), the presence in person or by
proxy of the holders of record of shares of Special Common Stock
representing a majority of all of the votes entitled to be cast by the
holders of the Special Common Stock outstanding as of the applicable
Record Date shall be necessary and sufficient to constitute a quorum of
the Special Common Stock voting separately as a class.
(b) For matters to be voted on by the Special Common Stock as a
separate class, and only on such matters, a holder of record of a share
of the Special Common Stock shall be entitled to ten votes on each
matter submitted to a vote (whether at a meeting or by written consent)
by holders of the Special Common Stock, voting separately as a class,
for each such share thereof held of record by such holder on a Record
Date if, with respect to such share, each and every beneficial owner
thereof was (1) the beneficial owner of the shares of common stock of
the Corporation exchanged therefor in the Merger (the "Premerger
Shares") on August 27, 1991, the date of the effectiveness of the
merger of Salick Health Care, Inc., a California corporation, into the
Corporation (the "Reincorporation Date"), and at all times until
exchanged for shares of Special Common Stock pursuant to the Merger and
(2) the beneficial owner of such share of Special Common Stock
immediately following the Effective Time and at all times since the
Effective Time, subject, in the case of a beneficial owner referred to
in subparagraph (d) hereof, to the presumptions set forth in such
subparagraph (d).
(c) For purposes of this subsection (i), a beneficial owner of any
Premerger Shares or shares of Special Common Stock acquired as a direct
result of an Exempt Transfer (as hereinafter defined) will be deemed to
have been the continuous beneficial owner of such share from the time
such share was acquired or deemed acquired by the prior beneficial
owner thereof. The occurrence of any of the following events shall
constitute an "Exempt Transfer":
(1) the transfer of the beneficial ownership of such share by
gift, by devise, or by bequest or otherwise through the laws of
inheritance or descent and distribution, outright or to a trust or
custodianship, in each case to or for the benefit of a member or
members of the transferor's family, or by a trustee to a trust
beneficiary or beneficiaries under the terms of the trust; or
(2) the transfer of the beneficial ownership of such share to a
committee of the property or conservator of an individual, to a
guardian for an individual, or to any similar legally appointed
successor to a beneficial owner; or
(3) the transfer of the beneficial ownership of such share to a
successor executor, trustee, guardian, committee, conservator,
custodian or similar fiduciary with respect to such share; or
(4) the transfer of the beneficial ownership of such share from
one spouse to another by reason of separation or divorce or under or
pursuant to community property laws or other similar laws of any
jurisdiction; or
(5) the transfer of the beneficial ownership of such share from
one employee benefit plan of the Corporation to another employee
benefit plan of the Corporation; or
(6) the transfer of record or the transfer of a beneficial
interest or interests in such share where the circumstances
surrounding such transfer clearly demonstrate that no material
change in beneficial ownership has occurred.
B-2
<PAGE>
For purposes of clause (1) above, a family member shall include only
the transferor's spouse, ancestors, lineal descendants, siblings and
their descendants, aunt and uncles, mother-in-law, father-in-law, sons-
in-law, daughters-in-law, brothers-in-law, sisters-in-law and first
cousins; and a legally adopted child of an individual shall be treated
as a child of such individual by blood.
(d) A beneficial owner of any share of Special Common Stock held of
record on a Record Date in "street" or "nominee" name or by a broker,
clearing agency, voting trustee, bank, trust company or other nominee
(including any such share so held at the Effective Time) shall be
presumed to have acquired the beneficial ownership of the Premerger
Shares exchanged therefor subsequent to the Reincorporation Date and
such share of Special Common Stock subsequent to the Effective Time.
Such presumptions shall be rebuttable by showing that beneficial
ownership of such share with respect to each and every beneficial owner
thereof complies with subparagraph (b) above. In order to facilitate an
orderly presentation of any showing which attempts to rebut such
presumptions, the Board may, from time to time, establish guidelines
and standards which shall govern any such showings.
(e) A beneficial owner of any share of the Special Common Stock
acquired as a direct result of a stock split, stock dividend,
reclassification, rights offering or other distribution of shares or
rights by the Corporation with respect to existing shares thereof
("dividend shares") will be deemed to have been the continuous
beneficial owner of such share from the time on which the original
shares, with respect to which the dividend shares were issued, were
acquired.
(f) A beneficial owner of any share of the Special Common Stock
beneficially owned by reason of participation in any employee stock
option or employee stock purchase plan or other similar individual
account employee benefit plan or arrangement of the Corporation shall
be deemed for purposes of this subsection (i) to have been the
beneficial owner of the Premerger Shares at the Reincorporation Date
and such share of Special Common Stock at the Effective Time if, as of
the Reincorporation Date the Premerger Shares for which the Special
Common Stock were exchanged, and as of the Effective Time such share of
Special Common Stock was allocated to the account of such beneficial
owner under such plan or arrangement, or at the Reincorporation Date
and the Effective Time such beneficial owner was the holder, as the
case may be, of an option or right to acquire Premerger Shares and an
option or right to acquire the Special Common Stock substituted
therefor in the Merger, respectively, and the distribution of such
share to such beneficial owner pursuant to such plan or arrangements,
or the purchase by such beneficial owner of such share upon the
exercise of an option or a right, as the case may be, shall not be
deemed to be a change in beneficial ownership for purposes of this
subsection (i).
(g) A beneficial owner of any Premerger Shares acquired upon
conversion of any debenture of the Corporation convertible into
Premerger Shares or upon exercise of an option or right to acquire
Premerger Shares shall be deemed upon such conversion or exercise for
purposes of this subsection (i) to have been at the time of such
conversion or such exercise the beneficial owner of such shares as of
the Reincorporation Date, if upon the Reincorporation Date such
convertible debenture or option or right was beneficially owned by such
beneficial owner.
(h) For purposes of this subsection (i), the terms "beneficial
owner", "beneficial ownership" and "beneficially owned" shall be
determined in accordance with Rule 13d-3, as in effect at the Effective
Time, promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, except as otherwise
provided in this subsection (i).
(i) Each share of Special Common Stock, whether at any particular
time the beneficial owner thereof is entitled to ten (10) votes or
less, shall be identical to all other shares of Special Common Stock in
all other respects and together all shares of Special Common Stock
shall constitute a single class of shares of the Corporation.
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<PAGE>
(ii) Voting for Directors. Notwithstanding the voting rights set forth in
subsection (i) of this Section C of Article FOURTH of this Certificate of
Incorporation, until the Termination Date, the holders of the Common Stock,
voting separately as a class, shall be entitled to elect five (5) Directors
to the Board and the holders of the Special Common Stock, voting separately
as a class, shall be entitled to elect five (5) Directors to the Board. The
absence of a quorum of the holders of the Common Stock shall not prevent
the election of the Directors, other than the election of the Directors to
be elected by the Common Stock, and the absence of a quorum of the holders
of the Special Common Stock shall not prevent the election of the
Directors, other than the election of the Directors to be elected by the
Special Common Stock. In the absence of either or both quorums as provided
in subsection (i) above, a majority of the holders present in person or by
proxy of the class which lacks a quorum shall have the power to adjourn for
a period of up to thirty (30) days the meeting for the election of the
Directors which they are entitled to elect from time to time without notice
other than announcement at the meeting until a quorum of such class shall
be present. From and after the Termination Date, the holders of the Common
Stock and the holders of the Special Common Stock shall vote together for
the election of Directors and not as a separate class or series and the
right of a holder of Special Common Stock to be entitled to ten votes per
share as set forth in paragraph (b) of subsection (i) above shall be of no
further force or effect.
In the event that the Corporation shall fail to deposit funds with the
Depositary and promptly pay the purchase price for shares of Special Common
Stock as provided in paragraph (d) of subsection (v) of this Section C or
upon the occurrence of an Insolvency Event as defined in paragraph (f) of
subsection (v) of this Section C, then upon the occurrence of such event
the authorized number of Directors constituting the Board, immediately and
automatically, without further action of the Board or the stockholders of
the Corporation, shall be increased by a number which will, together with
the number of Directors which the holders of the Special Common Stock are
then entitled to elect to the Board, represent a majority of the authorized
number of Directors of the Corporation. In such event, the Directors of the
Corporation then in office who were elected by the holders of the Special
Common Stock shall have the sole and exclusive right to elect to the Board
the persons to fill all of the new directorships created by such increase
in the authorized number of Directors and, thereafter, the holders of the
Special Common Stock shall be entitled to elect, at all subsequent meetings
of stockholders at which Directors are elected, a number of Directors
representing a majority of then authorized number of Directors of the
Corporation in the manner provided in this subsection (ii). The rights of
the holders of the Special Common Stock set forth in this paragraph shall
continue until such time as the aggregate Put Price and/or the Call Price,
as the case may be, together with interest thereon as provided in paragraph
(f) of subsection (v) of this Section C, has been paid in full to the
holders of Special Common Stock as provided in subsection (v) below.
Notwithstanding the rights set forth in this paragraph of the holders of
the Special Common Stock to elect a majority of the Board, such rights
shall be of no force or effect if Zeneca Limited or an affiliate thereof
has purchased and paid for, in accordance with Section 1.10 of the Merger
Agreement, all of the shares of Special Common Stock with respect to which
the Put has been exercised.
(iii) Restrictions and Limitations. Notwithstanding the voting rights set
forth in subsection (i) or subsection (ii) of this Section C of Article
FOURTH of this Certificate of Incorporation and except as otherwise
required by law, until the Termination Date, the Corporation shall not,
without (A) the affirmative vote, whether at a special or annual meeting
(in person or by proxy), or by the written consent, of holders of record of
a majority of all of the votes entitled to be cast by the holders of the
outstanding Special Common Stock, voting separately as a class and (B) the
affirmative vote, whether at a special or annual meeting (in person or by
proxy), or by the written consent of holders of record of a majority of the
total number of shares of the outstanding Common Stock, voting separately
as a class:
(a) Authorize or issue, or obligate itself to issue, any shares of
the Special Common Stock or authorize, issue or create, or obligate
itself to issue or create any other series or class of Common Stock or
any other securities of the Corporation, senior to, or on parity with,
the redemption, call, put, liquidation or other rights of the Special
Common Stock or the Common Stock, or any securities convertible or
exercisable for any of the foregoing, other than shares of the Special
Common Stock issuable upon the exercise of options outstanding at the
Effective Time; or
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(b) Authorize, effect or validate any merger or consolidation of the
Corporation with or into any other entity, whether or not the
Corporation is the surviving entity therein, or any recapitalization or
reclassification of the securities of the Corporation; or
(c) Authorize, effect or validate any sale, transfer or other
disposition of all or substantially all of the tangible or intangible
assets of the Corporation to any natural person or entity, including
without limitation any subsidiary or other affiliate of the
Corporation; or
(d) Authorize, effect or validate any liquidation, dissolution,
winding up or other cessation of the business or operations of the
Corporation; or
(e) Amend the Certificate of Incorporation of the Corporation or any
certificate amendatory thereof or supplemental thereto (including any
Certificate of Determination or any similar document relating to any
series or class of securities of the Corporation) to (1) increase the
authorized number of shares of the Special Common Stock; (2) so as to
amend, modify, repeal or otherwise affect the provisions of subsection
(i) of Section C of Article FOURTH of this Certificate of
Incorporation; (3) so as to amend, modify, repeal or otherwise affect
adversely any of the powers, preferences, or rights of the Special
Common Stock, including without limitation, the put and call rights,
the voting rights, liquidation rights; (4) so as to amend the
provisions of this subsection (iii) of Section C of Article FOURTH of
this Certificate of Incorporation; or (5) so as to amend, modify,
repeal or otherwise affect the provisions of Article FIFTH of this
Certificate of Incorporation.
(iv) Liquidation.
(a) Preference. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Corporation, after payment or provision for payment of the debts and
other liabilities of the Corporation, the holders of each share of
Special Common Stock shall be entitled to receive out of the assets of
the Corporation, whether such assets are capital, surplus or earnings,
an amount equal to $42.00 per share of Special Common Stock, or, if
greater, following a default in the payment of the Call Price or Put
Price, the amount of the Call Price or Put Price, as the case may be,
increased as provided in paragraph (f) of subsection (v) of this
Section C, before any payment shall be made or assets distributed on
the Common Stock or any other class or series of capital stock of the
Corporation.
If upon any dissolution, liquidation or winding up of the affairs of
the Corporation, the assets of the Corporation distributable as set
forth in this paragraph (a) among the holders of the Special Common
Stock shall be insufficient to permit the payment to them of the full
preferential amounts to which they are entitled, then the entire assets
of the Corporation so to be distributed shall be distributed ratably
among the holders of Special Common Stock then outstanding, until
payment in full of such amount per share. For purposes of this
subsection (iv), a sale of all or substantially all of the assets of
the Corporation, or a merger or consolidation of the Corporation with
or into another entity shall not be deemed to be a dissolution,
liquidation or winding up of the Corporation.
(b) Remaining Assets. After payment or distribution to the holders of
the Special Common Stock of the full preferential amounts to which the
holders of Special Common Stock are entitled as set forth in paragraph
(a) of this subsection (iv), the holders of each share of Common Stock
shall be entitled to receive out of the assets of the Corporation,
whether such assets are capital, surplus or earnings, an amount equal
to $42.00 per share of Common Stock before any further payment shall be
made or assets distributed to the holders of Special Common Stock. If
the assets distributable to the holders of Common Stock as set forth in
the preceding sentence among the holders of the Common Stock shall be
insufficient to permit the payment to them of $42.00 per share, such
assets so to be distributed shall be distributed ratably among the
holders of Common Stock then outstanding until payment in full of such
amount per share. After the payment to the holders of Common Stock of
$42.00 per share, the remaining assets of the Corporation available for
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distribution to stockholders shall be distributed ratably to the
holders of the Special Common Stock and the holders of Common Stock
then outstanding.
(v) Put and Call for Special Common Stock.
(a) Call by Corporation. The Corporation shall not have the right to
call or redeem any shares of the Special Common Stock and the
Corporation shall not purchase or otherwise acquire for value any
outstanding shares of the Special Common Stock, except as provided in
this subsection (v).
The Corporation shall have the option (the "Call") to purchase
effective as of the Call Date, at the Call Price per share, all, but
not less than all, of the outstanding shares of Special Common Stock by
giving the Call Notice in accordance with paragraph (b) of this
subsection (v) at any time during the Call Period and making the
deposit required as provided in paragraph (d) of this subsection (v)
with irrevocable instructions to the Depositary to pay the Call Price
for all shares of Special Common Stock surrendered as provided in
paragraph (d) of this subsection (v). The Call shall only be exercised
by the Corporation upon the affirmative vote (or written consent) of a
majority of the holders of the Common Stock, voting separately as a
class; provided, however, that, regardless of such vote, the
Corporation shall only exercise the Call to the extent that the
purchase of all of the shares of Special Common Stock pursuant to the
exercise of the Call would not be in violation of Section 160 of the
Delaware General Corporation Law or any other law for the protection of
creditors.
(b) Call Notice. At least ten and no more than fifteen days prior to
the Call Date, the Call Notice shall be mailed to each holder of
Special Common Stock at such holder's address as it appears on the
transfer books of the Corporation and to each holder of an option to
purchase shares of the Special Common Stock at the address for such
holder set forth in the records of the Corporation; provided, however,
that if more than fifteen days notice of the Call Date is required
under the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, the Call Notice shall be given the
minimum number of days prior to the Call Date as so required. On the
Call Notice Date, a similar notice shall be given by the Corporation by
publication in a newspaper of general circulation in the City of Los
Angeles, California. In order to facilitate the giving of the Call
Notice to holders of Special Common Stock, the Board may fix a record
date for determination of holders of Special Common Stock entitled to
be given the Call Notice, which record date may not be more than ten
days prior to the Call Notice Date. The Call Notice shall inform each
holder of (1) the election by the Corporation to exercise the Call, (2)
the Call Price, (3) the Call Date, (4) the rights of such holder with
respect thereto, (5) the identity and address of the Depositary and (6)
instructions as how to obtain the Call Price for shares of Special
Common Stock. The Call Notice shall be accompanied by a form of letter
of transmittal which shall be used by a holder of Special Common Stock
in surrendering certificates for the Special Common Stock and obtaining
the Call Price therefor.
(c) Put by Holders. Unless the Call has been previously exercised,
during the Put Period, each holder of the Special Common Stock shall
have the option (the "Put") to require the Corporation to purchase all
or a part of the Special Common Stock held by such holder at a purchase
price per share equal to the Put Price, by delivery of the Put Notice
during the Put Period to the Corporation or the Depositary electing to
have shares of Special Common Stock purchased by the Corporation and
specifying therein the whole number of shares of Special Common Stock
which such holder has elected to cause the Corporation to purchase,
accompanied by a certificate or certificates representing such shares.
At least ten and not more than thirty days prior to the beginning of
the Put Period, the Corporation shall mail the Put Notification to each
holder of Special Common Stock at such holder's address as it appears
on the transfer books of the Corporation and to each holder of an
option to purchase shares of the Special Common Stock at the address
for such holder set forth in the records of the Corporation, in each
case together with a form of Put Notice which may be used by such
holder in exercising the Put. A notice similar to the Put Notification
shall be given
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by the Corporation by publication in a newspaper of general circulation
in the City of Los Angeles, California at least ten and not more than
thirty days prior to the beginning of the Put Period. If the
Corporation shall fail to give the Put Notification to the holders of
Special Common Stock at least ten days prior to the beginning of the
Put Period as provided herein, the rights of the holders of Special
Common Stock shall not be prejudiced thereby and the Put shall
nevertheless become exercisable at the beginning of the Put Period as
herein provided but the expiration of the Put Period shall be extended
to that date which is twenty-five Business Days from the date the Put
Notification is given to holders of Special Common Stock. To facilitate
the giving of the Put Notification to the holders of Special Common
Stock, the Board may fix a record date for determination of holders of
Special Common Stock entitled to be given the Put Notification, which
record date may not be more than five days prior to the date the Put
Notification is given pursuant to this paragraph (c).
(d) Surrender and Payment of Stock. Prior to the date the Corporation
gives the Put Notification (or the beginning of the Put Period, if the
Corporation does not timely give the Put Notification) or the Call
Notice, as the case may be, the Corporation shall appoint the
Depositary. Prior to the Call Date, the Corporation shall deposit with
the Depositary an amount of cash sufficient to pay in full the
Corporation's obligations pursuant to the Call, assuming for purposes
thereof that all outstanding shares of Special Common Stock are to be
purchased pursuant to the Call. In the case of the exercise of the
Call, each holder of shares of Special Common Stock and, in case of the
exercise of the Put, each holder who has exercised the Put, will be
paid, within two Business Days following the surrender of the
certificate or certificates representing such shares to the Depositary
or the Corporation together with a properly executed letter of
transmittal, in the case the exercise of the Call, or the Put Notice,
in the case of the exercise of the Put, covering such shares of stock,
the Call Price or the Put Price for such shares, as the case may be;
provided, however, in the case of the exercise of the Call, the Call
Price shall in no event be payable prior to the Call Date. As
certificates representing shares of Special Common Stock with respect
to which the Put has been properly exercised are so surrendered to the
Depositary or the Corporation, the Corporation will immediately deposit
with the Depositary cash necessary to pay in full the Put Price for
such shares. Upon such payment, each surrendered certificate so paid
for shall be transferred to the Corporation, canceled and retired. In
the event of the exercise of the Put for less than all of the shares of
Special Common Stock represented by a certificate, a new certificate
representing the shares of Special Common Stock not purchased pursuant
to the exercise of the Put shall be issued to the holder of such
shares. Following the Put Period, any monies deposited by the
Corporation with the Depositary for purchases of shares upon exercise
of the Put which are not required to be used for the purchase of shares
of Special Common Stock surrendered for purchase pursuant to the
exercise of the Put shall revert to the general funds of the
Corporation. Any monies deposited with the Depositary for purchase of
shares pursuant to the exercise of the Call and unclaimed at the end of
two years from that date which is twenty-one Business Days following
the Call Date shall revert to the general funds of the Corporation.
After such reversion of funds, the Depositary shall, upon demand, pay
over to the Corporation such unclaimed amounts and thereupon the
Depositary shall be relieved of all responsibility in respect thereof
and any holder of shares of Special Common Stock shall look only to the
Corporation for the payment of the Call Price. Any interest accrued on
funds deposited pursuant to this paragraph (d) shall be paid from time
to time to the Corporation for its own account. The Call Notice having
been given as aforesaid and subject to the deposit of funds with the
Depositary pursuant to this paragraph (d) in respect of the exercise of
the Call together with irrevocable instructions to the Depositary to
pay the Call Price for all shares of Special Common Stock surrendered
as herein provided, then, notwithstanding that any certificates for
shares of Special Common Stock shall not have been surrendered for
cancellation, from and after the Call Date, all of the shares of
Special Common Stock, other than the Option Shares as provided in
paragraph (e) below, shall no longer be deemed outstanding and all
rights of the holders of such shares shall cease and terminate.
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(e) Surrender and Payment of Option Shares. Notwithstanding the
provisions of paragraph (d) of this subsection (v), if the Call Date
occurs prior to the Option Share Termination Date and the Corporation
has complied with all of the requirements of paragraph (d) of this
subsection (v) with respect to the exercise of the Call, the holders of
Option Shares shall be required to surrender the certificates therefor
to the Corporation or the Depositary on the Option Share Termination
Date together with a properly executed letter of transmittal. Upon such
surrender, such holders will be paid the Call Price for the Option
Shares. Upon payment in full of the Call Price for the Option Shares,
the surrendered certificates shall be transferred to the Corporation,
canceled and retired. Notwithstanding that any certificates for Option
Shares shall not have been so surrendered for cancellation, from and
after the Option Share Termination Date, the Option Shares shall no
longer be deemed outstanding and all rights of the holders of the
Option Shares shall cease and terminate.
(f) Default. If the Corporation shall fail to make the deposit or
promptly pay the purchase price for shares of the Special Common Stock
as provided in paragraph (d) or paragraph (e) of this subsection (v),
the Call Price or Put Price, as the case may be, for such shares shall
thereafter be increased by an amount equal to interest thereon from the
date of surrender of the certificates pursuant to paragraph (d) or
paragraph (e) of this subsection (v) at an annual rate equal to two
percentage points in excess of the Reference Rate until the purchase
price therefor, together with interest as herein provided, is paid in
full and, until such payment in full, the shares of Special Common
Stock shall continue to be outstanding and owned by the record owner
thereof. If, prior to the Termination Date, (i) the Corporation shall
file a voluntary petition in bankruptcy, or seek reorganization, in
order to effect a plan or other arrangement with creditors or any other
relief under the Bankruptcy Code or under any state or federal law
granting relief to debtors, whether now or hereafter in effect, or (ii)
any involuntary petition or proceeding pursuant to the Bankruptcy Code
or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced
against the Corporation and the same is not dismissed within thirty
(30) days, or the Corporation shall file an answer admitting the
jurisdiction of the court and the material allegations of any
involuntary petition, or (iii) the Corporation shall be adjudicated a
bankrupt, or an order for relief shall be entered by any court of
competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization
or other relief for debtors, then, and upon the occurrence of such
event (an "Insolvency Event"), without notice of any kind whatsoever,
the right of the holders of the Special Common Stock to exercise the
Put shall accelerate and the Put shall be exercisable immediately upon
the occurrence of such event and until the end of the Put Period
(without giving effect to acceleration of the commencement date hereof)
and, immediately upon the occurrence of such event, the Call shall be
null and void and of no further force or effect.
D. Definitions. For purposes of this Article FOURTH, the following terms
shall have the following meaning:
(i) "Bankruptcy Code" shall mean the Bankruptcy Reform Act, Title 11 of
the United States Code, as amended or recodified from time to time.
(ii) "Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which commercial banks are authorized to close in Los
Angeles, California.
(iii) "Board" shall mean the Board of Directors of the Corporation.
(iv) "Call Date" shall mean that date, prior to the expiration of the
Call Period, which is fixed by the Corporation for the purchase of all of
the outstanding Special Common Stock pursuant to the exercise of the Call.
(v) "Call Notice" shall mean the written notice of exercise of the Call
setting forth the information required by paragraph (b) of subsection (v)
above.
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(vi) "Call Notice Date" shall mean the date upon which the Call Notice is
mailed to each holder of Special Common Stock as provided in paragraph (b)
of subsection (v) above.
(vii) "Call Period" shall mean the period beginning with the Original
Issue Date and ending on the close of business on the last day (or the next
succeeding Business Day, if such date is not a Business Day) of the forty-
eighth month thereafter.
(viii) "Call Price" shall mean (A) if the Call Date is during the period
beginning with the Original Issue Date and ending on the same day of the
thirty-first calendar month thereafter, an amount equal to the greater of
Fair Market Value per share and the Formula Price per share of Special
Common Stock, but in no event greater than Fifty Dollars ($50.00) per share
of Special Common Stock, and (B) if the Call Date is thereafter, an amount
equal to the Fair Market Value per share of the Special Common Stock.
(ix) "Change of Control" shall mean a transfer, disposition or the
entering into an agreement to transfer or dispose of shares of Common Stock
by Zeneca Group or the issuance by the Corporation of additional shares of
Common Stock or any other equity security of the Corporation, the result of
which is that Zeneca Group does not own (or upon consummation of the
agreement to transfer or dispose, will not own), directly or indirectly,
more than fifty percent (50%) of the outstanding Common Stock or voting
equity securities of the Corporation.
(x) "Depositary" shall mean the bank or trust company in the City of Los
Angeles, California or the City of New York, New York having capital and
surplus of at least $100,000,000 which is appointed by the Corporation to
serve as agent for the purpose of receiving certificates representing
shares of the Special Common Stock upon exercise of the Put or Call, as the
case may be, and distributing the purchase price therefor.
(xi) "Effective Time" shall mean the time immediately following the
effectiveness of the Merger.
(xii) "Fair Market Value" shall mean (A) if the Special Common Stock is
then listed on a national securities exchange, the average of the closing
sales price of the Special Common Stock for the twenty consecutive trading
days immediately preceding the third Business Day prior to the Call Notice
Date (the "Twenty-Day Period"), on the principal securities exchange on
which such stock is then listed or, or if there is no reported sale on any
day during the Twenty-Day Period, the average of the bid and asked
quotations on such exchange on such day, or (B) if the Special Common Stock
is then publicly traded in the NASDAQ National Market System, the average
of the closing sales price of the Special Common Stock as reported by the
NASDAQ National Market System for the Twenty-Day Period, or if there is no
reported sale on any day during the Twenty-Day Period, the average of the
bid and asked quotations on such day, or (C) if the Special Common Stock is
then publicly traded in the over-the-counter market (other than the NASDAQ
National Market System), the average of the mean between the closing bid
and asked prices of the Special Common Stock in the over-the-counter market
for the Twenty-Day Period or, if no shares were traded on any day during
the Twenty-Day Period, on the next preceding day on which there was such a
trade, or (D) if the Special Common Stock is not then separately quoted or
publicly traded, the fair market value on the date such value is to be
determined, as determined in good faith by the Board.
(xiii) "Formula Price" shall mean (A) if the Call Date is prior to the
beginning of the thirtieth month following the Original Issue Date, an
amount equal to the present value on the Call Date of $42.00 payable on the
date which is thirty months from the Original Issue Date, discounted at a
rate which, when compounded on a daily basis, based upon a 360-day year, is
equal to four percent (4.00%) on an annualized basis and (B) if the Call
Date is during the thirtieth or thirty-first month following the Original
Issue Date, an amount equal to $42.00.
(xiv) "Merger" shall mean the merger of Atkemix Thirty-nine Inc. with and
into the Corporation pursuant to the terms of the Merger Agreement.
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(xv) "Merger Agreement" shall mean that certain Agreement and Plan of
Merger between the Corporation, Zeneca Limited and Atkemix Thirty-nine
Inc., dated as of December 22, 1994.
(xvi) A "month" shall refer to a period commencing as of the close of
business on the applicable date and ending with the close of business on
the numerical day of the following calendar month which coincides with the
numerical date of the applicable date.
(xvii) "Option Shares" shall mean shares of Special Common Stock acquired
within two months after the Effective Time upon exercise of incentive stock
options (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended) to purchase Special Common Stock outstanding immediately
after the Effective Time which shares of Special Common Stock have not been
disposed of by the person who exercised such option prior to the Call Date.
(xviii) "Option Share Termination Date" shall mean that date which is
fourteen months from the Original Issue Date.
(xix) "Original Issue Date" shall mean the date upon which a share of
Special Common Stock is first issued.
(xx) "Put Notice" shall mean a written notice electing to have shares of
Special Common Stock purchased by the Corporation pursuant to the exercise
of the Put and containing the information required by paragraph (c) of
subsection (v) above.
(xxi) "Put Notification" shall mean a written notice from the Corporation
to the holders of the Special Common Stock and the holders of options to
purchase shares of the Special Common Stock informing each such holder of
(A) the rights of such holder to cause the Corporation to purchase shares
of Special Common Stock during the Put Period, (B) the date of the
commencement and termination of the Put Period, (C) the Put Price, (D) the
identity and address of the Depositary and (E) instructions as to how to
exercise the Put.
(xxii) "Put Period" shall mean, subject to paragraphs (c) and (f) of
subsection (v) of Section C above, the period commencing with the date (or
the next succeeding Business Day, if such day is not a Business Day) which
is the earlier of (A) thirty calendar months from the Original Issue Date
or (B) the date upon which there is a Change of Control and ending on the
close of business on the twentieth Business Day thereafter or such later
date as may be required under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(xxiii) "Put Price" shall mean a purchase price of $42.00 per share of
Special Common Stock.
(xxiv) "Record Date" shall mean a record date for determining the holders
entitled to vote (whether at a meeting or by written consent) on any matter
submitted to a vote by the holders of the Special Common Stock or the
Common Stock.
(xxv) "Reference Rate" shall mean the rate of interest publicly announced
from time to time by Bank of America NT&SA in San Francisco, California as
its Reference Rate. Any change in the Reference Rate shall take effect at
the opening of business on the date specified in the public announcement of
a change in said Bank's reference rate.
(xxvi) "Termination Date" shall mean that date which is the earlier of
the date upon which (A) the Corporation has exercised the Call and has paid
to the Depositary the aggregate Call Price applicable to the Call and (B)
the Put Period has expired and the Corporation has paid to the Depositary
the Put Price for all shares of Special Common Stock with respect to which
the Put was exercised.
(xxvii) "Zeneca Group" shall mean Zeneca Group PLC, an English public
limited company, or any direct or indirect subsidiary thereof or any
combination of the foregoing.
(xxviii) "Zeneca Limited" shall mean Zeneca Limited, an English company.
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FIFTH: A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board. Subject to Article FOURTH hereof, the
authorized number of Directors of the Corporation shall be ten (10). Each
Director elected by the holders of the Common Stock as provided under Article
FOURTH above and each Director elected by the holders of the Special Common
Stock as provided in Article FOURTH above shall be elected to hold office for a
term to expire at the next succeeding annual meeting of stockholders after his
or her election and until his or her successor is elected and qualified. In
case any vacancy shall occur on the Board of Directors of the Corporation among
the Directors elected by holders of the Common Stock, such vacancy shall be
filled for the unexpired portion of the term of the Directorship so vacant only
by a majority of the Directors elected by the holders of the Common Stock who
are then in office, although less than a quorum thereof, or by the sole
remaining Director elected by the Common Stock or by the holders of Common
Stock at a special meeting of such holders. In case any vacancy shall occur on
the Board of Directors of the Corporation among the Directors elected by
holders of the Special Common Stock, such vacancy shall be filled for the
unexpired portion of the term of the Directorship so vacant only by a majority
of the Directors elected by the holders of the Special Common Stock who are
then in office, although less than a quorum thereof, or by the sole remaining
Director elected by the Special Common Stock or by the holders of Special
Common Stock at a special meeting of such holders. No decrease in the
authorized number of Directors as set forth in this Article FIFTH above shall
shorten the term of any incumbent Director regardless of the class which
elected him or her.
B. Subject to the rights, if any, of the holders of the Preferred Stock,
prior to the Termination Date, any or all of the Directors of the Corporation
may be removed from office at any time but only for cause and only by the
affirmative vote of the holders of shares representing at least sixty-six and
two-thirds percent (66-2/3%) of the total number of votes entitled to be cast
by the holders of the class that elected the Director being so removed, voting
separately as a class.
C. The Directors of the Corporation need not be elected by written ballot
unless the By-laws of the Corporation (the "By-laws") so provide.
SIXTH: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized
and empowered to adopt, amend or repeal any provision of the By-Laws of the
Corporation.
SEVENTH: The Corporation shall indemnify to the full extent permitted by, and
in the manner permissible under, the laws of the State of Delaware, any person
made or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he or she is or was a Director or
officer of the Corporation or served any other enterprise as a Director or
officer at the request of the Corporation and such right of indemnification
shall also be applicable to the executors, administrators and other similar
legal representatives of any such Director or officer. The right of
indemnification conferred in the preceding sentence shall include the right to
be paid by the Corporation the expenses incurred in defending any proceeding
for which such right to indemnification is applicable in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a Director or officer (and not in any other capacity in which
service was rendered by such indemnitee, including, without limitation, service
to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses under this Article SEVENTH or
otherwise. The foregoing provisions of this Article SEVENTH shall be deemed to
be a contract between the Corporation and each Director and officer who serves
in such capacity at any time while this Article SEVENTH is in effect, and any
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon such state of facts. The foregoing rights of
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indemnification and advancement of expenses shall not be deemed exclusive of
any other rights to which any Director or officer or his or her legal
representative may be entitled apart from the provisions of this Article
SEVENTH.
EIGHTH: A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived
any improper personal benefit. If the Delaware General Corporation Law is
amended to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. Any repeal or modification
of this provision shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or
modification.
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ANNEX C
BY-LAWS OF
SALICK HEALTH CARE, INC.
ARTICLE I--STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which
date shall be within thirteen months subsequent to the last annual meeting of
stockholders.
Section 2. Special Meetings.
Special meetings of the holders of the Common Stock and the Callable Puttable
Common Stock, $.001 par value per share (the "Special Common Stock"), voting
together as a class, for any purpose or purposes prescribed in the notice of
the meeting, may be called by the Board of Directors or the Chairman of the
Board and shall be held at such place, on such date, and at such time as they
or he shall fix. Special meetings of the holders of the Common Stock, voting
separately as a class, for any purpose or purposes prescribed in the notice of
the meeting, may be called by the holders of at least twenty-five percent of
the then outstanding shares of the Common Stock and shall be held at such
place, on such date, and at such time as they shall fix. Special meetings of
the holders of the Special Common Stock, voting separately as a class, for any
purpose or purposes prescribed in the notice of the meeting, may be called by
the holders of shares of the Special Common Stock representing at least twenty-
five percent of the votes of the then outstanding shares of the Special Common
Stock and shall be held at such place, on such date, and at such time as they
shall fix.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten nor more than sixty days before
the date on which the meeting is to be held, to each stockholder entitled to
vote at such meeting, except as otherwise provided herein or required by law
(meaning, here and hereinafter, as required from time to time by the Delaware
General Corporation Law or the Certificate of Incorporation of the
corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of the
votes entitled to be cast at the meeting, present in person or by proxy, shall
constitute a quorum for all purposes, unless or except to the extent that the
presence of a larger percentage may be required by law. Where a separate vote
by a class or classes is required, the holders of a majority of the votes of
such class or classes present in person or represented by proxy shall
constitute a quorum entitled to take action with respect to the vote on that
matter.
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If a quorum shall fail to attend any meeting, the chairman of the meeting or
the holders of a majority of the votes entitled to be cast at the meeting who
are present, in person or by proxy, may adjourn the meeting to another place,
date, or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
The Chairman of the Board of Directors, or in the absence of such person,
such person as the Board of Directors may have designated or, in his or her
absence, such person as may be chosen by the holders of a majority of the votes
entitled to be cast at the meeting who are present, in person or by proxy,
shall call to order any meeting of the stockholders and act as chairman of the
meeting. In the absence of the Secretary of the corporation, the secretary of
the meeting shall be such person as the chairman appoints.
Section 6. Conduct of Business.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting.
Each stockholder shall have that number of votes for every share of stock
registered in his or her name on the record date for the meeting as is provided
in the Certificate of Incorporation of the corporation or as may be required by
law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors of
election appointed in accordance with the Delaware General Corporation Law.
All elections of directors shall be determined by a plurality of the votes
cast, and except as otherwise required by law, all other matters shall be
determined by a majority of the votes cast.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or if not so specified, at the place where the
meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
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ARTICLE II--BOARD OF DIRECTORS
Section 1. Number and Term of Office.
The number of directors constituting the entire Board of Directors shall be
as provided in the Certificate of Incorporation. Except as otherwise provided
by law or the Certificate of Incorporation, the directors shall be elected at
the annual meeting of stockholders. Each director shall hold office until his
successor shall have been elected and qualified, or until his death, or until
he shall have resigned or has been removed as provided by law or the
Certificate of Incorporation.
Section 2. Vacancies.
If the office of any director becomes vacant by reason of death, resignation,
disqualification, removal or other cause, a successor shall be elected as
provided in the Certificate of Incorporation.
Section 3. Removal.
Any or all of the directors of the corporation may be removed from office at
any time as provided in the Certificate of Incorporation.
Section 4. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 5. Special Meetings.
Special meetings of the Board of Directors may be called by one-third of the
directors then in office (rounded up to the nearest whole number) or by the
Chairman of the Board and shall be held at such place, on such date, and at
such time as they or he or she shall fix. Notice of the place, date, and time
of each such special meeting shall be given each director by whom it is not
waived by mailing written notice not less than five business days before the
meeting or by telephoning the same by speaking directly to said director not
less than forty-eight hours before the meeting. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at a special
meeting.
Section 6. Quorum.
At any meeting of the Board of Directors, a majority of the total number of
the whole Board shall constitute a quorum for all purposes. If a quorum shall
fail to attend any meeting, a majority of those present may adjourn the meeting
to another place, date, or time, without further notice or waiver thereof.
Section 7. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 8. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
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Section 9. Powers.
(a) The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges
on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
(5) To confer upon any officer of the corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase, bonus
or other compensation plans for directors, officers, employees and agents
of the corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the
corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with these
by-laws, for the management of the corporation's business and affairs.
(b) Notwithstanding paragraph (a) and clauses (1) through (8) thereof
immediately above, the corporation will not take or agree to take, and will not
permit any Subsidiary to take or agree to take, directly or indirectly, any of
the following actions without the approval of the majority of the whole Board
of Directors of the corporation (including at least one director elected by the
holders of Common Stock of the corporation who at such time is an employee of
any Zeneca Group Entity and at least one director elected by the holders of the
Special Common Stock who was an executive officer of the corporation prior to
the Merger unless no such person is a member of the Board of Directors of the
corporation at such time, in which case such director shall be designated by
the majority of the directors then in office who were elected by the holders of
the Special Common Stock) present and voting at a meeting of the Board of
Directors of the corporation or by unanimous written consent; provided,
however, that the requirement that the majority include one director elected by
the holders of the Common Stock will terminate upon the holders of Special
Common Stock having the right to elect a majority of the Board pursuant to
Article FOURTH, C(ii) of the Certificate of Incorporation:
(i) adopt, repeal or modify any Business Plan,
(ii) authorize, sell, distribute or otherwise issue, or grant rights with
respect to the New Securities, except for any issuances of Special Common
Stock pursuant to the terms of the Employee Options,
(iii) repurchase, redeem or exchange any shares of Capital Stock, other
than as contemplated by the terms of the Special Common Stock or in
connection with the exercise of the Employee Options,
(iv) amend the Certificate of Incorporation or these by-laws,
(v) incur Debt (other than (a) Debt drawn under lines of credit approved
by the Board of Directors of the corporation but not exceeding $35,000,000
in the aggregate amount outstanding at any one time, (b) pursuant to prior
agreements or obligations existing on the date hereof, copies of which have
been made available to the representatives of a Zeneca Group Entity, (c)
Debt that has previously been approved in principal as part of the
financing of any Business Plan or annual budget approved by the
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Board of Directors of the corporation, subject to Zeneca agreeing to the
terms of any such Debt, provided that if Zeneca does not approve of the
terms of such Debt, Zeneca will ensure, directly or indirectly, access to
the same amount of Debt on terms acceptable to Zeneca and the Company, and
(d) Debt owed to the corporation or any Subsidiary),
(vi) liquidate (or invest in) any marketable securities (other than
pursuant to the rollover into a substantially similar type of marketable
securities or as required to finance the Business Plan or annual budget),
(vii) acquire or sell any interest in a business or assets (whether
tangible or intangible) for a purchase price exceeding $2,000,000 in any
single transaction (or series of related transactions), and $5,000,000 in
the aggregate in any fiscal year of the corporation (other than any such
acquisitions or sales which have previously been approved in principal or
in general as part of the adoption of any Business Plan or annual budget),
(viii) the entry into, amendment or modification of, or supplement to,
any contract to which the corporation or any of its Subsidiaries is a party
(including, without limitation, with respect to insurance coverage) or the
creation of any other obligation or commitment which creates a liability
(contingent or otherwise) of or requires payments by the corporation or any
of its Subsidiaries, in any such case, of more than $500,000 per year or
$2,000,000 over the term of such contract, obligation or commitment (other
than any such amendment, modification or supplement to any contract,
obligation or commitment which (A) would be otherwise permitted under any
other clause of this paragraph (b), (B) is a renewal or extension of an
existing contract on substantially identical terms or on the terms provided
therein for a renewal or extension thereof or (C) has previously been
approved in principal or in general as part of the adoption of any Business
Plan or annual budget),
(ix) enter into (whether by acquisition or otherwise) a line of business
other than the Core Business,
(x) the making of any investment in, or the entry into any joint venture
or partnership with, any Person (other than pursuant to the El Mirador
Medical Plaza-La Quinta, a California limited partnership, or the three
Alta Bates radiology limited partnerships of which the corporation or a
Subsidiary is a limited partner, all such obligations not to exceed
$1,000,000 in the aggregate or as previously approved in principal or in
general as part of the adoption of any Business Plan or annual budget),
(xi) any contract which capitates for, or accepts risk in, the provision
of health care services on a group basis, subject to delegation to the
operational committee and to achievement of a commercially reasonable
timetable for such approval,
(xii) the initiation or settlement by the corporation of claims or
litigation (A) in excess of $250,000 per individual claim or litigation
(other than collection matters or insured claims) or (B) otherwise material
to the corporation,
(xiii) (A) sell all or substantially all of the assets of the
corporation, (B) adopt a plan of liquidation or dissolution of the
corporation, (C) engage in a merger, consolidation, share exchange or other
business combination involving the corporation, (D) engage in a
recapitalization, stock split or similar reconstitution of the Capital
Stock or (E) file a petition by or on behalf of the corporation or any
Subsidiary, or the taking of similar action, under any bankruptcy,
insolvency, reorganization or similar law,
(xiv) other than as contemplated by the Merger Agreement, declare or make
any provision for payment of, or the setting aside of assets with respect
to, any dividend or other distribution of any property,
(xv) take any action that would reasonably be expected to, as a result of
a law, rule or regulation of a Governmental Authority organized within the
United States of America, United Kingdom or any other jurisdiction where
Zeneca or its Subsidiaries conduct a material portion of Zeneca's business,
(A) prevent
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Zeneca from exercising the Call Option or from otherwise obtaining complete
control of the corporation, (B) require Zeneca Shareholder to divest or
otherwise limit Zeneca Shareholder's ability to exercise full rights or
ownership over any shares of Capital Stock (whether acquired upon exercise
of the Call Option or otherwise) or (C) require the corporation or any
Subsidiary to divest any material assets or impose a material limitation on
the conduct of the corporation or any Subsidiary's business,
(xvi) the appointment or removal, with or without cause, of any Senior
Officer of the corporation and its Subsidiaries,
(xvii) the adoption or amendment of any employee compensation, severance,
pension, profit sharing, bonus, stock option or other benefit plan or
arrangement or the execution or amendment of, or supplement to, any
collective bargaining or union contract (other than an extension or renewal
of the collective bargaining agreement at Temple University Medical Center,
which affects the Company's cancer center, and related collective
bargaining agreement at Temple University),
(xviii) except for any transaction contemplated by, authorized by or
described in the Employment Agreements, any transaction by the corporation
or its Subsidiaries with any Senior Officer or director of the corporation
or any of its Subsidiaries or such Senior Officers' and directors'
Affiliates or with any Zeneca Group Entity,
(xix) any licensing or sub-licensing of any material intellectual
property owned or licensed by the corporation or any Subsidiary (including,
without limitation, any proprietary or confidential information, patient
data and any databases) other than licensing or sublicensing commitments
contained in prior agreements existing on the date hereof, copies of which
have been made available to representatives of a Zeneca Group Entity, or
pursuant to agreements which have previously been approved in principal or
in general as part of the adoption of any Business Plan or annual budget,
(xx) any change in the fiscal year of the corporation,
(xxi) the appointment or termination of engagement of the independent
auditors for the corporation and its Subsidiaries, and
(xxii) the creation and composition of any committee of the Board of
Directors.
(c) The Board of Directors of the corporation may delegate (by vote in
accordance with paragraph (b) above) to an operational committee such of the
powers listed in clauses (i) through (xxii) of said paragraph (b) as the Board
of Directors of the corporation deems appropriate, which delegation the Board
of Directors of the corporation shall revise at such time as it deems
appropriate. Such operational committee shall at all times consist of an equal
number of directors elected by the holders of the Common Stock and directors
elected by the holders of the Special Common Stock and vacancies on said
committee shall be filled in the manner provided in Article III of these by-
laws.
(d) The following terms, as used in paragraph (b) immediately above, have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such
Person.
"Business Plan" has the meaning set forth in the Governance Agreement.
"Call Option" means (i) the transactions contemplated by the Company Call
Rights and (ii)the issuance to a Zeneca Shareholder of the Common Stock to fund
the aggregate Call Price.
"Call Price" has the meaning set forth in the Certificate of Incorporation.
"Capital Stock" means, at any time, the Common Stock and the Special Common
Stock and any other shares of authorized capital stock of the corporation.
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"Company Call Right" means the right to call the Special Common Stock
pursuant to Section C of Article FOURTH of the Certificate of Incorporation.
"Core Business" means, at any time, the following lines of business:
diagnostic and therapeutic services to patients with complex, chronic illnesses
requiring sophisticated long-term care including, but not limited to, the
provision of personnel, equipment and other components necessary therefor,
principally in the areas of cancer, kidney failure, organ transplantation and
certain immune deficiency diseases.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable and current liabilities
arising in the ordinary course of business, (iv) all obligations of such Person
as lessee which are capitalized in accordance with generally accepted
accounting principles, (v) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is otherwise an obligation of such
Person, (vi) all guarantees, endorsements and other contingent obligations with
respect to Debt, or to otherwise assure the owner of any of such Debt against
loss with respect thereto and (vii) obligations to repurchase assets previously
sold.
"Depositary" has the meaning set forth in Article FOURTH of the Certificate
of Incorporation.
"Employee Options" means any replacement options to purchase Special Common
Stock granted to employees, consultants, officers or directors of the
corporation or any of its Subsidiaries as contemplated by the Merger Agreement.
"Employment Agreements" means any employment agreements of the Senior
Officers entered into by the Company and such Senior Officer in connection with
the Merger.
"Event Date" means the earlier of (i) the date on which the corporation has
exercised the Call Option and paid to the Depositary on the behalf of the
corporation the aggregate Call Price and (ii) the date on which the Put Period
has expired and the corporation has paid to the Depositary the purchase price
for all shares of the Special Common Stock, if any, with respect to which the
Put has been exercised.
"Governance Agreement" means that certain Governance Agreement, dated as of
December 22, 1994, by and among Bernard Salick, Zeneca and the corporation.
"Governmental Authority" means any local, county, state, commonwealth,
federal or foreign court, judicial, executive, or legislative instrumentality,
or any agency, authority, commission, board or official thereof.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement,
a Person shall be deemed to own subject to a Lien any property or asset which
is has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement relating to such property or asset.
"Merger Agreement" means the Agreement and Plan of Merger dated as December
22, 1994 among the corporation, Zeneca and Atkemix Thirty-nine Inc., a Delaware
corporation.
"New Securities" means any securities of the corporation or any Subsidiary of
the corporation of any type whatsoever (including, without limitation, any
stock appreciation or similar interest rights with respect to such securities).
"Person" means an individual, corporation, partnership, association, trust or
other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
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"Put" and "Put Period" have the respective meanings set forth in the
Certificate of Incorporation.
"Senior Officer" means, at any time, the twenty-five officers and employees
of the corporation or any of its Subsidiaries, who have the then-highest
aggregate annual salary and benefits.
"Subsidiary" means, as to any Person, (i) any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are,
directly or indirectly, owned or controlled by such Person, (ii) any
partnership of which such Person is, directly or indirectly, a general or
managing partner and (iii) any other entity that is, directly or indirectly,
controlled by such Person.
"Zeneca" means Zeneca Limited, an English company.
"Zeneca Group Entity" means, at any time, Zeneca and (i) Zeneca Group PLC, an
English company, (ii) any entity of which securities or other ownership
interest having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are, directly or
indirectly, owned or controlled by Zeneca Group PLC at such time and (iii) any
other entity that is, directly or indirectly, controlled by Zeneca Group PLC at
such time.
"Zeneca Shareholder" means, at any time, any Zeneca Group Entity that owns
shares of Capital Stock at such time.
Capitalized terms used in paragraph (b) above or this paragraph (d) but not
defined in this paragraph (d) have the respective meanings provided for in the
Merger Agreement.
Section 10. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III--COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the whole Board as
provided in Section 9(b) of Article II of these by-laws, may from time to time
designate committees of the Board, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the Board and shall,
for those committees and any others provided for herein, elect only directors
to serve thereon as the members. Any committee so designated shall consist at
all times of an equal number of directors elected by the holders of the Common
Stock and directors elected by the holders of the Special Common Stock. In case
any vacancy shall occur on any committee among the members thereof who are
directors elected by holders of the Common Stock, such vacancy shall be filled
only by a majority of the directors elected by the holders of the Common Stock
who are then in office, although less than a quorum thereof, or by the sole
remaining director elected by the Common Stock. In case any vacancy shall occur
on any committee among the members thereof who are directors elected by holders
of the Special Common Stock, such vacancy shall be filled only by a majority of
the directors elected by the holders of the Special Common Stock who are then
in office, although less than a quorum thereof, or by the sole remaining
director elected by the Special Common Stock.
Any committee so designated may exercise the power and authority of the Board
of Directors to declare a dividend, to authorize the issuance of stock or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
Delaware General Corporation Law if the resolution which designates the
committee or a supplemental resolution of the Board of Directors shall so
provide.
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Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and conducting
its business and shall act in accordance therewith, except as otherwise
provided herein or required by law. Adequate provision shall be made for notice
to members of all meetings; one-third of the members shall constitute a quorum
unless the committee shall consist of two members, in which event two members
shall constitute a quorum; and, in any event, all matters shall be determined
by a majority vote of the members present, including the affirmative vote of at
least one director elected by the holders of the Common Stock and at least one
director elected by the holders of the Special Common Stock. Action may be
taken by any committee without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of such committee.
ARTICLE IV--OFFICERS
Section 1. Generally.
The officers of the corporation shall consist of a Chairman of the Board,
President, a Secretary, a Treasurer and such other officers, including one or
more Vice Presidents, as may from time to time be appointed by the Board of
Directors. Officers shall be elected by the Board of Directors, which shall
consider that subject at its first meeting after every annual meeting of
stockholders. Each officer shall hold office until his or her successor is
elected and qualified or until his or her earlier resignation or removal. Any
number of offices may be held by the same person.
Section 2. Chairman of the Board.
The Chairman of the Board shall be a member of the Board of Directors, the
chief executive officer of the corporation and, if present, preside at all
meetings of the stockholders and Board of Directors. He or she shall exercise
and perform powers and duties, incident to the office of the chief executive
officer and such other powers and duties as may be from time to time assigned
to him or her by the Board of Directors or prescribed by these by-laws.
Section 3. President.
Subject to such supervisory powers, if any, as may be given by the Board of
Directors to the Chairman of the Board, the President shall, in the absence of
the Chairman of the Board, preside at all meetings of the stockholders and
Board of Directors. When performing the duties of the Chairman of the Board, he
or she shall have the powers and be subject to the restrictions placed upon the
Chairman of the Board. Subject to the provisions of these by-laws, the
supervisory powers, if any, of the Chairman of the Board of Directors, and to
the direction of the Board of Directors, he or she shall perform all duties and
have all powers which are commonly incident to the office of President and such
other powers and duties as may from time to time be delegated to him or her by
the Board of Directors. He or she shall have power to sign all stock
certificates, contracts and other instruments of the corporation which are
authorized. He or she shall have general supervision of and direction over all
of the other officers and agents of the corporation.
Section 4. Vice President.
Each Vice President shall have such powers and duties as may be delegated to
him or her by the Board of Directors. One Vice President shall be designated by
the Board to perform the duties and exercise the powers of the President in the
event of the President's absence or disability.
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Section 5. Chief Financial Officer.
The Chief Financial Officer shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, surplus and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The Chief Financial Officer shall deposit or cause to be deposited all moneys
and other valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the Board of Directors and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or these by-laws.
Section 6. Treasurer.
The Treasurer shall have the responsibility for such day-to-day financial
matters of the corporation and other duties as are commonly incident to the
office of Treasurer (other than those duties performed by the Chief Financial
Officer) or as the Board of Directors or the chief executive officer may from
time to time prescribe.
Section 7. Secretary.
The Secretary shall issue all authorized notices for, and shall keep minutes
of, all meetings of the stockholders and the Board of Directors. He or she
shall have charge of the corporate books and shall perform such other duties as
are commonly incident to the office of Secretary or as the Board of Directors
may from time to time prescribe.
Section 8. Delegation of Authority.
The Board of Directors may from time to time delegate the powers or duties of
any officer to any other officers or agents, notwithstanding any provision
hereof.
Section 9. Removal.
Any officer of the corporation may be removed at any time, with or without
cause, by the Board of Directors.
Section 10. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the Chairman of the
Board, the President or any officer of the corporation authorized by the chief
executive officer shall have power to vote and otherwise act on behalf of the
corporation, in person or by proxy, at any meeting of stockholders of or with
respect to any action of stockholders of any other corporation in which the
corporation may hold securities and otherwise to exercise any and all rights
and powers which the corporation may possess by reason of its ownership of
securities in such other corporation.
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ARTICLE V--STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the name
of the corporation by, the Chairman of the Board, the President or a Vice
President, and by the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer, certifying the number of shares owned by him or her.
Any of or all the signatures on the certificate may be facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these by-
laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise
any rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty nor less than ten days before the date of any meeting of stockholders,
nor more than sixty days prior to the time for such other action as
hereinbefore described; provided, however, that if no record date is fixed by
the Board of Directors, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at
a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates, of stock
shall be governed by such other regulations as the Board of Directors may
establish.
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ARTICLE VI--NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or with an overnight courier service or by sending such notice by
facsimile or by prepaid telegram or mailgram. Any such notice shall be
addressed to such stockholder, director, officer, employee or agent at his or
her last known address or facsimile number as the same appears on the books of
the corporation. The time when such notice is received, if hand delivered or
sent by facsimile, or dispatched, if delivered through the mails or by
overnight courier, shall be the time of the giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, director, officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII--MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these by-laws, facsimile signatures of any officer
or officers of the corporation may be used whenever and as authorized by the
Board of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name of
the corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates
of the seal may be kept and used by the Chief Financial Officer, Treasurer or
by an Assistant Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the corporation and upon such information,
opinions, reports or statements presented to the corporation by any of its
officers or employees, or committees of the Board of Directors so designated,
or by any other person as to matters which such director or committee member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the corporation.
Section 4. Fiscal Year.
The fiscal year of the corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these by-laws which requires that an act be done
or not done a specified number of days prior to an event or that an act be done
during a period of a specified number of days prior
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to an event, calendar days shall be used, the day of the doing of the act shall
be excluded, and the day of the event shall be included.
ARTICLE VIII--INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party to
or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or an officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
a director, officer, employee or agent, shall be indemnified and held harmless
by the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than such law permitted
the corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 3 of this ARTICLE VIII with respect to
proceedings to enforce rights to indemnification, the corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the corporation.
Section 2. Right to Advancement of Expenses.
The right to indemnification conferred in Section 1 of this ARTICLE VIII
shall include the right to be paid by the corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the corporation of an undertaking (hereinafter an "undertaking"),
by or on behalf of such indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which there is
no further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 2 or otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections 1 and 2 of this ARTICLE VIII shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be
a director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
Section 3. Right of Indemnitee to Bring Suit.
If a claim under Section 1 or 2 of this ARTICLE VIII is not paid in full by
the corporation within twenty days after a written claim has been received by
the corporation, the indemnitee may at any time thereafter bring suit against
the corporation to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit, or in a suit brought by the corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that,
and (ii) in any suit brought by the corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the corporation shall be
entitled to recover
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such expenses upon a final adjudication from which there is no further right to
appeal that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by
the indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or brought by the corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that
the indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this ARTICLE VIII or otherwise shall be on the corporation.
Section 4. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses conferred in
this ARTICLE VIII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the corporation's Certificate
of Incorporation, by-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 5. Insurance.
The corporation may maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the Corporation.
The corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the corporation to the fullest extent of
the provisions of this Article XIII with respect to the indemnification and
advancement of expenses of directors and officers of the corporation.
ARTICLE IX--AMENDMENTS
Subject to the provisions of Section 9(b) of Article II of these by-laws,
these by-laws may be amended or repealed by the Board of Directors at any
meeting or by the vote of the stockholders as provided in the Certificate of
Incorporation.
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ANNEX D
SECTION 262
OF THE DELAWARE GENERAL CORPORATION LAW
(a) Any stockholder of a corporation of this State who hold 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 (S)228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock corporation; the words
"stock" and "share" mean and include what is ordinarily meant by those words
and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S)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
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporation,
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 of
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 (S)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 of
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.
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(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or
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consolidation); provided, however, that if no petition for an appraisal shall
be filed within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a written
withdrawal of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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ANNEX E
PERSONAL AND CONFIDENTIAL
December 22, 1994
Board of Directors
Salick Health Care, Inc.
8201 Beverly Boulevard
Los Angeles, CA 90048
Mesdames and Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.001 per share (the "Shares"),
of Salick Health Care, Inc. (the "Company") of the Merger Consideration (as
defined below) to be received for Shares pursuant to the Agreement and Plan of
Merger (the "Agreement") dated as of December 22, 1994 among the Company,
Zeneca Limited ("Zeneca"), and an indirect wholly-owned subsidiary of Zeneca
("Merger Subsidiary").
The Agreement provides for the merger (the "Merger") of Merger Subsidiary with
and into the Company, with the Company surviving, and the conversion of each
outstanding Share into the right to receive one half share of the special
common stock of the Company (the "Special Common Stock" or the "Stock
Consideration") and $18.875 in cash (the "Cash Consideration" and, together
with the Stock Consideration, the "Merger Consideration"). The Special Common
Stock will have the terms and conditions provided in the Agreement and, subject
to the terms of the Agreement, will represent, on a fully diluted basis, 50% of
the total common stock of the Company outstanding immediately after
effectiveness of the Merger. In addition, the Company will make a deferred
payment of $0.625 per Share, payable to the record holders of the Shares in two
equal installments at 180 days and 360 days after effectiveness of the Merger.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We have also provided certain investment banking services to Zeneca
from time to time, and may provide investment banking services to Zeneca in the
future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five fiscal years ended August 31, 1994; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
certain other communications from the Company to its stockholders; certain
internal financial analyses and forecasts for the Company prepared by its
management; and certain annual and interim reports to shareholders of Zeneca.
We also have held discussions with members of the senior management of the
Company regarding its past and current business operations, financial condition
and future prospects, and with members of the management of Zeneca regarding
the future operations of the Company. In addition, we have reviewed the
reported price and trading activity for the Shares, compared certain financial
and stock market information for the Company with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the health care
services industry specifically and in other industries generally and performed
such other studies and analyses as we considered appropriate.
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We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries and we have not been furnished with any such evaluation or
appraisal. In providing our opinion, we are not expressing any view as to the
prices at which the Special Common Stock may trade (a) following the issuance
of such Special Common Stock, or (b) more particularly, after the latest date
at which such Special Common Stock may be put to the Company. In this regard,
we are assuming that holders of the Shares who become holders of the Special
Common Stock as a result of the Merger will exercise such put right when it
becomes available, to the extent they have not previously disposed of their
Special Common Stock. We express no view as to whether, under certain
circumstances, it may be advantageous for holders of the Special Common Stock
to continue to hold such Special Common Stock after the latest date at which
such Special Common Stock can be put to the Company. Also, we have assumed that
the obligation of Zeneca pursuant to Section 1.10 of the Agreement is a valid
and binding obligation of Zeneca.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Merger
Consideration to be received by the holders of Shares pursuant to the Agreement
is fair to such holders.
Very truly yours,
GOLDMAN, SACHS & CO.
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ANNEX F
December 22, 1994
Board of Directors
Salick Health Care, Inc.
8201 Beverly Boulevard
Los Angeles, CA 90048
Members of the Board:
We understand that Salick Health Care, Inc. (the "Company"), Zeneca Limited
("Zeneca"), and a subsidiary of Zeneca ("Merger Subsidiary") have entered into
an Agreement and Plan of Merger dated as of December 22, 1994 (the
"Agreement"). The Agreement provides for the merger (the "Merger") of Merger
Subsidiary with and into the Company, with the Company surviving, and the
conversion of each outstanding share of the Company's Common Stock, par value
$0.001 per share (the "Shares"), into the right to receive one half share of
the callable puttable common stock of the Company (the "Special Common Stock"
or the "Stock Consideration") and $18.875 in cash (the "Cash Consideration"
and, together with the Stock Consideration, the "Merger Consideration"). The
Special Common Stock will have the terms and conditions provided in the
Agreement and, subject to the terms of the Agreement, will represent, on a
fully diluted basis, 50% of the total common stock of the Company outstanding
immediately after effectiveness of the Merger. In addition, the Company will
make a deferred payment of $0.625 per Share, payable to the record holders of
the Shares in two equal installments at 180 days and 360 days after
effectiveness of the Merger.
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding Shares of the Merger Consideration to
be received by them in the Merger. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement;
(ii) Analyzed certain historical business and financial information
relating to the Company, including the Annual Reports to Stockholders
and Annual Reports on Form 10-K of the Company for the five years
ended August 31, 1994;
(iii) Analyzed certain historical business and financial information
relating to Zeneca, including the Annual Report on Form F-20 for the
year ended December 31, 1993, and the report on Form 6-K for the
period ended June 30, 1994, as well as Moody's Investors Service and
Standard & Poor's reports on Zeneca;
(iv) Reviewed various financial forecasts and other data provided to us by
the Company relating to its business;
(v) Held discussions with members of the senior management of the Company
with respect to the business and prospects of the Company and the
strategic objectives of the Company;
(vi) Held discussions with members of the senior management of Zeneca with
respect to the business and prospects of Zeneca;
(vii) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to the
business of the Company;
(viii) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be
generally comparable to that of the Company, and in other industries
generally;
(ix) Reviewed the historical stock prices and trading volumes of the
Company's common stock; and
(x) Conducted such other financial studies, analyses and investigations as
we deemed appropriate.
F-1
<PAGE>
We have relied upon the accuracy and completeness of the foregoing financial
and other information, and have not assumed any responsibility for any
independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company or Zeneca. With
respect to financial forecasts of the Company, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of management of the Company as to the future financial
performance of the Company. We assume no responsibility for and express no view
as to such forecasts or the assumptions on which they are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In rendering our opinion, we have assumed that the Acquisition will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company and that obtaining the necessary
regulatory approvals for the Acquisition will not have an adverse effect on the
Company. With your permission, we have assumed that the obligation of Zeneca in
Section 1.10 of the Agreement is a valid and binding obligation of Zeneca. In
providing our opinion, we are not expressing any view as to the prices at which
the Special Common Stock may trade (a) following the issuance of such Special
Common Stock, or (b) more particularly, after the latest date at which such
Special Common Stock may be put to the Company. In this regard, we are assuming
that holders of the Shares who become holders of the Special Common Stock as a
result of the Merger will exercise such put right when it becomes available, to
the extent they have not previously disposed of their Special Common Stock. We
express no view as to whether, under certain circumstances, it may be
advantageous for holders of the Special Common Stock to continue to hold such
Special Common Stock after the latest date at which such Special Common Stock
can be put to the Company.
Lazard Freres & Co. is acting as financial advisor to the Company in
connection with the Merger and will receive a fee for our services upon closing
of the Merger.
Based on and subject to the foregoing, we are of the opinion that the Merger
Consideration to be received by the holders of the outstanding Shares pursuant
to the Agreement is fair to such holders from a financial point of view.
Very truly yours,
LAZARD FRERES & CO.
F-2
<PAGE>
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PROXY SALICK HEALTH CARE, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING APRIL 13, 1995
LESLIE F. BELL and BARBARA BROMLEY-WILLIAMS, or either of them, each with the
power of substitution, are hereby authorized to represent and vote the shares
of Common Stock held of record by the undersigned at the meeting of
stockholders of Salick Health Care, Inc. (the "Company"), to be held on
Thursday, April 13, 1995 at 9:30 A.M., local time, or any adjournments or
postponements thereof with respect to:
1. Approval and adoption of an Agreement and Plan of Merger, dated as of
December 22, 1994, as amended, by and among the Company, Zeneca Limited, an
English company ("Zeneca"), and Atkemix Thirty-nine Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of Zeneca ("Merger
Subsidiary"), pursuant to which, among other things, (a) Merger Subsidiary will
be merged (the "Merger") with and into the Company, with the Company being the
surviving corporation, (b) the Company's certificate of incorporation of the
Company will be amended to, among other things, authorize the issuance by the
Company of Callable Puttable Common Stock, par value $.001 per share (the
"Special Common Stock"), having the rights described in the Proxy
Statement/Prospectus accompanying this Proxy, (c) each outstanding share of
Common Stock, $.001 par value per share, of the Company (the "Shares") (other
than Shares as to which appraisal rights have been perfected in accordance with
Delaware General Corporation Law), will be converted into the right to receive
$18.875 in cash and, although no fractional shares will be issued, one-half
share of Special Common Stock, (d) the outstanding common stock of Merger
Subsidiary will be converted into shares of the Common Stock of the Company
representing immediately after the Merger 50% of the equity of the Company
(assuming exercise in full of all options outstanding immediately prior to the
Merger), (e) options to purchase shares of Special Common Stock will be issued
in exchange for the options to purchase Shares which are outstanding
immediately prior to the effective time of the Merger and (f) the ten nominees
to the Company's Board of Directors who are listed in the Proxy
Statement/Prospectus accompanying this Proxy will be elected. All fractional
shares of Special Common Stock that holders of Shares otherwise would be
entitled to receive will be aggregated and sold and the net proceeds paid to
such holders. Holders of the Special Common Stock will have the right to cause
the Company to purchase all or some of the shares thereof during a twenty
business day period commencing two and one-half years after the consummation of
the Merger (the "Closing") at a price of $42.00 per share and the Company will
have the right to acquire all, but not less than all, of the Special Common
Stock at any time during the four year period commencing with the Closing at
the market price therefor (subject, during the first two years and seven
months, to a minimum price of $42.00 per share, discounted from a date which is
two years and six months from the effective time of the Merger, if called prior
to that date, at a rate which, when compounded daily, is equal to four percent
on an annualized basis, and a maximum price of $50.00 per share). As additional
consideration for Shares converted in the Merger, the Company will make a
distribution to all holders of record of Shares immediately prior to the
effective time of the Merger in an aggregate amount of $0.625 per Share, to be
paid in two equal installments of $0.3125 each, the first to be paid 180 days
after the Closing and the second to be paid 360 days after the Closing.
2. Election of Directors: [_] For[_] Against[_] Abstain
[_] FOR all Class I nominees [_] WITHHOLD AUTHORITY to
listed below (except as vote for all Class I
marked below) nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW.)
Bernard Salick, M.D. and Leslie F. Bell
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE DATE, SIGN AND RETURN
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO SUCH DIRECTIONS ARE INDICATED, THE PROXIES WILL VOTE FOR
PROPOSAL 1, THE MERGER PROPOSAL, AND FOR PROPOSAL 2, THE ELECTION OF DIRECTORS.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.
Dated: ___________________________
----------------------------------
(Stockholder's Signature)
----------------------------------
(Stockholder's Signature)
Please sign exactly as your name
appears on this proxy. If signing
for estates, trusts or
corporations, title or capacity
should be stated. If shares are
held jointly, each holder should
sign.
- -------------------------------------------------------------------------------
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Indemnification of Directors and Officers of Salick Health Care, Inc.
Section 102(b)(7) of the Delaware General Corporation Law permits a Delaware
corporation to limit the liability of its directors in accordance with the
provisions set forth therein. The existing certificate of incorporation of
Salick Health Care, Inc. provides that the personal liability of its directors
shall be limited to the fullest extent permitted by applicable law.
Section 145 of the Delaware General Corporation Law contains provisions
permitting corporations to indemnify any person who is or was a director,
officer, employee or agent of the corporation, or who is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, in
accordance with the provisions set forth therein. The existing by-laws of
Salick Health Care, Inc. generally provide for indemnification of such persons
to the fullest extent allowed by applicable law.
Salick Health Care, Inc. is party to Indemnification Agreements with certain
of its officers and directors. In general, the Indemnification Agreements
provide for indemnification of the individuals party thereto for certain
expenses and liabilities, provided that the individual meets certain standards
of conduct. The Indemnification Agreements also establish certain procedures
and deadlines for indemnification and advancement of expenses as well as
certain limitations upon indemnification.
Salick Health Care, Inc. has purchased directors' and officers' liability
insurance in the amount of $20,000,000.
(b) Indemnification of Directors and Officers of Zeneca PLC
Article 141 of the Articles of Association of Zeneca PLC provides:
"Subject to the provisions of and so far as may be consistent with the
Securities Act, every Director, Secretary or other officer of Zeneca [PLC]
shall be entitled to be indemnified by Zeneca [PLC] out of its own funds
against and/or exempted by Zeneca [PLC] from all cash charges, losses,
expenses and liabilities incurred by him in the actual or purported
execution and/or discharge of his duties and/or the exercise or purported
exercise of his powers and/or otherwise in relation to or in connection
with his duties, powers or office."
Article 142 of the Articles of Association of Zeneca PLC provides:
"The Directors shall have the power to purchase and maintain insurance
for or for the benefit of any persons who are or were at any time
directors, officers, or employees of Zeneca [PLC] or of any other company
in which Zeneca [PLC] has any interest whether direct or indirect, or who
are or were at any time trustees of any pension fund or employees' share
scheme or any other scheme or arrangements principally for the benefit of
employees in which employees of Zeneca [PLC] or of any such other company
are interested, including (without prejudice to the generality of the
foregoing) insurance against any liability incurred by such persons in
respect to any act or omission in the actual or purported execution or
discharge of their duties or in the exercise of their powers or otherwise
in relation to their duties, powers or offices in relation to Zeneca [PLC]
or any such other company or pension fund, employees' share scheme or any
other such scheme or arrangements."
Section 310 of the United Kingdom Companies Act 1985 (the "Companies Act")
provides:
"(1) This section applies to any provision, whether contained in a
company's articles or in any contract with the company or otherwise, for
exempting any officer of the company or any person (whether an officer or
not) employed by the company as auditor from, or indemnifying him against,
any
II-1
<PAGE>
liability which by virtue of any rule of law would otherwise attach to him
in respect of any negligence, default, breach of duty or breach of trust of
which he may be guilty in relation to the company.
(2) Except as provided by the following subsection, any such provision
is void.
(3) This section does not prevent a company--
(a) from purchasing and maintaining for any officer or auditor
insurance against any such liability, or
(b) from indemnifying any such officer or auditor against any
liability incurred by him--
(i) in defending any proceedings (whether civil or criminal)
in which judgment is given in his favor or he is acquitted, or
(ii) in connection with any application under Section 144(3)
or (4) (acquisition of shares by innocent nominee) or section
727 (general power to grant relief in case of honest and
reasonable conduct) in which relief is granted to him by the
court."
Section 727 of the Companies Act provides:
"(1) If in any proceedings for negligence, default, breach of duty or
breach of trust against an officer of a company or a person employed by a
company as auditor (whether he is or is not an officer of the company) it
appears to the court hearing the case that that officer or person is or may
be liable in respect of the negligence, default, breach of duty or breach
of trust, but that he has acted honestly and reasonably, and that having
regard to all the circumstances of the case (including those connected with
his appointment) he ought fairly to be excused for the negligence, default,
breach of duty or breach of trust, that court may relieve him, either
wholly or partly, from his liability on such terms as it thinks fit.
(2) If any such officer or person as above-mentioned has reason to
apprehend that any claim will or might be made against him in respect of
any negligence, default, breach of duty or breach of trust, he may apply to
the court for relief; and the court on the application has the same power
to relieve him as under this section it would have had if it had been a
court before which proceedings against that person for negligence, default,
breach of duty or breach of trust had been brought.
(3) Where a case to which subsection (1) applies is being tried by a
judge with a jury, the judge, after hearing the evidence, may, if he is
satisfied that the defendant or defender ought in pursuance of that
subsection to be relieved either in whole or in part from his liability
sought to be enforced against him, withdraw the case in whole or in part
from the jury and forthwith direct judgment to be entered for the defendant
or defender on such terms as to costs or otherwise as the judge may think
proper."
Zeneca PLC will indemnify and hold harmless each director and each officer or
representative of Zeneca PLC who signs the Registration Statement and Zeneca
PLC's authorized representatives from and against certain civil liabilities
based on information supplied by Zeneca PLC for use herein.
As of January 1, 1995, Zeneca PLC has purchased directors' and officers'
liability insurance from United States and United Kingdom insurers in the
amount of $150 million.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<C> <S>
2.1 Copy of Agreement and Plan of Merger, dated as of December 22,
1994, as amended, by and among Salick Health Care, Inc, Zeneca
Limited and Atkemix Thirty-nine Inc. (attached as Annex A to the
Proxy Statement/Prospectus forming a part of this Registration
Statement).
2.2 Assignment Agreement, dated January 26, 1995, among Zeneca Limited
and Zeneca PLC.
2.3 Copy of Agreement and Plan of Merger between Salick Health Care,
Inc., a California corporation, and Salick Health Care, Inc., a
Delaware corporation. Incorporated by reference to Exhibit 1 of
the Registration Statement on Form 8-B of Salick Health Care, Inc.
dated August 28, 1991.
3.1 Certificate of Incorporation of Salick Health Care, Inc. in the
form to be effective on the effective date of the Merger (attached
as Annex B to the Proxy Statement/
Prospectus forming a part of this Registration Statement on Form
S-4 of Salick Health Care, Inc.).
3.2 By-Laws of Salick Health Care, Inc. in the form to be effective on
the effective date of the Merger (attached as Annex C to the Proxy
Statement/Prospectus forming a part of this Registration Statement
on Form S-4 of Salick Health Care, Inc.).
4.1 Business Loan Agreement of Salick Health Care, Inc. with Bank of
America NT&SA dated January 1, 1993. Incorporated by reference to
Exhibit 4(f) of the Form 10-K of Salick Health Care, Inc. for the
year ended August 31, 1993.
4.2 Specimen form of certificate of Common Stock of Salick Health
Care, Inc. Incorporated by reference to Exhibit 4(g) of the
Registration Statement on Form 8-B of Salick Health Care, Inc.
dated August 28, 1991.
4.3 Specimen form of certificate of Callable Puttable Common Stock of
Salick Health Care, Inc.
5.1 Opinion of Sanders, Barnet, Goldman, Simons & Mosk, A Professional
Corporation, on behalf of Salick Health Care, Inc.
5.2 Opinion of the Solicitor of Zeneca PLC as to the validity of the
contingent debt obligations of Zeneca PLC.
5.3 Opinion of Davis Polk & Wardwell, United States counsel for Zeneca
PLC, as to the validity of the contingent debt obligations of
Zeneca PLC.
8.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson, special
counsel for Salick Health Care, Inc.
12.1 Computation of Ratio of Earnings to Fixed Charges under UK GAAP
for Zeneca PLC.
12.2 Computation of Ratio of Earnings to Fixed Charges under US GAAP
for Zeneca PLC.
23.1 Consent of Sanders, Barnet, Goldman, Simons & Mosk, A Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in
Exhibit 8.1).
23.3 Consent of Independent Accountants for Salick Health Care, Inc.
23.4 Consent of the Solicitor of Zeneca PLC (included in Exhibit 5.2).
23.5 Consent of Davis Polk & Wardwell (included in Exhibit 5.3).
</TABLE>
II-3
<PAGE>
(a) Exhibits.
<TABLE>
<C> <S>
23.6 Consent of KPMG, independent chartered accountants to Zeneca PLC.
23.7 Consent of Goldman, Sachs & Co.
23.8 Consent of Lazard Freres & Co.
23.9 Consent of Robert C. Black to be named as a director
23.10 Consent of Dr. Michael G. Carter to be named as a director
23.11 Consent of John G. Goddard to be named as a director
23.12 Consent of Dr. Thomas F.W. McKillop to be named as a director
23.13 Consent of Dr. Clifford Richard Guy to be named as a director
24 Powers of Attorney with respect to Zeneca PLC signatories
(included on the signature pages).
</TABLE>
(b) Financial Statement Schedule
Schedule VIII--Valuation and Qualifying Accounts (included as page II-
11)
ITEM 22. UNDERTAKINGS
Salick Health Care, Inc. hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form F-
3, and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE>
(c) (1) 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.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities 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 of 1933 may be permitted to directors, officers and controlling persons of
Salick Health Care, Inc. pursuant to the foregoing provisions, or otherwise,
Salick Health Care, Inc. has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(e) To respond to requests for information that is incorporated by reference
into the 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) 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.
Zeneca PLC hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form F-
3, and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the
II-5
<PAGE>
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by (S) 210.3-19 of this chapter at the start of any delayed offering
or throughout a continuous offering. Financial statements and information
otherwise required by Section 10(a)(3) of the Act need not be furnished,
provided that the registrant includes in the prospectus, by means of a post-
effective amendment, financial statements required pursuant to this paragraph
(a)(4) and other information necessary to ensure that all other information in
the prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, with respect to registration
statements on Form F-3, a post-effective amendment need not be filed to include
financial statements and information required by Section 10(a)(3) of the Act or
(S) 210.3-19 of this chapter if such financial statements and information are
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the Form F-3.
(b) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) (1) 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.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(d) To respond to requests for information that is incorporated by reference
into the prospectus within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally prompt
means; and to arrange or provide for a facility in the U.S. for the purpose of
responding to such requests. The above undertaking includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(e) 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.
II-6
<PAGE>
(f) Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of Zeneca
PLC pursuant to the foregoing provisions, or otherwise, Zeneca PLC has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-7
<PAGE>
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 Los Angeles, State of
California, on March 10, 1995.
SALICK HEALTH CARE, INC.
/s/ Bernard Salick
By___________________________________
Bernard Salick, M.D.,
Chairman of the Board, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURES TITLE DATE
/s/ Bernard Salick Chairman of the March 10, 1995
- ------------------------------------- Board, Chief
Bernard Salick, M.D. Executive Officer,
President and
Director (Principal
Executive Officer)
/s/ Leslie F. Bell Executive Vice March 10, 1995
- ------------------------------------- President, Chief
Leslie F. Bell Financial Officer,
Secretary and
Director (Principal
Financial Officer)
/s/ Barbara Bromley-Williams Senior Vice March 10, 1995
- ------------------------------------- President--
Barbara Bromley-Williams Professional
Services and
Director
/s/ Michael T. Fiore Executive Vice March 10, 1995
- ------------------------------------- President, Chief
Michael T. Fiore Operating Officer
and Director
/s/ Sheldon S. King Executive Vice March 10, 1995
- ------------------------------------- President and
Sheldon S. King Director
/s/ Thomas Mintz Director March 10, 1995
- -------------------------------------
Thomas Mintz, M.D.
Director
- -------------------------------------
Paul G. Rogers
Director
- -------------------------------------
Regina E. Herzlinger
/s/ Blair L. Hundahl Vice President- March 10, 1995
- ------------------------------------- Finance (Principal
Blair L. Hundahl Accounting Officer)
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in London, England on the
10th day of March, 1995.
ZENECA GROUP PLC
/s/ J.D.F. Barnes
By:__________________________________
Name: J. David F. Barnes
Title: Chief Executive
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Glenn M. Engelmann
and William C. Lucas and each of them severally, acting alone and without the
other, his true and lawful attorney-in-fact with authority to execute in the
name of each such person, and to file with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
any and all amendments (including without limitation post-effective amendments)
to this Registration Statement necessary or advisable to enable the
Registration Statement to comply with the Securities Act of 1933, as amended,
and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such other changes in
the Registration Statement as the aforesaid attorney-in-fact executing the same
deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chairman
- -------------------------------------
Sir Denys H. Henderson
/s/ J.D.F. Barnes Chief Executive and March 10, 1995
- ------------------------------------- Director (Principal
J. David F. Barnes Executive Officer)
/s/ John C. Mayo Finance Director March 10, 1995
- ------------------------------------- (Principal Financial
John C. Mayo and Accounting
Officer)
/s/ Dr. Peter Doyle Director March 10, 1995
- -------------------------------------
Dr. Peter Doyle
/s/ Anthony T.G. Rodgers Director March 10, 1995
- -------------------------------------
Anthony T.G. Rodgers
II-9
<PAGE>
SIGNATURE TITLE DATE
/s/ Alan I.H. Pink Director March 10, 1995
- -------------------------------------
Alan I.H. Pink
Director
- -------------------------------------
Peter L. Bonfield
Director
- -------------------------------------
Lord Henry Chilver
/s/ Sir Richard Greenbury Director March 10, 1995
- -------------------------------------
Sir Richard Greenbury
Director
- -------------------------------------
Gillian M. Lewis
/s/ Sir M. Sydney Lipworth Director March 10, 1995
- -------------------------------------
Sir M. Sydney Lipworth
Director
- -------------------------------------
Sir C. Jeremy Morse
Director
- -------------------------------------
Thomas H. Wyman
Authorized Representative
/s/ Glenn M. Engelmann
- -------------------------------------
Glenn M. Engelmann, as the duly
authorized representative of Zeneca
Group PLC in the United States
II-10
<PAGE>
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO
BALANCE AT COSTS AND BALANCE AT
JANUARY 1 EXPENSES OTHER ACCOUNTS DEDUCTIONS DECEMBER 31
---------- ---------- -------------- ---------- -----------
((Pounds) MILLION)
<S> <C> <C> <C> <C> <C>
1991
Allowance for doubtful
accounts............... 10 8 1 (3) 16
Allowance for losses
(deducted from
investments)........... -- 2 -- -- 2
------- ------- ------- ------- -------
Total................... 10 10 1 (3) 18
======= ======= ======= ======= =======
1992
Allowance for doubtful
accounts............... 16 6 21 (5) 38
Allowance for losses
(deducted from invest-
ments)................. 2 1 -- -- 3
------- ------- ------- ------- -------
Total................... 18 7 21 (5) 41
======= ======= ======= ======= =======
1993
Allowance for doubtful
accounts............... 38 11 -- (11) 38
Allowance for losses
(deducted from invest-
ments)................. 3 1 -- -- 4
------- ------- ------- ------- -------
Total................... 41 12 -- (11) 42
======= ======= ======= ======= =======
</TABLE>
II-11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Copy of Agreement and Plan of Merger, as amended, dated as
of December 22, 1994, by and among Salick Health Care, Inc,
Zeneca Limited and Atkemix Thirty-nine Inc. (attached as
Annex A to the Proxy Statement/Prospectus forming a part of
this Registration Statement).
2.2 Assignment Agreement, dated January 26, 1995, among Zeneca
Limited and Zeneca PLC.
2.3 Copy of Agreement and Plan of Merger between Salick Health
Care, Inc., a California corporation, and Salick Health
Care, Inc., a Delaware corporation. Incorporated by
reference to Exhibit 1 of the Registration Statement on Form
8-B of Salick Health Care, Inc. dated August 28, 1991.
3.1 Certificate of Incorporation of Salick Health Care, Inc. in
the form to be effective on the effective date of the Merger
(attached as Annex B to the Proxy Statement/
Prospectus forming a part of this Registration Statement on
Form S-4 of Salick Health Care, Inc.).
3.2 By-Laws of Salick Health Care, Inc. in the form to be
effective on the effective date of the Merger (attached as
Annex C to the Proxy Statement/Prospectus forming a part of
this Registration Statement on Form S-4 of Salick Health
Care, Inc.).
4.1 Business Loan Agreement of Salick Health Care, Inc. with
Bank of America NT&SA dated January 1, 1993. Incorporated by
reference to Exhibit 4(f) of the Form 10-K of Salick Health
Care, Inc. for the year ended August 31, 1993.
4.2 Specimen form of certificate of Common Stock of Salick
Health Care, Inc. Incorporated by reference to Exhibit 4(g)
of the Registration Statement on Form 8-B of Salick Health
Care, Inc. dated August 28, 1991.
4.3 Specimen form of certificate of Callable Puttable Common
Stock of Salick Health Care, Inc.
5.1 Opinion of Sanders, Barnet, Goldman, Simons & Mosk, A
Professional Corporation, on behalf of Salick Health Care,
Inc.
5.2 Opinion of the Solicitor of Zeneca PLC as to the validity of
the contingent debt obligations of Zeneca PLC.
5.3 Opinion of Davis Polk & Wardwell, United States counsel for
Zeneca PLC, as to the validity of the contingent debt
obligations of Zeneca PLC.
8.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson, special
counsel for Salick Health Care, Inc.
12.1 Computation of Ratio of Earnings to Fixed Charges under UK
GAAP for Zeneca PLC.
12.2 Computation of Ratio of Earnings to Fixed Charges under US
GAAP for Zeneca PLC.
23.1 Consent of Sanders, Barnet, Goldman, Simons & Mosk, A
Professional Corporation (included in Exhibit 5.1).
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 8.1).
23.3 Consent of Independent Accountants for Salick Health Care,
Inc.
23.4 Consent of the Solicitor of Zeneca PLC (included in Exhibit
5.2).
23.5 Consent of Davis Polk & Wardwell (included in Exhibit 5.3).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.6 Consent of KPMG, independent chartered accountants
to Zeneca PLC.
23.7 Consent of Goldman, Sachs & Co.
23.8 Consent of Lazard Freres & Co.
23.9 Consent of Robert C. Black to be named as a
director
23.10 Consent of Dr. Michael G. Carter to be named as a
director
23.11 Consent of John G. Goddard to be named as a
director
23.12 Consent of Dr. Thomas F.W. McKillop to be named as
a director
23.13 Consent of Dr. Clifford Richard Guy to be named as
a director
24 Powers of Attorney with respect to Zeneca PLC
signatories (included on the signature pages).
</TABLE>
<PAGE>
EXHIBIT 2.2
Dated 26th January 1995
ZENECA LIMITED
- and -
ZENECA GROUP PLC
--------------------
Assignment Agreement
--------------------
SFG/1w : 25.1.95
Agreements: AAS
<PAGE>
This AGREEMENT is dated the twenty-sixth day of January, 1995, between ZENECA
Limited, an English company (the "Assignor") and ZENECA Group PLC, and English
public limited company (the "Assignee").
WHEREAS, pursuant to Section 1.10 of the Agreement and Plan of Merger (the
"Merger Agreement") dated as of 22 December 1994, among Salick Health Care,
Inc., the Assignor and Atkemix Thirty-nine Inc., the Assignee can assume
obligations of the Assignor under Section 1.10 of the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and mutual agreements
contained herein, the parties hereto agree as follows:
1. Definitions
-----------
All capitalized terms used but not defined herein shall have the respective
meanings set forth in the Merger Agreement.
2. Assignment and Assumption
-------------------------
The Assignee hereby assumes all of the obligations of the Assignor under
Section 1.10 of the Merger Agreement
<PAGE>
-2-
with respect to the put rights of the holders of the Special Common Stock
and agrees to make all payments to the Company or the holders of the
Special Common Stock, as the case may be, payable in respect of such put
rights and the Assignor hereby assigns all such obligations. All other
rights and obligations pursuant to the Merger Agreement shall remain vested
in the Assignor unamended by anything contained herein.
3. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to the principles of
conflicts of laws of such state.
4. Counterparts, Effectiveness
---------------------------
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become effective
when signed by each party hereto.
<PAGE>
-3-
5. Successors and Assigns
----------------------
The provision of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Neither this Agreement nor any provision hereof is intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
For and on behalf of
ZENECA GROUP PLC
/s/ GRAEME H.R. MUSKER
Name: GRAEME H. R. MUSKER
Title: Company Secretary
<PAGE>
-4-
For and on behalf of
ZENECA LIMITED
/s/ JANE JUNIPER
Name: Jane Juniper
Title: Authorized Signatory
<PAGE>
EXHIBIT 4.3
NUMBER SHARES
LOGO OF
SALICK HEALTH CARE, INC.
CALLABLE PUTTABLE CALLABLE PUTTABLE
COMMON STOCK COMMON STOCK
SALICK HEALTH CARE, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
CUSIP 794690 20 6
SEE REVERSE FOR CERTAIN DEFINITIONS
This is to Certify that
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF CALLABLE PUTTABLE COMMON STOCK,
PAR VALUE $.001, OF
SALICK HEALTH CARE, INC.
transferable on the books of the Corporation by the holder hereof, in person or
by duly authorized attorney, upon surrender of this Certificate duly endorsed.
This Certificate is not valid until countersigned by the Transfer Agent and
Registrar.
IN WITNESS WHEREOF the Corporation has caused this Certificate to be signed
in facsimile by its duly authorized officers and a facsimile of its corporate
seal.
Dated:
Countersigned and Registered:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(JERSEY CITY, NEW JERSEY)
Transfer Agent and Registrar
BY
AUTHORIZED SIGNATURE SECRETARY
SALICK HEALTH CARE, INC.
CORPORATE
SEAL
JULY 25,
1991
DELAWARE
CHAIRMAN OF THE BOARD
<PAGE>
SALICK HEALTH CARE, INC.
CALLABLE PUTTABLE COMMON STOCK
As set forth in the corporation's Certificate of Incorporation, subject to
certain exceptions and limitations, when voting separately as a class, holders
of certain shares of the corporation's Callable Puttable Common Stock are
entitled to ten votes per share until there is a change in the beneficial
ownership thereof and, upon such change in beneficial ownership, holders of such
shares will be entitled to only one vote per share. The corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional, or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
COM PROP - as common property
UNIF GIFT MIN ACT - ______________________ Custodian _____________________
(Cust) (Minor)
under Uniform Gifts to Minors
Act _________________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value received ________________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
________________________________________________________________________________
(NAME AND ADDRESS OF ASSIGNEE SHOULD BE PRINTED OR TYPEWRITTEN)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Callable Puttable Common Stock represented by the within Certificate and
do hereby irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated:_____________________________________
-----------------------------------------
NOTICE: The signature to this assignment
must correspond with the name(s)
as written upon the face of the
certificate in every
particular, without alteration
or enlargement, or any change
whatsoever.
<PAGE>
EXHIBIT 5.1
March 10, 1995
Salick Health Care, Inc.
8201 Beverly Boulevard
Los Angeles, California 90048
Gentlemen:
We have acted as counsel for Salick Health Care, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of 5,714,156 shares of the
Callable Puttable Common Stock, $.001 par value per share, of the Company (the
"Special Common Stock"), which includes shares of Special Common Stock issuable
upon exercise of options to purchase shares thereof, and the registration of
such options, which shares and options are issuable in exchange for shares of
the Company's Common Stock, $.001 par value per share (the "Common Stock"), and
options to purchase shares of the Common Stock, pursuant to and in accordance
with the terms of an Agreement and Plan of Merger, dated as of December 22,
1994, as amended, among the Company, Zeneca Limited, an English company, and
Atkemix Thirty-nine Inc., a Delaware corporation.
We have examined the proceedings taken by the Company in connection with
the issuance of such shares and options and have been informed of and have
verified additional proceedings proposed to be taken with respect thereto. Based
on the foregoing, it is our opinion that such shares of Special Common Stock
will, upon the issuance thereof in the manner referred to in the Registration
Statement on Form S-4, be legally and validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement on Form S-4 and consent to the use of our name
under the heading "LEGAL MATTERS"
<PAGE>
Salick Health Care, Inc.
March 10, 1995
Page 2
in the Proxy Statement/Prospectus constituting part of said Registration
Statement.
Respectfully submitted,
SANDERS, BARNET, GOLDMAN,
SIMONS & MOSK,
A Professional Corporation
By: /s/ Irwin G. Barnet
--------------------------------
Irwin G. Barnet
IGB/JA
<PAGE>
EXHIBIT 5.2
[LETTERHEAD OF ZENECA]
Your ref Our ref Direct line Tel ext. Date
SFG(GM)/TR/1931 071 304 5103 5103 March 13, 1995
Dear Sirs:
Reference is made to the Registration Statement on Form F-4 (the "Registration
Statement"), filed with the United States Securities and Exchange Commission by
ZENECA Group PLC, an English Company ("ZENECA"), for the purpose of registering
under the United States Securities Act of 1993, as amended (the "Act"), ZENECA's
contingent put obligations described below (the "Contingent Obligations"). The
Contingent Obligations arise pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") dated as of December 22, 1994 among Salick Health Care,
Inc., Zeneca Limited and Atkemix Thirty-nine Inc. and the Assignment Agreement
dated January 26, 1995 between Zeneca Limited and ZENECA.
As solicitor of ZENECA, I have considered such questions of English law and have
examined such documents as I have deemed necessary or appropriate for the
purpose of this opinion.
Based on the foregoing, and assuming for the purposes of this opinion all
necessary compliance with the Act and all other applicable laws of the United
States of America and the several States thereof, it is my opinion that:
1. ZENECA was duly incorporated on 17 June 1992 and at the date hereof
continues as a duly incorporated company under the laws of England.
2. At the Effective Time (as defined in the Merger Agreement) the Contingent
Obligations will constitute valid and binding obligations of ZENECA.
Cont'd/...
<PAGE>
-2-
I express no opinion with respect to the laws of any jurisdiction other than
England. Insofar as this opinion relates to matters of the federal laws of the
United States or the State of New York, I have relied upon the opinion of Davis
Polk & Wardwell, United States Counsel for ZENECA, of even date herewith and
addressed to you. I hereby consent to the filing of this opinion as an exhibit
to the Registration Statement, and to the references to me under the caption
"Legal Matters" contained in the Registration Statement.
Yours faithfully
/s/ G.H.R. MUSKER
G.H.R. Musker
Secretary & Solicitor
<PAGE>
EXHIBIT 5.3
March 13, 1995
Zeneca Group PLC
15 Stanhope Gate
London W1Y 6LN
England
Dear Sirs:
We are acting as special U.S. counsel to Zeneca Group PLC ("Zeneca") in
connection with the Registration Statement of Form F-4 (the "Registration
Statement") filed with the United States Securities and Exchange Commission by
Zeneca for the purpose of registering under the United States Securities Act of
1933 (the "Act") Zeneca's contingent put obligations described below (the
"Contingent Obligations"). The Contingent Obligations arise pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") dated as of December 22,
1994 among Salick Health Care, Inc., Zeneca Limited and Atkemix Thirty-Nine Inc.
and the Assignment Agreement dated January 26, 1995 between Zeneca Limited and
Zeneca. We have examined such matters of fact and law as we have deemed
necessary or advisable for the purpose of this opinion.
Based on the foregoing, and assuming due authorization by all necessary
action by Zeneca under applicable English law, we are of the opinion that upon
consummation of the Merger (as defined in the Merger Agreement) the Contingent
Obligations will constitute valid and binding obligations of Zeneca.
We are members of the Bar of the State of New York, and we express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York and the federal laws of the United States. In expressing our opinion
herein, we have, without independent investigation, relied as to all matters of
English law upon the opinion of Graeme H.R. Musker, Group Solicitor of Zeneca,
which has been filed as an exhibit to the
<PAGE>
Zeneca Group PLC 2 March 13, 1995
Registration Statement. Our opinion is, insofar as such laws are concerned,
subject to the assumptions, qualifications and exceptions contained in such
opinion of Graeme H.R. Musker.
We hereby consent to the use of our name under the Caption "Legal Matters"
in the Registration Statement and to the filing, as an exhibit to the
Registration Statement, of this opinion.
Very truly yours,
By: /s/ DAVIS POLK & WARDWELL
--------------------------
Davis Polk & Wardwell
<PAGE>
EXHIBIT 8.1
212-859-8177
(FAX: 212-859-8588)
March 10, 1995
Salick Health Care, Inc.
8201 Beverly Boulevard
Los Angeles, California 90048
Dear Sirs:
We are acting as special counsel to Salick Health Care, Inc., a Delaware
corporation (the "Company") in connection with the Proxy Statement/Prospectus
(the "Prospectus") included in the registration statement (the "Registration
Statement") on Form S-4 under the Securities Act of 1933, filed with the
Securities and Exchange Commission in March 1995 with respect to the Merger
among the Company, Zeneca Limited, an English company, and Atkemix Thirty-nine
Inc., a Delaware corporation. All capitalized terms used herein that are defined
in the Prospectus have the meanings assigned to such terms therein.
We hereby confirm that the portions of the section of the Prospectus
captioned "MERGER PROPOSAL-Certain Federal Income Tax Consequences" which refer
to Fried, Frank, Harris, Shriver & Jacobson, based on the assumptions and
subject to the qualifications and limitations set forth therein, reflect our
opinion regarding the material United States federal income tax consequences,
under currently applicable law, of the Merger as well as of the ownership of the
Special Common Stock, to the holders of Shares who are United States citizens or
<PAGE>
Salick Health Care, Inc. -2- March 10, 1995
resident individuals and who hold such Shares as capital assets and will hold
the Special Common Stock as a capital asset.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendments thereto and to the reference to this
firm under the caption "MERGER PROPOSAL-Certain Federal Income Tax
Consequences." In giving such consent, we do not thereby admit that we are in
the category of such persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
The opinions expressed herein are solely for your benefit and may not be
relied upon in any manner or for any purpose except as specifically provided for
herein.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ PETER v.Z.COBB
--------------------------------------
Peter v.Z. Cobb
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
HALF
YEAR YEAR HALF
YEAR YEAR YEAR YEAR 1993 1993 YEAR
1989 1990 1991 1992 (Pounds) (Pounds) 1994
(Pounds) (Pounds) (Pounds) (Pounds) # # (Pounds)
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
UK GAAP
EARNINGS
Income from ordinary ac-
tivities before taxa-
tion................... 617 354 531 102 633 362 361
Adjustments to bring
associated undertakings
onto income received
basis.................. -1 -4 -2 -1 -2
Fixed Charges........... 329 281 300 271 183 105 45
--- --- --- --- --- --- ---
945 631 829 372 805 465 396
--- --- --- --- --- --- ---
FIXED CHARGES
Interest payable on long
term debt.............. 10 10 10 6 21 3 20
Interest payable on
short term borrowings
and other financing
costs.................. 28 23 31 25 30 13 20
Interest payable on
amounts due to the ICI
Group.................. 280 236 249 234 105 87 1
Interest elements of
operating lease
charges................ 11 12 10 6 7 2 4
--- --- --- --- --- --- ---
329 281 300 271 163 105 45
--- --- --- --- --- --- ---
Ratio................... 2.9 2.2 2.8 1.4 4.9 4.4 8.8
</TABLE>
- --------
# Restated for change in accounting policy. (UITF Abstract 6 "Accounting for
post-retirement benefits other than pensions" was adopted on January 1,
1994.)
<PAGE>
EXHIBIT 12.2
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
HALF HALF
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
1989 1990 1991 1992 1993 1993 1994
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)# (Pounds)# (Pounds)
-------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
US GAAP
EARNINGS
Income from ordinary
activities before
taxation: UK GAAP...... 617 354 531 102 633 362 351
Adjustments to conform
with US GAAP:
Pension expense....... -19 -11 -23 -9 -33 -25 -25
Post Retirement
Benefits............. -5 -3 1
Purchase accounting
adjustments (goodwill
and intangibles)..... -40 -53 -42 -70 -48 -15 -10
Disposal of over the
counter
pharmaceuticals
business in the US... -210 210 -8
Other................. -6 6 7 1
---- --- --- --- --- --- ---
Income from ordinary
activities before
taxation: US GAAP...... 348 500 460 29 554 311 318
Adjustment to bring
associated undertakings
onto income received
basis.................. -1 -4 -2 -1 -2
Fixed Charges........... 329 281 300 271 163 105 45
---- --- --- --- --- --- ---
676 777 758 299 717 414 363
---- --- --- --- --- --- ---
FIXED CHARGES
Interest payable on long
term debt.............. 10 10 10 6 21 3 20
Interest payable on
short term borrowings
and other financing
costs.................. 28 23 31 25 30 13 20
Interest payable on
amounts due to the ICI
Group.................. 280 236 249 234 105 87 1
Interest element of
operating lease
charges................ 11 12 10 6 7 2 4
---- --- --- --- --- --- ---
329 281 300 271 163 105 45
---- --- --- --- --- --- ---
Ratio................... 2.1 2.8 2.5 1.1 4.4 3.9 8.1
</TABLE>
# Restated for change in accounting policy. (UITF Abstract 6 "Accounting for
post-retirement benefits other than pensions" was adopted on January 1,
1994.)
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Salick Health
Care, Inc. of our report dated November 11, 1994 appearing on page 44 of the
Company's Annual Report on Form 10-K/A for the year ended August 31, 1994. We
also consent to the references to us under the heading "Experts" and "Selected
Financial Data" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected Financial Data".
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Los Angeles, California
March 10, 1995
<PAGE>
EXHIBIT 23.6
The Directors
ZENECA Group PLC
15 Stanhope Gate
LONDON
W1Y 6LN
March 13, 1995
- --------
Dear Sirs:
We consent to the use of our audit report dated 3 March 1994, on the
consolidated financial statements of ZENECA Group PLC as of 31 December 1993 and
1992 and for each of the three years in the period then ended, which is included
in the 31 December 1993 ZENECA Group PLC Annual Report and Accounts on Form 20-F
and incorporated by reference herein, and to the reference to our firm under the
heading of "Experts" in the registration statement.
Yours faithfully,
KPMG
Chartered Accountants
Registered Auditors
London, England
<PAGE>
EXHIBIT 23.7
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
March 10, 1995
Board of Directors
Salick Health Care, Inc.
8201 Beverly Boulevard
Los Angeles, CA 90048
Re: Registration Statement on Form S-4 of Salick Health Care, Inc. relating to
the Special Common Stock being registered in connection with the Merger
(as hereinafter referred to).
Members of the Board:
Reference is made to our opinion letter dated December 22, 1994 with respect to
the fairness to the holders of the outstanding shares of Common Stock, par value
$0.001 per share (the "Shares"), of Salick Health Care, Inc. (the "Company") of
the Merger Consideration (as defined below) to be received for Shares pursuant
to the Agreement and Plan of Merger (the "Agreement") dated as of December 22,
1994 among the Company, Zeneca Limited ("Zeneca"), and an indirect wholly-owned
subsidiary of Zeneca ("Merger Subsidiary"). The Agreement provides for the
merger of Merger Subsidiary with and into the Company, with the Company
surviving, and the conversion of each outstanding Share into the right to
receive one half share of the special common stock of the Company (the "Stock
Consideration") and $18.875 in cash (together with the Stock Consideration, the
"Merger Consideration").
The foregoing opinion letter is solely for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary--Opinions of Financial Advisors" and "Merger
Proposal--Opinions of the Company's Financial Advisors" and to the inclusion of
the foregoing opinion in the Proxy Statement included in the above mentioned
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
GOLDMAN, SACHS & CO.
<PAGE>
EXHIBIT 23.8
[LETTERHEAD OF LAZARD FRERES & CO]
March 10, 1995
Board of Directors
Salick Health Care, Inc.
8201 Beverly Boulevard
Los Angeles, California 90048
Re: Registration Statement on Form S-4 of Salick Health Care Inc. relating to
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the Special Common Stock being registered in connection with the Merger
-----------------------------------------------------------------------
(as hereinafter referred to)
----------------------------
Members of the Board:
Reference is made to our opinion letter dated December 22, 1994 with
respect to the proposed acquisition transaction pursuant to the Agreement and
Plan of Merger, dated as of December 22, 1994 (the "Agreement"), among Salick
Health Care, Inc. (the "Company"), Zeneca Limited, and an indirect wholly-owned
subsidiary of Zeneca Limited. The Agreement provides for the merger (the
"Merger") of such subsidiary with and into the Company, with the Company
surviving, and the conversion of each outstanding share of the Company's Common
Stock into the right to receive one-half share of the Company's special common
stock (the "Special Common Stock") and $18.875 in cash.
The foregoing opinion letter is solely for the information and assistance
of the Board of Directors of the Company in connection with its consideration of
the transaction contemplated therein and is not to be used, circulated, quoted
or otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent.
<PAGE>
Board of Directors
In that regard, we hereby consent (i) to the reference to the opinion of
our Firm under the captions "Summary--Opinions of Financial Advisors" and
"Merger Proposal--Opinions of the Company's Financial Advisors" and to the
inclusion of the foregoing opinion in the Proxy Statement included in the
above-mentioned Registration Statement and (ii) to the deletion of the
penultimate paragraph of our opinion from the copy of our opinion that is
included in such Proxy Statement. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
LAZARD FRERES & CO
<PAGE>
EXHIBIT 23.9
CONSENT
-------
March 7, 1995
I hereby consent to being named in the registration statement as a person
about to become a director of Salick Health Care, Inc.
Very truly yours,
/s/ Robert C. Black
-------------------------------
Robert C. Black
<PAGE>
EXHIBIT 23.10
March 9, 1995
I hereby consent to being named in the registration statement as a person
about to become a director of Salick Health Care, Inc.
Very truly yours,
/s/ Michael G. Carter
------------------------------
Dr. Michael G. Carter
<PAGE>
EXHIBIT 23.11
8 March 1995
I hereby consent to being named in the registration statement as a person
about to become a director of Salick Health Care, Inc.
Very truly yours,
/s/ John G. Goddard
--------------------------------
John G. Goddard
<PAGE>
EXHIBIT 23.12
March 9, 1995
I hereby consent to being named in the registration statement as a person
about to become a director of Salick Health Care, Inc.
Very truly yours,
/s/ Thomas F.W. McKillop
---------------------------------
Dr. Thomas F.W. McKillop
<PAGE>
EXHIBIT 23.13
March 10, 1995
I hereby consent to being named in the registration statement as a person
about to become a director of Salick Health Care, Inc.
Very truly yours,
/s/ Clifford Richard Guy
---------------------------------
Dr. Clifford Richard Guy
