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________________________________________________________________________________
________________________________________________________________________________
SCHEDULE 14A INFORMATION
PROXY STATEMENT/PROSPECTUS PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
CHECK THE APPROPRIATE BOX:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SS 240.14a-11(c) or SS 240.14a-12
------------------------
BIOCRAFT LABORATORIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
------------------------
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: COMMON
STOCK, PAR VALUE $.01 PER SHARE OF BIOCRAFT LABORATORIES, INC.; AMERICAN
DEPOSITARY SHARES OF TEVA PHARMACEUTICAL INDUSTRIES LIMITED ('TEVA').(1)
2) Aggregate number of securities to which transaction applies: 14,352,193
SHARES OF COMMON STOCK OF BIOCRAFT; 6,616,361 AMERICAN DEPOSITARY SHARES
OF TEVA
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $38.875 PER
AMERICAN DEPOSITARY SHARE OF TEVA(2)
4) Proposed maximum aggregate value of transaction: $257,211,034(3)
5) Total fee paid: $51,442.21
- ------------
(1) Each American Depositary Share ('ADS') of Teva represents 10 Ordinary
Shares, par value NIS 0.01 each, of Teva.
(2) Based on the average of the high and low prices of Teva's ADSs reported on
March 13, 1996 and the maximum number of ADSs of Teva issuable of 6,616,361
ADSs.
(3) Estimated solely for purposes of calculating the filing fee.
------------------------
[x] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing:
1) Amount Previously Paid: .............
2) Form, Schedule or Registration Statement No.: .............
3) Filing Party: .............
4) Date Filed: .............
________________________________________________________________________________
________________________________________________________________________________
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BIOCRAFT LABORATORIES, INC.
18-01 RIVER ROAD
FAIR LAWN, NEW JERSEY 07410
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Biocraft Laboratories, Inc., which will be held at 10:00 a.m. on Friday, May 31,
1996, at the Marriott at Glenpointe, 100 Frank Burr Blvd., Teaneck, New Jersey.
At the Special Meeting, holders of Biocraft Common Stock will be asked to
consider a proposal to approve and adopt an Agreement and Plan of Merger
providing for a merger in which Biocraft will become a wholly owned subsidiary
of Teva Pharmaceutical Industries Limited. Pursuant to the merger, each share of
Biocraft Common Stock will be converted into the right to receive 0.461 American
Depositary Shares ('ADSs') of Teva. Each ADS represents 10 Ordinary Shares of
Teva.
The proposed merger is described in the accompanying Proxy
Statement/Prospectus, the forepart of which includes a summary of the terms of
the merger and certain other information relating to the proposed transaction. I
urge you to review carefully the Proxy Statement/Prospectus and the Annexes
thereto.
THE BIOCRAFT BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF BIOCRAFT AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD
UNANIMOUSLY APPROVED THE AGREEMENT AND PLAN OF MERGER PROVIDING FOR THE MERGER
AND RECOMMENDS THAT THE HOLDERS OF BIOCRAFT COMMON STOCK VOTE IN FAVOR OF THE
AGREEMENT AND PLAN OF MERGER AT THE MEETING.
I hope you will attend the Special Meeting. However, whether or not you
plan to attend the meeting, please complete, sign and date the accompanying
proxy card promptly and return it in the enclosed prepaid envelope. If you are
present at the meeting you may, if you wish, withdraw your proxy and vote in
person.
HAROLD SNYDER
Chairman, Chief Executive Officer
and President
Fair Lawn, New Jersey
April 29, 1996
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BIOCRAFT LABORATORIES, INC.
18-01 RIVER ROAD
FAIR LAWN, NEW JERSEY 07410
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
MAY 31, 1996
------------------------
To the Stockholders of
Biocraft Laboratories, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the 'Special
Meeting') of Biocraft Laboratories, Inc., a Delaware corporation ('Biocraft'),
will be held on Friday, May 31, 1996, at the Marriott at Glenpointe, 100 Frank
Burr Blvd., Teaneck, New Jersey, commencing at 10:00 a.m., local time, for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger (the 'Merger Agreement') dated as of January
29, 1996, among Teva Pharmaceutical Industries Limited, a company organized
under the laws of the State of Israel ('Teva'), Genco Merger Corporation, a
Delaware corporation and a wholly owned subsidiary of Teva ('Merger Sub'),
and Biocraft, providing for the merger of Merger Sub with and into Biocraft
(the 'Merger'). Pursuant to the Merger, Biocraft will become a wholly owned
subsidiary of Teva, and each outstanding share of Common Stock, par value
$.01 per share, of Biocraft ('Biocraft Common Stock') will be converted
into the right to receive 0.461 American Depositary Shares of Teva ('Teva
ADSs'), each Teva ADS representing 10 Ordinary Shares, par value NIS 0.01
each, of Teva ('Teva Ordinary Shares'). A copy of the Merger Agreement is
attached as Annex I to the accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 22, 1996,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Special Meeting and any adjournment or postponement thereof.
The affirmative vote of holders of two-thirds (66 2/3%) of the outstanding
shares of Biocraft Common Stock is necessary to approve and adopt the Merger
Agreement providing for the Merger. The holders of approximately 60% of the
outstanding shares of Biocraft Common Stock have executed an irrevocable proxy
appointing Teva as agent to vote such shares in favor of the Merger Agreement
and the Merger. In accordance with the Delaware General Corporation Law, holders
of Biocraft Common Stock are not entitled to dissenters' appraisal rights in
connection with the Merger.
Whether or not you plan to attend the Special Meeting, please fill in,
sign, date and return the enclosed form of proxy card promptly. A return
envelope is enclosed for your convenience and requires no postage for mailing in
the United States.
HAROLD SNYDER
Chairman, Chief Executive Officer
and President
Fair Lawn, New Jersey
April 29, 1996
YOUR VOTE IS IMPORTANT
PLEASE DATE, SIGN AND COMPLETE THE ACCOMPANYING PROXY CARD
AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
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BIOCRAFT LABORATORIES, INC.
PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 31, 1996
------------------------
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
PROSPECTUS
FOR UP TO
6,616,361 AMERICAN DEPOSITARY SHARES
REPRESENTING 66,163,610 ORDINARY SHARES, PAR VALUE NIS 0.01 PER SHARE
This Proxy Statement/Prospectus relates to the proposed merger (the
'Merger') of Biocraft Laboratories, Inc., a Delaware corporation ('Biocraft'),
with Genco Merger Corporation, a Delaware corporation ('Merger Sub') and a
wholly owned subsidiary of Teva Pharmaceutical Industries Limited, a company
organized under the laws of the State of Israel ('Teva'), pursuant to an
Agreement and Plan of Merger dated as of January 29, 1996 (the 'Merger
Agreement'). As a result of the Merger, Biocraft will become a wholly owned
subsidiary of Teva. At the effective time of the Merger (the 'Effective Time'),
each outstanding share of Common Stock, par value $.01 per share, of Biocraft
('Biocraft Common Stock') will be converted into the right to receive 0.461
American Depositary Shares of Teva ('Teva ADSs'), each Teva ADS representing 10
Ordinary Shares, par value New Israeli Shekels ('NIS') 0.01 per share, of Teva
('Teva Ordinary Shares'). Biocraft is soliciting proxies from its stockholders
for use at the Special Meeting of Stockholders of Biocraft scheduled to be held
on Friday, May 31, 1996 (the 'Special Meeting') to consider the approval and
adoption of the Merger Agreement providing for the Merger. The Merger is
expected to be consummated immediately after approval of the Merger by the
stockholders of Biocraft.
This Proxy Statement/Prospectus constitutes both the proxy statement of
Biocraft relating to the solicitation of proxies by its Board of Directors for
use at the Special Meeting and the prospectus of Teva with respect to the Teva
Ordinary Shares represented by Teva ADSs to be issued in the Merger in exchange
for outstanding shares of Biocraft Common Stock. This Proxy Statement/Prospectus
and the enclosed forms of proxy are first being sent to stockholders of Biocraft
on or about May 2, 1996.
SEE 'RISK FACTORS' ON PAGE 16 FOR A DESCRIPTION OF CERTAIN FACTORS
CONCERNING TEVA AND ITS OPERATIONS FOLLOWING THE MERGER.
------------------------
THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE SECURITIES AUTHORITY OF THE STATE OF ISRAEL HAS EXEMPTED TEVA FROM THE
REQUIREMENT UNDER ISRAELI LAW TO OBTAIN A PERMIT TO PUBLISH THE PROSPECTUS
IN CONNECTION WITH THE OFFERING HEREUNDER. NOTHING IN THE EXEMPTION
GRANTED SHALL BE CONSTRUED AS AN EXPRESSION OF OPINION AS TO THE
QUALITY OF THE SECURITIES OFFERED HEREBY.
------------------------
A COPY OF THIS PROXY STATEMENT/PROSPECTUS WILL BE FILED WITH THE REGISTRAR OF
COMPANIES AND THE SECURITIES AUTHORITY OF THE STATE OF ISRAEL. ALL PERMITS,
APPROVALS AND LICENSES REQUIRED UNDER THE LAWS OF THE STATE OF ISRAEL
FOR THE OFFERING OF THE TEVA ORDINARY SHARES AND FOR THE PUBLICATION
OF THIS PROXY STATEMENT/PROSPECTUS HAVE BEEN OBTAINED.
------------------------
The date of this Proxy Statement/Prospectus is April 29, 1996.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS,
IN CONNECTION WITH THE SOLICITATION AND THE OFFERING MADE BY THIS PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES IN ANY
JURISDICTION IN WHICH SUCH SOLICITATION OR OFFERING MAY NOT LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF TEVA OR BIOCRAFT
SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------------
AVAILABLE INFORMATION
Biocraft is subject to the informational requirements of the Securities
Exchange Act of 1934 (the 'Exchange Act'), and Teva is subject to those
informational requirements of the Exchange Act that are applicable to foreign
private issuers. In accordance with the Exchange Act, Teva and Biocraft file
reports and other information with the Securities and Exchange Commission (the
'SEC'). Biocraft also files proxies with the SEC in accordance with the Exchange
Act. Teva is not subject to the SEC's proxy requirements. This filed material
can be inspected and copied at the public reference facilities maintained by the
SEC at Room 1024, 450 Fifth Street, N.W., Washington, DC 20549, and at the
following Regional Offices of the SEC: Chicago Regional Office (Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661) and New York
Regional Office (Seven World Trade Center, 13th Floor, New York, New York
10048). Copies of such material can be obtained by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, DC 20549, at
prescribed rates. In addition, such material for Teva can be inspected at the
offices of the National Association of Securities Dealers, Inc. (the 'NASD'),
1735 K Street, N.W., Washington, DC 20006. Such material for Biocraft can be
inspected at the offices of the New York Stock Exchange, Inc. (the 'NYSE'), 20
Broad Street, New York, New York 10005.
Teva has filed a Registration Statement on Form F-4 (the 'Registration
Statement') with the SEC under the Securities Act of 1933, as amended (the
'Securities Act') with respect to the Teva Ordinary Shares, represented by Teva
ADSs, to be issued upon consummation of the Merger. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto, certain portions of which have
been omitted as permitted by the rules and regulations of the SEC. Copies of the
Registration Statement (including such omitted portions) are available from the
SEC upon payment of prescribed rates. For further information, reference is made
to the Registration Statement and the exhibits filed therewith. Statements
contained in this Proxy Statement/Prospectus or in any document incorporated by
reference in this Proxy Statement/Prospectus relating to the contents of any
contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such reference.
Teva is currently exempt from the rules under the Exchange Act prescribing
the furnishing and content of proxy statements, and its officers, directors and
principal shareholders are exempt from the reporting and short-swing profit
recovery provisions contained in Section 16 of such Act. Teva is not required
under the Exchange Act to publish financial statements as frequently or as
promptly as are United States companies subject thereto. Teva will, however,
continue to furnish its shareholders with annual reports containing audited
financial statements and quarterly reports containing unaudited results of
operations as well as such other reports as may from time to time be authorized
by Teva's Board of Directors or be required under law.
2
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Teva prepares its consolidated financial statements in accordance with
accounting principles generally accepted in Israel ('Israel GAAP') and the
United States ('U.S. GAAP'). As applicable to Teva's financial statements, such
accounting principles are practically identical, except as described in Note 12
of Notes to Consolidated Financial Statements contained in Teva's Annual Report
on Form 20-F for the fiscal year ended December 31, 1995.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following Teva documents are incorporated by reference in this Proxy
Statement/Prospectus:
(a) Annual Report on Form 20-F for the year ended December 31, 1995
(File No. 0-16174); and
(b) Reports of Foreign Issuer on Form 6-K pursuant to Rules 13a-16 and
15d-16, filed with the SEC on January 4, 1996, January 11, 1996, January
18, 1996, January 30, 1996, March 4, 1996, March 5, 1996, March 15, 1996,
April 2, 1996, April 15, 1996, April 17, 1996 and April 19, 1996.
The following Biocraft documents are incorporated by reference in this
Proxy Statement/Prospectus:
(a) Annual Report on Form 10-K for the year ended March 31, 1995 (File
No. 1-8867), as amended by Form 10-K/A-1 filed with the SEC on April 29,
1996; and
(b) Quarterly Reports on Form 10-Q for the periods ended June 30,
1995, September 30, 1995 and December 31, 1995.
All reports and definitive proxy or information statements filed by Teva
and Biocraft pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
subsequent to the date of this Proxy Statement/Prospectus and prior to the date
of the Special Meeting shall be deemed to be incorporated by reference into this
Proxy Statement/Prospectus from the dates of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated in
this Proxy Statement/Prospectus shall be deemed to be modified or superseded for
purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
All information appearing in this Proxy Statement/Prospectus or in any document
incorporated herein by reference is not necessarily complete and is qualified in
its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated by reference herein and should
be read together with such information and documents.
All information contained in this Proxy Statement/Prospectus relating to
Teva or Merger Sub has been supplied by Teva, and all information relating to
Biocraft has been supplied by Biocraft.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS
(EXCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED UPON ORAL OR WRITTEN REQUEST. WITH
RESPECT TO TEVA'S DOCUMENTS, REQUESTS SHOULD BE DIRECTED TO 5 BASEL STREET, P.O.
BOX 3190, PETACH TIKVA 49131 ISRAEL, ATTN: UZI KARNIEL (TELEPHONE:
011-972-3-9267267). WITH RESPECT TO BIOCRAFT'S DOCUMENTS, REQUESTS SHOULD BE
DIRECTED TO 18-01 RIVER ROAD, FAIR LAWN, NEW JERSEY 07410, ATTN: ETHYL ANDERSEN
(TELEPHONE: (201) 703-0400). IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 24, 1996.
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TABLE OF CONTENTS
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SUMMARY.................................................................................................... 7
Special Meeting....................................................................................... 7
Votes Required........................................................................................ 7
The Merger............................................................................................ 7
Irrevocable Proxy and Termination Rights Agreement.................................................... 11
Regulatory Matters.................................................................................... 11
Certain Tax Consequences of the Merger................................................................ 11
Anticipated Accounting Treatment...................................................................... 12
Absence of Appraisal Rights........................................................................... 12
Market Price Data..................................................................................... 12
Certain Significant Considerations.................................................................... 12
Teva and Biocraft Selected Historical and Pro Forma Combined Financial Data........................... 13
Comparative Per ADS and Per Share Data................................................................ 15
RISK FACTORS............................................................................................... 16
Fixed Exchange Ratio.................................................................................. 16
Difficulty of Integration of Operations Following the Merger.......................................... 16
Regulatory Status of Copaxone'r'...................................................................... 16
Biocraft's History of Regulatory Problems............................................................. 16
Dependency on Product Development..................................................................... 17
Competition and Technological Change.................................................................. 17
Government Regulation................................................................................. 18
Product Liability..................................................................................... 18
Pharmaceutical Pricing and Health Care Reform......................................................... 18
Legal Proceedings..................................................................................... 19
Foreign Operations.................................................................................... 19
Risk of More Limited Information from Foreign Private Issuer.......................................... 19
Service and Enforcement of Legal Process.............................................................. 19
THE SPECIAL MEETING........................................................................................ 20
Special Meeting....................................................................................... 20
Record Date; Shares Entitled to Vote.................................................................. 21
Vote Required and Irrevocable Proxy................................................................... 21
Proxies; Proxy Solicitation........................................................................... 21
Miscellaneous......................................................................................... 22
THE MERGER................................................................................................. 22
Background of the Merger.............................................................................. 22
Recommendation of the Biocraft Board and Biocraft's Reasons for the Merger............................ 23
Certain Advantages and Disadvantages of the Merger to Biocraft and its Stockholders................... 24
Teva's Reasons for the Merger......................................................................... 24
Opinion of Financial Advisor.......................................................................... 25
Effective Time........................................................................................ 28
Exchange Ratio........................................................................................ 28
Exchange Agent; Exchange Procedures; Distributions with Respect to Unexchanged Shares; No Further
Ownership Rights in Biocraft Common Stock; No Fractional Teva ADSs................................... 28
Admission for Trading on NASDAQ National Market....................................................... 30
Cessation of NYSE Trading and Deregistration of Biocraft Common Stock After the Merger................ 30
Certain Significant Considerations.................................................................... 30
Certain Tax Consequences of the Merger................................................................ 30
Anticipated Accounting Treatment...................................................................... 31
Absence of Appraisal Rights........................................................................... 31
Irrevocable Proxy and Termination Rights Agreement.................................................... 31
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Interests of Certain Persons in the Merger............................................................ 32
Operations After the Merger........................................................................... 33
Effect on Dividend Reinvestment Plan.................................................................. 33
Severance Payments; Effect on Employee Benefit and Stock Option Plans; Indemnification................ 34
Regulatory Filings and Approvals...................................................................... 35
Resale of Teva ADSs................................................................................... 36
Right of the Biocraft Board to Withdraw Recommendation................................................ 36
DESCRIPTION OF TEVA........................................................................................ 37
DESCRIPTION OF BIOCRAFT.................................................................................... 37
COMPARATIVE STOCK PRICES AND DIVIDENDS..................................................................... 38
Teva ADSs............................................................................................. 38
Teva Ordinary Shares.................................................................................. 39
Dividends on Teva Ordinary Shares..................................................................... 39
Biocraft Common Stock................................................................................. 40
Dividends on Biocraft Common Stock.................................................................... 41
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS................................................ 42
TERMS OF THE MERGER AGREEMENT.............................................................................. 48
The Merger; Exchange and Conversion of Shares......................................................... 48
Exchange of Share Certificates........................................................................ 48
Treatment of Biocraft Stock Options................................................................... 49
Effective Time........................................................................................ 49
Termination Rights.................................................................................... 50
Certain Fees and Expenses............................................................................. 50
Conditions to the Merger.............................................................................. 51
Representations and Warranties........................................................................ 53
Indemnification; Officers' and Directors' Liability Insurance......................................... 53
Certain Covenants of Biocraft......................................................................... 53
Certain Covenants of Teva............................................................................. 54
No Solicitation of Other Offers....................................................................... 55
Amendments............................................................................................ 55
DESCRIPTION OF TEVA ORDINARY SHARES........................................................................ 56
DESCRIPTION OF AMERICAN DEPOSITARY SHARES.................................................................. 56
American Depositary Receipts.......................................................................... 56
Deposit and Withdrawal of Teva Ordinary Shares........................................................ 56
Dividends, Other Distributions and Rights............................................................. 57
Record Dates.......................................................................................... 59
Reports and Other Communications...................................................................... 59
Voting of the Underlying Teva Ordinary Shares......................................................... 59
Amendment and Termination of the Deposit Agreement.................................................... 60
Charges of Depositary................................................................................. 60
Liability of Holders for Taxes, Duties or Other Charges............................................... 61
Transfer of American Depositary Receipts.............................................................. 61
General............................................................................................... 61
COMPARISON OF STOCKHOLDER RIGHTS........................................................................... 62
Vote Required for Certain Actions..................................................................... 62
Appraisal Rights...................................................................................... 62
Stockholders' Meeting................................................................................. 63
Action by Written Consent of Stockholders............................................................. 63
Election of Directors; Classes of Directors; Cumulative Voting........................................ 63
Newly Created Directorships and Vacancies............................................................. 64
Removal of Directors.................................................................................. 64
Dividends............................................................................................. 65
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Treasury Shares....................................................................................... 65
Business Combinations................................................................................. 65
Limitation on Directors' Liability; Indemnification of Officers and Directors......................... 66
Loans to Directors and Officers....................................................................... 66
Special Meetings...................................................................................... 66
Warrants or Options................................................................................... 67
Stockholder Suits..................................................................................... 67
Registration of Shares in Name of Pledgee............................................................. 67
Inspection of Corporate Books and Records; Shareholder Lists.......................................... 67
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND OWNERS OF 5% OR MORE OF BIOCRAFT COMMON STOCK...... 68
EXPERTS.................................................................................................... 69
LEGAL MATTERS.............................................................................................. 69
ANNEX I -- Agreement and Plan of Merger
ANNEX II -- Opinion of Goldman, Sachs & Co.
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained elsewhere
in this Proxy Statement/Prospectus, in the attached Annexes and in the documents
incorporated herein by reference. Stockholders are urged to read carefully this
Proxy Statement/Prospectus and the attached Annexes in their entirety.
This Proxy Statement/Prospectus relates to the proposed merger (the
'Merger') of Biocraft Laboratories, Inc., a Delaware corporation ('Biocraft'),
with Genco Merger Corporation, a Delaware corporation ('Merger Sub') and a
wholly owned subsidiary of Teva Pharmaceutical Industries Limited, a company
organized under the laws of the State of Israel ('Teva'), pursuant to an
Agreement and Plan of Merger dated as of January 29, 1996 (the 'Merger
Agreement'). As a result of the Merger, Biocraft will become a wholly owned
subsidiary of Teva. At the effective time of the Merger (the 'Effective Time'),
each outstanding share of Common Stock, par value $.01 per share, of Biocraft
(the 'Biocraft Common Stock') will be converted into the right to receive 0.461
American Depositary Shares of Teva ('Teva ADSs'), each Teva ADS representing 10
Ordinary Shares, par value NIS 0.01 per share, of Teva ('Teva Ordinary Shares').
Teva ADSs are represented by American Depositary Receipts ('ADRs'). The exchange
ratio of 0.461 Teva ADSs for each share of Biocraft Common Stock, as set forth
in the Merger Agreement, is hereinafter referred to as the 'Exchange Ratio'.
SPECIAL MEETING
A Special Meeting of the stockholders of Biocraft will be held at 10:00
a.m., local time, on Friday, May 31, 1996 (the 'Special Meeting'), at the
Marriott at Glenpointe, 100 Frank Burr Blvd., Teaneck, New Jersey. Only holders
of record of Biocraft Common Stock at the close of business on Monday, April 22,
1996 (the 'Record Date'), will be entitled to notice of, and to vote at, the
Special Meeting. At the Special Meeting, holders of Biocraft Common Stock will
be asked to consider and vote upon the approval of the Merger Agreement, a copy
of which is attached as Annex I to this Proxy Statement/Prospectus, pursuant to
which Merger Sub will be merged with and into Biocraft. Biocraft will be the
surviving corporation in the Merger (the 'Surviving Corporation') and will
become a wholly owned subsidiary of Teva. Holders of Biocraft Common Stock will
also transact such other business as may properly come before the Special
Meeting.
VOTES REQUIRED
The affirmative vote of the holders of two-thirds (66 2/3%) of the
outstanding shares of Biocraft Common Stock is required for the approval of the
Merger Agreement. As an inducement for Teva to enter into the Merger Agreement,
Harold Snyder, Biocraft's current Chairman, Chief Executive Officer and
President, Beatrice Snyder, Biocraft's current Senior Vice President and
Secretary, and their children as trustees for certain trusts which Mr. and Mrs.
Snyder have established, holding in the aggregate approximately 60% of the
outstanding Biocraft Common Stock, have executed an Irrevocable Proxy and
Termination Rights Agreement (the 'Irrevocable Proxy') pursuant to which such
stockholders have, among other things, appointed Teva their lawful agent,
attorney and proxy to vote such shares of Biocraft Common Stock in favor of the
Merger Agreement and the Merger. See 'THE MERGER -- Irrevocable Proxy and
Termination Rights Agreement' and 'THE SPECIAL MEETING -- Vote Required and
Irrevocable Proxy'.
The approval of the shareholders of Teva is not required to effect the
Merger.
THE MERGER
The Parties. Teva develops, manufactures and markets branded, generic
(off-patent) and branded generic pharmaceutical products. Teva also manufactures
and sells bulk pharmaceutical chemicals, hospital supplies, veterinary products,
yeast and alcohol. Teva is the leading supplier of such products in Israel and
has manufacturing facilities in Israel, Europe and the United States. Over 60%
of its sales are generated outside of Israel. The principal executive offices of
Teva are located at 5 Basel Street, Petach Tikva 49131 Israel. The telephone
number is 011-972-3-9267267.
7
<PAGE>
<PAGE>
Merger Sub, a Delaware corporation, is a wholly owned subsidiary of Teva
formed solely for the purpose of effecting the Merger.
Biocraft develops, manufactures and markets generic drugs in the United
States. Its facilities are located in Northern New Jersey and in Missouri. The
principal executive offices of Biocraft are located at 18-01 River Road, Fair
Lawn, New Jersey 07410. The telephone number is (201) 703-0400.
Exchange Ratio. At the Effective Time, each outstanding share of Biocraft
Common Stock, other than treasury shares, will be converted into the right to
receive 0.461 Teva ADSs, each Teva ADS representing 10 Teva Ordinary Shares. No
fractional Teva ADSs will be issued in the Merger and the holders of shares of
Biocraft Common Stock will be entitled to a cash payment in lieu of any such
fractional Teva ADSs which would otherwise be issued in the Merger.
Recommendation of the Biocraft Board and Reasons for the Merger; Certain
Advantages and Disadvantages. THE BIOCRAFT BOARD HAS UNANIMOUSLY ADOPTED THE
MERGER AGREEMENT, DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF
BIOCRAFT AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE STOCKHOLDERS OF BIOCRAFT
VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT. In reaching its decision to adopt
the Merger Agreement and recommend the Merger, the Biocraft Board considered a
number of factors. See 'THE MERGER -- Background of the Merger' and
' -- Recommendation of the Biocraft Board and Biocraft's Reasons for the
Merger'. See also 'THE MERGER -- Certain Advantages and Disadvantages of the
Merger to Biocraft and its Stockholders' for a summary of certain actual and
potential advantages and disadvantages of the Merger.
Opinion of Financial Advisor. Goldman, Sachs & Co. ('Goldman Sachs')
delivered its oral opinion on January 28, 1996 to the Board of Directors of
Biocraft that the Exchange Ratio pursuant to the Merger is fair to the holders
of Biocraft Common Stock. Goldman Sachs confirmed its oral opinion by delivery
of its written opinion dated January 29, 1996. In addition, Goldman Sachs
subsequently confirmed its earlier opinion by delivery of its written opinion
dated as of the date hereof. The full text of the written opinion of Goldman
Sachs dated as of the date hereof, which sets forth assumptions made, matters
considered and limitations on the review undertaken in connection with the
opinion, is attached as Annex II to this Proxy Statement/Prospectus and is
incorporated herein by reference. HOLDERS OF BIOCRAFT COMMON STOCK ARE URGED TO,
AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. See 'THE MERGER -- Opinion of
Financial Advisor'.
Interests of Certain Persons in the Merger. As of the Record Date,
directors and executive officers of Biocraft and their affiliates owned (i)
9,104,884 shares of Biocraft Common Stock (for which they will receive the same
consideration as other Biocraft stockholders) and (ii) options to acquire
117,400 shares of Biocraft Common Stock, which will be treated in the Merger as
described below under 'THE MERGER -- Severance Payments; Effect on Employee
Benefit and Stock Option Plans'. In addition, Harold Snyder, Biocraft's current
Chairman, President and Chief Executive Officer, and Beatrice Snyder, Biocraft's
current Senior Vice President and Secretary, are expected to be parties to
employment agreements with the Surviving Corporation pursuant to which their
employment with the Surviving Corporation shall continue and their current
compensation and other benefits will continue to be provided to them following
the Effective Time. Pursuant to such employment agreements, Mr. Snyder will
serve as Senior Vice President and Mrs. Snyder will serve as Vice
President - Cost Accounting and Inventory and Secretary of the Surviving
Corporation. In addition, Mr. Snyder and Mrs. Snyder will be nominated at the
next annual meeting of Teva shareholders to serve on Teva's Board of Directors.
Mr. Snyder is also expected to be designated as a member of Teva's executive
committee. See 'THE MERGER -- Interests of Certain Persons in the Merger'. The
Merger Agreement also provides for the payment of certain severance benefits to
executive officers and employees of Biocraft. See 'THE MERGER -- Severance
Payments; Effect on Employee Benefit and Stock Option Plans;
Indemnification -- Severance Payments'.
Security Ownership of Certain Persons; Irrevocable Proxies. As of the
Record Date, there were 14,184,843 shares of Biocraft Common Stock outstanding,
of which 9,104,884 shares (approximately 64.2% of the outstanding shares of
Biocraft Common Stock) were beneficially owned by directors and executive
officers of Biocraft and their affiliates. See 'SECURITY OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND OWNERS OF 5% OR MORE OF BIOCRAFT COMMON
8
<PAGE>
<PAGE>
STOCK'. All such directors and executive officers and their affiliates have
indicated to Biocraft that they intend to vote or direct the vote of all such
shares in favor of the approval of the Merger Agreement. In addition, Harold and
Beatrice Snyder and their children as trustees for certain trusts which Mr. and
Mrs. Snyder have established, holding in the aggregate approximately 60% of the
outstanding shares of Biocraft Common Stock, have appointed Teva as irrevocable
proxy to vote their shares in favor of approval of the Merger Agreement and the
Merger.
Dividend Reinvestment Plan. Biocraft has amended, pursuant to the Merger
Agreement, the Stockholder Dividend Reinvestment and Stock Purchase Plan to
terminate the supplemental payment investment option offered thereunder. Teva
does not have a comparable plan; accordingly, no dividend reinvestment plan will
be available following the Merger to former holders of Biocraft Common Stock.
Stock Option Plans. Pursuant to the Merger Agreement, prior to the
Effective Time the Biocraft Board will terminate the Biocraft Incentive Stock
Option Plan and the 1987 Directors' Stock Option Plan and each holder of options
under such plans will, in accordance with the terms of his or her option
agreements, have the right to exercise, by written notice, all such options,
whether or not then exercisable by the terms of the applicable option agreement.
Options as to which no notice of exercise is received by Biocraft (other than
options held by executive officers or directors subject to Section 16 of the
Exchange Act) will be converted into the right to receive promptly after the
Effective Time, as to each share of Biocraft Common Stock covered thereby
(without regard to any then applicable restrictions on the exercise of such
options), the number of Teva ADSs determined by (i) multiplying the Exchange
Ratio by the fair market value of a Teva ADS on the Effective Date, (ii)
subtracting from the product of such multiplication the sum of the applicable
per share exercise price plus applicable per share withholding for taxes (which
will be appropriately remitted to the applicable tax authority on behalf of such
optionee) and (iii) dividing the amount obtained in clause (ii) by the fair
market value of a Teva ADS on the Effective Date. For such purpose, the fair
market value of a Teva ADS on the NASDAQ National Market shall mean the average
of the last sale prices of a Teva ADS on the NASDAQ National Market on each of
the ten trading days ending two trading days prior to the Effective Date. In
addition, prior to the Effective Time, but subject to the Merger, the Biocraft
Board will cause Biocraft's Restricted Stock Purchase Plan to be amended to (a)
provide that no further restricted stock grants be made after the Effective Time
and (b) provide that the terms and conditions of such Plan will apply to the
Teva Ordinary Shares and the Teva ADSs representing such Teva Ordinary Shares
issued upon the Merger to the holders of restricted stock under such Plan, and
such holders shall thereafter hold such Teva ADSs and Teva Ordinary Shares
subject to the terms and conditions of such Plan, including without limitation
any requirement for the legending of certificates evidencing such securities.
Conditions to the Merger. The obligations of Teva, Merger Sub and Biocraft
to consummate the Merger are subject to the satisfaction or waiver of various
conditions, including, without limitation, obtaining Biocraft stockholder
approval and admission for trading (subject to official notice of issuance) on
the NASDAQ National Market of the Teva ADSs representing Teva Ordinary Shares to
be issued in connection with the Merger. See 'TERMS OF THE MERGER
AGREEMENT -- Conditions to the Merger'.
No Solicitation. The Merger Agreement provides that Biocraft may not, nor
may it permit any of its subsidiaries to, nor may it authorize or permit any of
its officers or directors or any investment banker, attorney or other advisor or
representative retained by it or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Takeover
Proposal (as defined therein), or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal. However, to the extent required by the fiduciary obligations
of the Biocraft Board (as determined in good faith by the Biocraft Board after
reviewing the advice of outside counsel), Biocraft may, in response to an
unsolicited Takeover Proposal and subject to compliance with Biocraft's
responsibility to keep Teva informed in all material respects of the status and
details of any such Takeover Proposal and certain other conditions, (a) furnish
and discuss information with respect to Biocraft to any person pursuant to a
customary
9
<PAGE>
<PAGE>
confidentiality agreement (as determined by Biocraft's outside counsel) with
such person and (b) participate in negotiations and discussions regarding such
Takeover Proposal. See 'TERMS OF THE MERGER AGREEMENT -- No Solicitation of
Other Offers'.
Right of the Biocraft Board to Withdraw Recommendation. Under the Merger
Agreement, the Biocraft Board or any committee thereof may not (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Teva or Merger
Sub, the Biocraft Board's approval or recommendation of the Merger Agreement or
the Merger, (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, if the Biocraft Board receives a
Takeover Proposal that, in the exercise of its fiduciary obligations (as
determined in good faith by the Biocraft Board, after reviewing the advice of
outside counsel), it determines to be Superior Proposal, the Biocraft Board may
(a) withdraw or modify its approval or recommendation of the Merger Agreement or
the Merger, (b) approve or recommend any Superior Proposal (as defined in the
Merger Agreement), (c) enter into an agreement with respect to such Superior
Proposal or (d) terminate the Merger Agreement, in each case at any time after
the second business day following Teva's receipt of written notice advising Teva
that the Biocraft Board has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. In addition, if Biocraft proposes to enter
into an agreement with respect to any Takeover Proposal, the Merger Agreement
requires Biocraft, concurrently with entering into such an agreement, to pay to
Teva the fees and expenses described below under ' -- Certain Fees and
Expenses'. See 'THE MERGER -- Right of the Biocraft Board to Withdraw
Recommendation'.
Certain Fees and Expenses. The Merger Agreement requires Biocraft to pay
promptly to Teva a termination fee in the amount of $6 million, plus all
expenses described therein, if the Merger Agreement is terminated by Biocraft in
accordance with the provisions described above under 'Right of the Biocraft
Board to Withdraw Recommendation' or is terminated by Teva as a result of (i)
the withdrawal or modification by the Biocraft Board of its approval or
recommendation of the Merger to Biocraft's stockholders or its approval or
recommendation to Biocraft's stockholders of any Takeover Proposal, or its
resolution to do the foregoing, (ii) the occurrence of a Third Party Acquisition
(as defined therein), or (iii) a material breach of any covenant, representation
or warranty, of Biocraft in the Merger Agreement or the Special Meeting being
canceled or not being held by August 15, 1996 (except as a result of a judgment,
injunction, order or decree of any competent authority or events beyond the
reasonable control of Biocraft) and, within 12 months of such termination,
Biocraft enters into an agreement with certain persons with respect to a Third
Party Acquisition, or a Third Party Acquisition occurs with certain persons. The
Merger Agreement also requires Teva to pay promptly to Biocraft a termination
fee in the amount of $6 million, plus all expenses described therein, if the
Merger Agreement is terminated due to a material breach of a covenant,
representation or warranty of Teva in the Merger Agreement and, within 12 months
after such termination, Teva is acquired by merger, tender offer or otherwise,
or a person acquires 20% or more of Teva's total assets or outstanding Ordinary
Shares or Teva enters into an agreement with respect to the foregoing. Expenses
are also payable in certain other circumstances. See 'TERMS OF THE MERGER
AGREEMENT -- Certain Fees and Expenses'.
Termination. The Merger Agreement may be terminated, and the Merger
contemplated thereby may be abandoned, at any time prior to the Effective Time,
whether before or after approval by the stockholders of Biocraft of matters
presented in connection with the Merger, (i) by mutual written consent of Teva,
Merger Sub and Biocraft, (ii) by Teva if the required approval of the
stockholders of Biocraft is not obtained or the Special Meeting is canceled or
is otherwise not held prior to August 15, 1996 (except in certain
circumstances), or (iii) by either Teva or Biocraft if (a) the Merger shall not
have been consummated on or before August 31, 1996, (b) any law or regulation of
any competent authority makes the Merger illegal or prohibited or any final
judgment, injunction, order or decree prohibits the Merger or (c) if there is a
material breach of a covenant or a breach of a representation or warranty which
breach materially and adversely affects the value of the breaching party which
is not cured within the specified period, (iv) by Biocraft, under the
circumstances set forth above under 'Right of the
10
<PAGE>
<PAGE>
Biocraft Board to Withdraw Recommendation' or (v) by Teva if (a) the Biocraft
Board shall have withdrawn or modified in a manner adverse to Teva its approval
or recommendation of the Merger or the Merger Agreement, or approved or
recommended any Takeover Proposal, or resolved to take any of the foregoing
actions, or (b) a Third Party Acquisition shall have occurred. See 'TERMS OF THE
MERGER AGREEMENT -- Termination Rights'.
IRREVOCABLE PROXY AND TERMINATION RIGHTS AGREEMENT
As an inducement for Teva to enter into the Merger Agreement, Harold
Snyder, Biocraft's current Chairman, Chief Executive Officer and President,
Beatrice Snyder, Biocraft's current Senior Vice President and Secretary, and
their children as trustees for certain trusts which Mr. and Mrs. Snyder have
established, holding in the aggregate approximately 60% of the outstanding
Biocraft Common Stock, have executed the Irrevocable Proxy pursuant to which
such stockholders have appointed Teva their lawful agent, attorney and proxy to
vote such shares of Biocraft Common Stock in favor of the Merger Agreement and
the Merger. In addition, pursuant to the Irrevocable Proxy, if the Merger
Agreement is terminated in certain specified circumstances and a stockholder who
is a party to the Irrevocable Proxy sells or otherwise disposes of any of such
stockholder's Biocraft Common Stock pursuant to a Third Party Acquisition (as
defined in the Merger Agreement), then such stockholder is obligated to pay to
Teva such stockholder's Profit per Share (as defined therein) multiplied by the
number of shares of Biocraft Common Stock sold by such stockholder. See 'THE
MERGER -- Irrevocable Proxy and Termination Rights Agreement'.
REGULATORY MATTERS
Antitrust. The Merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the 'HSR
Act'), and the rules and regulations thereunder, which provide that certain
transactions may not be consummated until required information and material have
been furnished to the Antitrust Division of the Department of Justice (the
'Antitrust Division') and the Federal Trade Commission (the 'FTC') and certain
waiting periods have expired or been terminated. Biocraft and Teva filed the
required information and material with the Antitrust Division and the FTC on
March 1, 1996. Early termination of the statutory waiting period under the HSR
Act was granted on March 28, 1996. See 'THE MERGER -- Regulatory Filings and
Approvals -- Antitrust'.
Israeli Regulatory Approvals. The consummation of the Merger is conditioned
upon (i) there being in effect the consent of the Controller of Foreign Currency
of the Bank of Israel (the 'Controller of Foreign Currency') to the Merger, the
issuance of the Teva Ordinary Shares and certain of the transactions
contemplated in connection with the Merger, (ii) Teva having received the
required permit from the Israeli Securities Authority to publish a prospectus in
connection with the Merger or having obtained an exemption from such requirement
and (iii) consent in principle having been granted by the Tel Aviv Stock
Exchange ('TASE') to list the Teva Ordinary Shares to be issued in connection
with the Merger. Teva has obtained the consent of the Controller of Foreign
Currency to the Merger, the issuance of the Teva Ordinary Shares and the
transactions contemplated thereby. Teva has obtained from the Israeli Securities
Authority an exemption from the requirement to publish a prospectus in
connection with the Merger. Both the Listing and the Executive Committees of the
TASE have recommended to the TASE Board of Directors to consent in principle to
list the Teva Ordinary Shares to be issued pursuant to this Proxy
Statement/Prospectus. The TASE Board of Directors is scheduled to consider the
matter on May 2, 1996. See 'THE MERGER -- Regulatory Filings and
Approvals -- Israeli Regulatory Approvals'.
CERTAIN TAX CONSEQUENCES OF THE MERGER
The Merger is intended to qualify as a 'tax-free reorganization' for United
States Federal income tax purposes. Accordingly, no gain or loss will be
recognized for United States Federal income tax purposes by the Biocraft
stockholders as a result of the exchange of shares of Biocraft Common Stock for
Teva ADSs representing Teva Ordinary Shares in the Merger. However, cash
received by Biocraft stockholders in lieu of fractional Teva ADSs may give rise
to taxable gain or loss. In addition, any
11
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<PAGE>
Biocraft stockholder that is a United States citizen or resident or a domestic
corporation and which owns (directly, indirectly or constructively) five percent
or more of the Teva Ordinary Shares immediately following the Effective Time may
have to comply with certain requirements to avoid recognizing gain, if any, on
the exchange. Each stockholder of Biocraft is urged to consult his or her tax
advisor to determine the specific tax consequences of the Merger to such
stockholder.
The obligations of Teva and Biocraft to consummate the Merger are each
subject to the receipt of an opinion of their respective tax counsel to the
effect that the Merger will be a 'tax-free reorganization' for United States
Federal income tax purposes. For a further discussion of the tax consequences of
the Merger, see 'THE MERGER -- Certain Tax Consequences of the Merger'.
ANTICIPATED ACCOUNTING TREATMENT
Teva and Biocraft believe that the Merger will qualify as a
'pooling-of-interests' for accounting and financial reporting purposes. It is a
condition to the consummation of the Merger that Kesselman & Kesselman, the
independent auditors for Teva, and Ernst & Young LLP, the independent auditors
for Biocraft, issue their opinions that there is no fact or circumstance known
to them concerning Teva or Merger Sub, on the one hand, or Biocraft, on the
other hand, respectively, which would cause the Merger not to be recorded for
accounting purposes as a 'pooling-of-interests' transaction. See 'THE
MERGER -- Anticipated Accounting Treatment'.
ABSENCE OF APPRAISAL RIGHTS
Stockholders of Biocraft will not be entitled to appraisal rights under
Delaware law in connection with the Merger. See 'THE MERGER -- Absence of
Appraisal Rights'.
MARKET PRICE DATA
Teva ADSs representing Teva Ordinary Shares (symbol: TEVIY) are admitted
for trading on the NASDAQ National Market and Biocraft Common Stock (symbol:
BCL) is listed on the NYSE. Teva Ordinary Shares are listed for trading on the
Tel Aviv Stock Exchange.
The following table sets forth the high and low sales prices per Teva ADS
on the NASDAQ National Market and per share of Biocraft Common Stock on the NYSE
(on a historical and equivalent per share basis) on January 26, 1996, the last
trading day in the United States prior to public announcement of the signing of
the Merger Agreement:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Teva ADSs........................................................ $46.00 $45.25
Biocraft Common Stock
Historical.................................................. $13.63 $12.75
Equivalent share basis(1)................................... 21.21 20.86
</TABLE>
- ------------
(1) Equivalent share basis is determined by multiplying the applicable Teva ADS
price by 0.461 to reflect the terms of the Merger Agreement.
The last reported sales price of the Teva Ordinary Shares on the Tel Aviv
Stock Exchange on January 28, 1995, the last trading day on such exchange prior
to public announcement of the signing of the Merger Agreement, was $4.58. Each
Teva ADS represents 10 Teva Ordinary Shares. See 'COMPARATIVE STOCK PRICES AND
DIVIDENDS'.
CERTAIN SIGNIFICANT CONSIDERATIONS
In considering whether to approve and adopt the Merger Agreement providing
for the Merger, stockholders of Biocraft should carefully consider those factors
described under 'RISK FACTORS' as well as the fact that the Exchange Ratio is
fixed and will not be adjusted based on changes in the price of the Teva ADSs,
and the price of the Teva ADSs at the Effective Time may vary from the price as
of the date of this Proxy Statement/Prospectus or the date on which stockholders
of Biocraft vote on the Merger due to changes in the business, operations or
prospects of Teva, market assessments of the likelihood that the Merger will be
consummated and the timing thereof, general market and economic conditions, and
other factors.
12
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<PAGE>
TEVA AND BIOCRAFT
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following tables present selected historical financial data of Teva and
Biocraft and selected pro forma combined financial data, after giving effect to
the Merger under the 'pooling of interests' method of accounting as if the
Merger had been consummated at the beginning of the periods presented, and, with
respect to the pro forma statement of income for the year ended December 31,
1995, after giving effect to the acquisitions by Teva of Biogal Pharmaceutical
Works Ltd. and Industrie Chimiche Italiane S.p.A. under the 'purchase' method of
accounting, as if they had occurred as of January 1, 1995. Teva's and Biocraft's
historical financial data for each of the annual periods presented have been
derived from their respective audited consolidated financial statements
previously filed with the SEC. Biocraft's historical financial data for the nine
months ended December 31, 1995 and 1994 presented, have been derived from
Biocraft's unaudited financial statements previously filed with the SEC. All
such financial statements have been incorporated by reference herein. Biocraft's
unaudited interim financial information as of December 31, 1995 and for the
periods ended December 31, 1995 and 1994 includes all adjustments (consisting of
only normal recurring accruals) which are, in the opinion of management of
Biocraft, necessary for a fair presentation of the results of operations for
such interim periods. Operating results for the nine months ended December 31,
1995 are not necessarily indicative of the results that may be achieved for the
year ended March 31, 1996. Biocraft's historical financial data should be read
in conjunction with 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' and the consolidated financial statements and related
notes thereto incorporated by reference herein. The historical financial data
for Teva are presented for each of the five years in the period ended December
31, 1995. Biocraft's historical financial data are presented on the basis of
fiscal years ended March 31.
The selected pro forma combined financial data have been derived from, or
prepared on a basis consistent with, the unaudited pro forma combined financial
statements included in this Proxy Statement/Prospectus. Pro forma earnings per
Teva ADS are computed assuming that 0.461 Teva ADSs are issued in exchange for
each share of Biocraft Common Stock in the Merger. For purposes of the pro forma
information, Biocraft's financial data for all periods presented have been
recast to reflect the results of operations on a calendar year basis, prior to
combination of those results with the results of Teva. The selected pro forma
combined financial data should be read in conjunction with, and is qualified in
its entirety by reference to, the unaudited pro forma combined financial data
and the notes thereto. See 'UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS'. The following data are presented for illustrative purposes only and
are not necessarily indicative of the operating results or financial position
that would have occurred or that will occur after consummation of the Merger.
13
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<PAGE>
TEVA HISTORICAL
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(IN THOUSANDS US DOLLARS, EXCEPT PER ADS DATA)
<S> <C> <C> <C> <C> <C>
Operating Data:
Sales................................................. 667,677 587,711 501,975 396,336 320,983
Gross profit.......................................... 278,158 258,478 213,855 154,387 117,034
Write-off in accordance with General Health Fund debt
arrangement......................................... 4,745 -- -- -- --
Operating income...................................... 110,413 106,730 87,981 54,729 35,477
Net income............................................ 79,792 71,646 57,475 31,734 23,282
Earnings per ADS
Primary.......................................... 1.46 1.32 1.07 0.61 0.49
Fully diluted.................................... 1.46 1.32 1.07 0.61 0.46
Weighted average number of ADSs outstanding:
Primary.......................................... 55,112 54,968 54,950 54,111 47,120
Fully diluted.................................... 55,112 54,968 54,950 54,111 51,109
Cash dividends per ADS................................ 0.26 0.26 0.21 0.11 0.09
Balance Sheet Data at End of Period:
Working capital....................................... 64,792 159,782 123,577 90,775 102,315
Total assets.......................................... 871,294 675,983 562,917 433,650 368,623
Long-term debt........................................ 40,763 80,838 50,914 12,769 23,348
Shareholders' equity.................................. 402,883 342,037 267,526 216,538 178,977
Book value per ADS.................................... 7.38 6.26 5.05 4.18 3.80
U.S. GAAP Data
Net income................................................. 81,461 70,095 53,848 36,414 23,282
Earnings per ADS:
Primary.......................................... 1.49 1.29 1.00 0.69 0.49
Fully diluted.................................... 1.49 1.29 1.00 0.69 0.46
</TABLE>
BIOCRAFT HISTORICAL
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
DECEMBER 31, FISCAL YEARS ENDED MARCH 31,
--------------------------- -----------------------------------------------
1995 1994 1995 1994 1993 1992 1991
------------ ------------ ------- ------- ------- ------- -------
(IN THOUSANDS US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Sales............................ 106,729 102,891 140,794 143,149 113,176 84,259 76,121
Gross profit..................... 14,360 17,534 25,085 33,509 24,005 9,434 17,952
Net income (loss)................ (4,726) (2,533) (2,395) 6,105 5,856 (6,740) 3,708
Earnings (loss) per share........ (0.33) (0.18) (0.17) 0.43 0.42 (0.48) 0.27
Cash dividends per share......... -- 0.10 0.10 0.10 0.10 0.10 0.10
Balance Sheet Data at End of Period:
Working capital.................. 55,145 55,452 60,177 63,256 60,642 60,032 62,919
Total assets..................... 183,275 170,879 172,945 168,073 170,147 164,252 157,378
Long-term debt................... 52,402 46,596 50,800 48,582 52,255 56,405 45,109
Shareholders' equity............. 89,751 93,701 93,981 97,292 91,867 86,320 93,286
Book value per share............. 6.33 6.61 6.63 6.88 6.52 6.15 6.68
</TABLE>
14
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<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
TEVA AND BIOCRAFT
<TABLE>
<CAPTION>
1995 1994 1993
--------- ------- -------
(IN THOUSANDS US DOLLARS,
EXCEPT PER ADS DATA)
<S> <C> <C> <C>
Operating Data:
Sales......................................................................... 894,454 724,857 648,727
Gross profit.................................................................. 316,080 281,848 252,511
Write-off in accordance with General Health Fund debt arrangement............. 4,745 -- --
Operating income.............................................................. 107,622 103,955 104,487
Net income.................................................................... 74,818 68,454 66,596
Earnings per ADS.............................................................. 1.22 1.12 1.10
Weighted Average Number of ADSs Outstanding................................... 61,678 61,534 61,516
Cash dividends per ADS*....................................................... 0.26 0.26 0.21
Balance Sheet Data at End of Year:
Working capital............................................................... 97,387 -- --
Total assets.................................................................. 1,040,637 -- --
Long-term debt................................................................ 93,165 -- --
Shareholders' equity.......................................................... 473,767 -- --
Book value per ADS............................................................ 7.75
U.S. GAAP Data:
Net income.................................................................... 75,286 69,176 67,745
Earnings per ADS.............................................................. 1.22 1.12 1.10
</TABLE>
- ------------
* Pro forma combined cash dividends per ADS reflect Teva cash dividends declared
for the years presented.
COMPARATIVE PER ADS AND PER SHARE DATA
The following table sets forth certain historical per ADS and per share
data of Teva and Biocraft and combined per ADS data on an unaudited pro forma
basis after giving effect to the Merger on a 'pooling of interests' basis
assuming that 0.461 Teva ADSs are issued in exchange for each share of Biocraft
Common Stock in the Merger. This data should be read in conjunction with the
selected historical financial data, the pro forma combined financial statements
and the separate historical financial statements of Teva and Biocraft and the
notes thereto, included in, or incorporated by reference into, this Proxy
Statement/Prospectus. The unaudited pro forma combined financial data are not
necessarily indicative of the operating results that would have been achieved
had the Merger been in effect as of the beginning of the periods presented and
should not necessarily be construed as representative of future operations.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------
1995 1994 1993
----- ---- ----
(US DOLLARS)
<S> <C> <C> <C>
Biocraft -- historical
Earnings (loss) per share............................................. (0.17) 0.43 0.42
Cash dividends per share.............................................. 0.10 0.10 0.10
Book value per share.................................................. 6.63 6.88 6.52
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
----- ---- ----
(US DOLLARS)
<S> <C> <C> <C>
Teva -- historical
Earnings per ADS...................................................... 1.46 1.32 1.07
Cash dividends per ADS................................................ 0.26 0.26 0.21
Book value per ADS.................................................... 7.38 6.26 5.05
Pro forma combined
Earnings per ADS...................................................... 1.22 1.12 1.10
Cash dividends per ADS*............................................... 0.26 0.26 0.21
Book value per ADS.................................................... 7.75 -- --
Biocraft pro forma equivalents
Earnings per share.................................................... 0.56 0.52 0.51
Cash dividends per share.............................................. 0.12 0.12 0.10
Book value per share.................................................. 3.57 -- --
</TABLE>
- ------------
* Pro forma combined cash dividends per ADS reflect Teva cash dividends declared
for the years presented.
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RISK FACTORS
In addition to the other information in this Proxy Statement/Prospectus,
the following factors should be considered carefully by the stockholders of
Biocraft in evaluating whether to approve and adopt the Merger Agreement
providing for the Merger. The Private Securities Litigation Reform Act of 1995
provides a 'safe harbor' for forward looking statements. Any forward looking
statements contained in this Proxy Statement/Prospectus, including, without
limitation, those relating to the combined operations of Teva and Biocraft after
the Merger, are subject to, among other things, such factors.
FIXED EXCHANGE RATIO
In considering whether to approve and adopt the Merger Agreement providing
for the Merger, stockholders of Biocraft should carefully consider that the
Exchange Ratio is fixed and will not be adjusted based on changes in the price
of the Teva ADSs, and the price of the Teva ADSs at the Effective Time may vary
from the price as of the date of this Proxy Statement/Prospectus or the date on
which stockholders of Biocraft vote on the Merger due to changes in the
business, operations or prospects of Teva, market assessments of the likelihood
that the Merger will be consummated and the timing thereof, general market and
economic conditions, and other factors.
DIFFICULTY OF INTEGRATION OF OPERATIONS FOLLOWING THE MERGER
The Teva Board and the Biocraft Board have each given careful consideration
to the Merger and believe it to be in the best interests of their respective
stockholders. However, the Merger involves the combination of two companies that
have operated independently. Accordingly, there can be no assurance that
Biocraft can be successfully integrated into Teva or that Teva and its
shareholders (including the stockholders of Biocraft who become shareholders of
Teva) will ultimately realize any benefits from the Merger. The success of the
combined company following the Merger will require the dedication of management
resources which may temporarily detract from attention to the day to day
business of Teva and Biocraft. There can be no assurance that there will not be
high costs associated with integrating the two companies, that such diversion of
management resources will not adversely affect revenues or that other material
adverse effects will not result from such activities.
REGULATORY STATUS OF COPAXONE'r'
During 1995, Teva filed applications for marketing approval of Copaxone'r'
(co-polymer-1), Teva's innovative product for the treatment of relapsing,
remitting multiple sclerosis, with the U.S. Food and Drug Administration
('FDA'), the United Kingdom's Medicines Control Agency (the 'MCA') and the
Israeli Ministry of Health. In addition, Teva has built facilities for the
production of Copaxone'r' which must also be approved by such regulatory
authorities. However, there can be no assurance that the FDA, the MCA, the
Israeli Ministry of Health or any other governmental agency will grant marketing
approval for this product or approval for these facilities or when such
approvals will be forthcoming. Failure to obtain, or delays in obtaining,
regulatory approval of this product or difficulties in the production of this
product on a commercial scale could adversely affect Teva. Teva is aware of
other products for the treatment of multiple sclerosis, one of which is already
on the market. As competitors enter this market, the resulting competition may
adversely affect the market for, and the price of, Copaxone'r'.
BIOCRAFT'S HISTORY OF REGULATORY PROBLEMS
In July 1994, Biocraft entered into a consent decree with the FDA to
resolve outstanding regulatory issues with respect to its dosage form
facilities. Among other things, the consent decree required Biocraft to suspend
shipments of certain products until Biocraft satisfied certain requirements.
Biocraft also had to obtain and submit to the FDA expert certifications of
procedures used in the manufacturing and testing of the remainder of its
products, scheduled periodically over an 18-month period. In November 1995, the
FDA completed its inspection of Biocraft's research and development laboratories
in connection with new product submissions and issued its findings on a Form
483. At the end of January 1996, Biocraft submitted the final group of expert
certifications in accordance with the consent decree. Although Biocraft believes
that it has responded adequately to the Form 483 and has
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satisfactorily completed all expert certifications, no assurances can be given
that the FDA will find such responses or certifications acceptable. Since
February 1996 Biocraft has received approvals from the FDA to manufacture four
new generic drugs including sucralfate, an antiulcer drug for which Biocraft
received the first generic approval. These approvals are the first such
approvals which Biocraft has received in over two and one half years. Biocraft
cannot predict the timing of its receipt of any additional new drug approvals as
a result of the FDA's continuing review of the Form 483 response, certifications
or other matters which they may choose to consider or subsequent inspections
that they may require. Were Biocraft's regulatory problems with the FDA to
continue or new ones to arise, or were Teva to experience significant regulatory
problems with the FDA, the results of operations of the combined companies
following the Merger would be materially and adversely affected.
DEPENDENCY ON PRODUCT DEVELOPMENT
The future results of operations of Teva and Biocraft will depend, to a
certain degree, upon their ability to successfully commercialize additional
generic and/or innovative branded pharmaceutical products. Innovative products
must be developed, tested and manufactured, as well as proven to be safe and
effective in clinical trials. Generic products must be proven to be the
bioequivalent of the branded counterpart, and all products must meet regulatory
standards and receive requisite regulatory approvals. The development and
commercialization process is both time consuming and costly. There can be no
assurance that any products presently under development, if and when fully
developed and tested, will perform in accordance with Teva's or Biocraft's
expectations, that necessary regulatory approvals will be obtained in a timely
manner, if at all, or that any of such products can be successfully and
profitably produced and marketed. Delays in any part of the process or the
inability of Teva or Biocraft to obtain regulatory approval of their products
could adversely affect the respective operating results of Teva and Biocraft and
the combined company following the Merger.
COMPETITION AND TECHNOLOGICAL CHANGE
In the United States, Teva and Biocraft experience substantial competition
in connection with the manufacture and sale of generic pharmaceuticals. Many
competitors, including divisions and subsidiaries of large branded
pharmaceutical companies that market off-patent drugs, have greater financial,
technical, clinical, marketing and other resources than Teva and Biocraft and,
therefore, are able to expend more than Teva and Biocraft in areas such as
research, marketing and product development. Although a company with greater
resources will not necessarily receive FDA approval for a particular off-patent
drug before its smaller competitors, relatively large research and development
expenditures enable a company to support many FDA applications simultaneously,
thereby improving the likelihood that it will be among the first to obtain
approval of at least some off-patent drugs. Selling prices of generic drugs
typically decline, sometimes dramatically, as additional companies receive
Abbreviated New Drug Applications ('ANDAs') approvals for a given product and
competition intensifies, including price competition from the branded product.
Teva's and Biocraft's profitability will thus depend, in part, on their ability
to maintain efficient production and to develop and introduce new products in a
timely manner.
In addition, competition in the United States generic pharmaceutical market
continues to intensify as the pharmaceutical industry adjusts to increased
pressures to contain health care costs. Brand name companies are increasingly
selling their products into the generic market directly by acquiring or forming
strategic alliances with generic pharmaceutical companies. No regulatory
approvals are required for a brand name manufacturer to sell directly or through
a third party to the generic market, nor do such manufacturers face any other
significant barriers to entry into such market. In addition, such companies
continually seek to find new ways to defeat generic competition, such as
developing patented controlled release products or developing and marketing as
over-the-counter products those branded products which are about to face generic
competition. The competitive environment will continue to affect both Teva's and
Biocraft's respective pharmaceutical operations. The markets in which Teva and
Biocraft operate are undergoing, and are expected to continue to undergo, rapid
and significant technological change, and Teva and Biocraft expect competition
to intensify as technological
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<PAGE>
advances in such fields are made. There can be no assurance that developments by
others will not render the products or technologies of Teva or Biocraft obsolete
or uncompetitive.
GOVERNMENT REGULATION
Teva is subject to extensive pharmaceutical industry regulation in Israel,
the United States, Hungary and other jurisdictions, and Biocraft is subject to
such regulation in the United States. Neither Teva nor Biocraft can predict the
extent to which it may be affected by legislative and other regulatory
developments concerning its products.
In Israel, the manufacture and sale of pharmaceutical products is regulated
in a manner substantially similar to that in the United States. Legal
requirements generally prohibit the handling, manufacture, marketing and
importation of any pharmaceutical unless it is properly registered in accordance
with applicable law. The registration file relating to any particular product
must contain medical data related to product efficacy and safety, including
results of clinical testing and references to medical publications as well as
detailed information regarding production methods and quality control. The
Ministry of Health is authorized to cancel the registration of a pharmaceutical
if found to be harmful or ineffective or manufactured and marketed other than in
accordance with the registration conditions.
In the United States, Teva's innovative products are subject to rigorous
preclinical and clinical testing for safety and efficacy as well as other
approval processes of New Drug Applications ('NDAs') by the FDA and similar
health authorities in other countries. The process of obtaining such approvals
is time consuming and costly. There can be no assurance that any innovative
products developed by Teva will be determined to be safe and efficacious in
clinical trials or meet other applicable regulatory standards to receive the
necessary approvals for manufacture and marketing.
Teva and Biocraft, as well as other generic drug manufacturers, are
dependent on obtaining timely approvals of ANDAs from the FDA before marketing
most of its products. Any manufacturer failing to comply with FDA requirements
may be unable to obtain approvals for the introduction of new products and, even
after approval, initial product shipments may be delayed. The FDA also has the
authority to revoke drug approvals previously granted and remove from the market
previously approved drug products containing ingredients no longer approved by
the FDA. Teva's and Biocraft's major facilities and products are periodically
inspected by the FDA, which has extensive enforcement powers over the activities
of pharmaceutical manufacturers, including the power to seize, force to recall
and prohibit the sale or import of noncomplying products, and halt operations of
and criminally prosecute noncomplying manufacturers. Any failure by Teva or
Biocraft to comply with applicable FDA policies and regulations could have a
material adverse effect on the operations of Teva or Biocraft.
PRODUCT LIABILITY
The businesses of Teva and Biocraft inherently expose them to potential
liability. From time to time, the pharmaceutical industry has experienced
difficulty in obtaining desired amounts of product liability insurance coverage.
Biocraft effectively self-insures its product liability coverage. If any product
liability claim not covered by insurance or exceeding the policy limits were
sustained against Teva, or if any material product liability claim were
sustained against Biocraft, it could have a material adverse effect on the
respective businesses and financial conditions of such companies.
PHARMACEUTICAL PRICING AND HEALTH CARE REFORM
Increasing expenditures for health care have been the subject of
considerable public attention in Israel, the United States and Western European
countries. Both private and governmental entities are seeking to find ways to
reduce or contain health care costs. In many countries in which Teva currently
operates, including Israel, pharmaceutical prices are subject to regulation. In
the United States, numerous proposals have been introduced or proposed in
Congress and in some state legislatures that would effect changes in the United
States health care system. Similar activities are taking place in Europe. Teva
and Biocraft cannot predict the nature of the measures that may be adopted or
their
18
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<PAGE>
impact on the respective results of operations of Teva and Biocraft and the
combined company following the Merger.
LEGAL PROCEEDINGS
On March 31, 1996, an indictment relating to tax issues was filed by the
Jerusalem district attorney's office against Promedico Ltd., a former subsidiary
of Teva ('Promedico'), as well as certain of its officers, including Mr. Eli
Hurvitz, the President and C.E.O. of Teva, who served during the period in which
Promedico was owned by Teva (1980 - 1986) as the chairman of Promedico. The
charges allege: failure to report commissions allegedly received by Promedico;
failure to register such commissions in Promedico's books; failure to pay taxes
which may be due on such commissions; and fraudulent actions regarding the
foregoing. The charges are attributed to Mr. Hurvitz by reason of his serving as
the chairman of the board of directors of Promedico between the years
1980 - 1986. Mr. Hurvitz denies any culpability in regard to this matter, and
the Board of Directors of Teva has expressed its fullest confidence and support
of his ability to continue managing Teva and that Mr. Hurvitz will be fully and
completely exonerated. While Teva is not a party to these proceedings, there can
be no assurance as to the outcome of these proceedings or any effect they may
have on the operations of Teva.
FOREIGN OPERATIONS
A significant portion of the operations of Teva are conducted outside of
the United States. Teva may, therefore, be directly affected by economic,
political and military conditions in the countries in which it is located, as
well as by currency exchange rate fluctuations and the exchange control
regulations of such countries. Teva's executive offices and the majority of its
manufacturing facilities are located in the State of Israel. Teva's Israeli
operations are dependent upon materials imported from outside of Israel. Teva
also exports significant amounts of products from Israel. Accordingly, the
operations of Teva could be materially adversely affected by acts of terrorism
or if major hostilities involving Israel should occur in the Middle East or
trade between Israel and its present trading partners should be curtailed.
RISK OF MORE LIMITED INFORMATION FROM FOREIGN PRIVATE ISSUER
Teva is subject to the informational requirements of the Exchange Act that
are applicable to foreign private issuers, which differ significantly from the
reporting requirements applicable to U.S. issuers such as Biocraft. After the
Merger, the former stockholders of Biocraft will only be entitled to receive as
shareholders of Teva those reports required of foreign private issuers. For
example, Teva is currently exempt from the rules under the Exchange Act
prescribing the furnishing and content of proxy statements, and its officers,
directors and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section 16 of such Act. Teva
is not required under the Exchange Act to publish financial statements as
frequently or as promptly as are United States companies subject thereto.
SERVICE AND ENFORCEMENT OF LEGAL PROCESS
Service of process upon Teva, its directors and the experts named herein,
most of whom reside outside the United States, may be difficult to obtain within
the United States. Furthermore, since most of Teva's assets are outside the
United States, any judgment obtained in the United States against Teva may not
be collectible within the United States. Teva has appointed Lemmon Company, 650
Cathill Road, Sellersville, Pennsylvania, as its agent to receive service of
process in any action against Teva in any federal court or court in the State of
New York arising out of the issuance of securities pursuant to this Proxy
Statement/Prospectus. In addition, Teva has submitted to the jurisdiction of any
state or federal court sitting in the State of New York with respect to any suit
arising out of, under or in connection with the Merger Agreement and has
appointed CT Corporation System in the City of New York as its agent to receive
process in any such suit.
Teva has been informed by its legal counsel in Israel, S. Horowitz & Co.,
that there is doubt as to the enforceability of civil liabilities under the
Securities Act or the Exchange Act in original actions
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instituted in Israel. However, subject to certain time limitations, an Israeli
court may declare a foreign civil judgment enforceable if it finds that (1) the
judgment was given in a state the courts of which were, according to its laws,
competent to give it, (2) the judgment is no longer appealable, (3) the
obligation imposed by the judgment is enforceable according to the rules
relating to the enforceability of judgments in Israel and its content is not
contrary to public policy and (4) the judgment is executory in the state in
which it was given. A foreign judgment will not be declared enforceable if it
was given in a state the laws of which do not provide for the enforcement of
judgments of Israeli courts (subject to exceptional cases) or if its enforcement
is likely to prejudice the sovereignty or security of Israel. A foreign judgment
will also not be enforceable if it is proven to the Israeli court that (a) the
judgment was obtained by fraud, (b) there was no due process, (c) the judgment
was given by a court not competent to give it according to the rules of private
international law in Israel, (d) the judgment is at variance with another
judgment given in the same matter between the same parties and still valid or
(e) at the time the action was brought in the foreign court a suit in the same
matter and between the same parties was pending before a court or tribunal in
Israel.
Under existing law, a foreign judgment payable in foreign currency may be
paid in Israeli currency at the rate of exchange on the date of payment, but the
judgment debtor may also make payment in foreign currency if the Israeli
exchange control regulations then in effect permit such foreign currency
payment. Pending collection, the amount of the judgment of an Israeli court
stated in Israeli currency will ordinarily be linked to the Israeli consumer
price index. For judgments recovered in Israeli currency, judgment creditors
must bear the risk that they will be unable to convert their award into foreign
currency that can be transferred out of Israel. Such judgment creditors must
also bear the risk of unfavorable exchange rates.
THE SPECIAL MEETING
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to Biocraft stockholders
in connection with the solicitation by the Biocraft Board of proxies for use at
the Special Meeting to be held on Friday, May 31, 1996, at 10:00 a.m., local
time, at the Marriott at Glenpointe, 100 Frank Burr Blvd., Teaneck, New Jersey.
At the Special Meeting, holders of Biocraft Common Stock will consider and
vote upon a proposal to approve the Merger Agreement. The Merger Agreement
provides that, upon the terms and subject to the conditions thereof, Merger Sub
will be merged with and into Biocraft and Biocraft will become a wholly owned
subsidiary of Teva. Each share of Biocraft Common Stock issued and outstanding
immediately prior to the Merger will be converted into the right to receive that
number of validly issued, fully paid and nonassessable Teva ADSs equal to the
Exchange Ratio.
No fractional Teva ADSs will be issued in the Merger. In lieu of any such
fractional Teva ADSs, each holder of Biocraft Common Stock who otherwise would
be entitled to receive a fractional Teva ADS pursuant to the Merger Agreement
will be paid an amount in cash, without interest, equal to such holder's
proportionate interest in the net proceeds from the sale by the Exchange Agent
(as defined below) on behalf of all such holders of the aggregate of the
fractions of Teva ADSs which would otherwise be issued.
THE BIOCRAFT BOARD HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT, DETERMINED
THAT THE MERGER IS IN THE BEST INTERESTS OF BIOCRAFT AND ITS STOCKHOLDERS, AND
RECOMMENDS THAT THE STOCKHOLDERS OF BIOCRAFT VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT. SEE 'THE MERGER -- BACKGROUND OF THE MERGER' AND ' -- RECOMMENDATION
OF THE BIOCRAFT BOARD AND BIOCRAFT'S REASONS FOR THE MERGER'.
The Teva Board of Directors has approved the Merger Agreement and the
issuance of Teva ADSs representing Teva Ordinary Shares in the Merger, and the
Board of Directors of Merger Sub, and Teva, as the sole stockholder of Merger
Sub, have respectively adopted and approved the Merger Agreement. Approval of
the Merger Agreement and the Merger by Teva's shareholders is not required to
effect the Merger.
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RECORD DATE; SHARES ENTITLED TO VOTE
The close of business on April 22, 1996 has been fixed as the Record Date
for determining the holders of Biocraft Common Stock who are entitled to notice
of and to vote at the Special Meeting. As of the Record Date, there were
14,184,843 shares of Biocraft Common Stock outstanding and entitled to vote, and
such shares were held by approximately 761 holders of record. The holders of
record on the Record Date of Biocraft Common Stock are entitled to one vote per
share of Biocraft Common Stock on each matter submitted to a vote at the Special
Meeting. The presence in person or by proxy of the holders of a majority of the
outstanding Biocraft Common Stock entitled to vote is necessary to constitute a
quorum for the transaction of business at the Special Meeting. As a result of
the Irrevocable Proxy, such quorum requirement for the Special Meeting will be
met.
Proxies relating to 'street name' shares that are properly executed and
returned by brokers will be counted as shares present for purposes of
determining the presence of a quorum, but will not be treated as shares having
voted at the Special Meeting as to the Merger Agreement if authority to vote has
been withheld by the broker (a 'broker non-vote'). Abstentions will be recorded
as such by the inspectors of election for the Special Meeting. In light of the
treatment of broker non-votes and abstentions and the fact that the affirmative
vote required to approve the Merger Agreement is two-thirds of the total number
of outstanding shares of Biocraft Common Stock on the Record Date, broker
non-votes and abstentions will have the same effect as votes against approval of
the Merger Agreement.
VOTE REQUIRED AND IRREVOCABLE PROXY
The affirmative vote of holders of two-thirds (66-2/3%) of the outstanding
shares of the Biocraft Common Stock is required for approval of the Merger
Agreement. As of April 22, 1996, the Biocraft directors and executive officers
and their affiliates as a group held shares representing approximately 64.2% of
the outstanding shares of Biocraft Common Stock. Each of the directors and
executive officers of Biocraft who owns shares of Biocraft Common Stock has
advised Biocraft that he/she intends to vote or direct the vote of all such
shares over which he/she has voting control, subject to and consistent with any
fiduciary obligations in the case of shares held as a fiduciary, for approval
and adoption of the Merger Agreement and the Merger. In addition, as an
inducement for Teva to enter into the Merger Agreement, each of Harold Snyder,
Biocraft's current Chairman, Chief Executive Officer and President, Beatrice
Snyder, Biocraft's current Senior Vice President and Secretary, and their
children as trustees for certain trusts which Mr. and Mrs. Snyder have
established, holding in the aggregate approximately 60% of the outstanding
shares of Biocraft Common Stock, has executed the Irrevocable Proxy whereby,
among other things, such stockholder has irrevocably appointed Teva as agent,
attorney and proxy to vote such stockholder's shares (i) in favor of the Merger,
(ii) in favor of the Merger Agreement, (iii) against any Takeover Proposal (as
defined in the Merger Agreement) (other than the Merger) or other proposal which
provides for any merger, sale of assets or other business combination between
Biocraft and any other person or entity or which would make it impractical for
Teva to effect a merger or other business combination of Biocraft with Teva or a
wholly owned subsidiary of Teva and (iv) against any other action or agreement
that would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Biocraft under the Merger Agreement or which
could result in any of Biocraft's obligations under the Merger Agreement not
being fulfilled. As of the Record Date, Teva owned no outstanding shares of
Biocraft Common Stock. See 'THE MERGER -- Irrevocable Proxy and Termination
Rights Agreement'.
PROXIES; PROXY SOLICITATION
Shares of Biocraft Common Stock represented by properly executed, unrevoked
proxies received at or prior to the Special Meeting will be voted at the Special
Meeting in accordance with the instructions contained therein. Shares of
Biocraft Common Stock represented by properly executed, unrevoked proxies for
which no instruction is given will be voted FOR approval of the Merger
Agreement. Biocraft stockholders are requested to complete, sign, date and
return promptly the enclosed proxy card in the postage-paid envelope provided
for this purpose to ensure that their shares are voted. A Biocraft stockholder
may revoke a proxy by submitting a later dated proxy with respect to the same
shares at any time prior to the vote on the approval of the Merger Agreement, by
delivering
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written notice of revocation to the Secretary of Biocraft at any time prior to
such vote or by attending the Special Meeting and voting in person. Mere
attendance at the Special Meeting will not in and of itself revoke a proxy.
If the Special Meeting is postponed or adjourned for any reason, when the
Special Meeting is convened or reconvened, all proxies will be voted in the same
manner as such proxies would have been voted at the original convening of the
meeting (except for any proxies which have heretofore effectively been revoked
or withdrawn), notwithstanding that they may have been effectively voted on the
same or any other matter at a previous meeting.
The cost of the solicitation of proxies by Biocraft's Board of Directors
for use at the Special Meeting will be borne by Biocraft. In addition to
solicitation by mail, directors, officers and employees of Biocraft may solicit
proxies by telephone, telegram or otherwise. Such directors, officers and
employees of Biocraft will not be additionally compensated for such solicitation
but may be reimbursed by Biocraft for out-of-pocket expenses incurred in
connection therewith. Brokerage firms, fiduciaries and other custodians who
forward soliciting material to the beneficial owners of shares of Biocraft
Common Stock held of record by them will be reimbursed for their reasonable
expenses incurred in forwarding such material.
MISCELLANEOUS
Representatives of Ernst & Young LLP, Biocraft's independent auditors, are
expected to be present at the Special Meeting. Such representatives will be
afforded an opportunity to make a statement, if they desire to do so, and are
expected to be available to respond to appropriate questions.
THE MERGER
BACKGROUND OF THE MERGER
In September 1991, the Board of Directors of Biocraft determined that it
was appropriate to begin to consider possible strategic alternatives for
realizing stockholder value. The Board was influenced in this determination by
developing trends in, and affecting, the pharmaceutical industry generally.
These included increasing consolidations in the pharmaceutical industry and in
the industries comprising Biocraft's customer base. These trends were viewed as
being affected, in turn, by actual and anticipated changes in government and
private health care reimbursement policies and the drive throughout the health
care industry to achieve greater efficiencies and cost savings. The Board also
took into account the expressed interest of Biocraft's founders and principal
stockholders, Harold and Beatrice Snyder, to diversify in an appropriate manner
their substantial investment in Biocraft. Against this background, it was the
sense of the Board that Biocraft explore the possibility of forming a strategic
alliance with another entity through a merger, an acquisition of Biocraft or a
substantial capital investment in Biocraft by a strategic partner.
To assist it in the evaluation of potential transactions, in November 1991
the Board of Directors of Biocraft authorized the retention of Wertheim Schroder
& Co., Incorporated ('Wertheim Schroder') as financial advisors to Biocraft. In
the succeeding months, as Wertheim Schroder acquainted itself with Biocraft's
business and operations it also began, with assistance from Mr. and Mrs. Snyder
and other members of the Snyder family, to identify U.S. and foreign companies
that were either involved in the pharmaceutical industry or known to be
exploring acquisitions or significant investments in the industry and that
appeared to possess the financial and other resources to be able to develop and
expand Biocraft's operations. While this work was ongoing, the Board considered,
among other matters, the manner in which expressions of interest should be
solicited and the timing of such solicitation. Also during this period, Biocraft
received several unsolicited expressions of interest in a strategic transaction.
Mr. and Mrs. Snyder, with the assistance of Wertheim Schroder, conducted
exploratory discussions with these parties, but none of such discussions
developed into an offer.
On May 27, 1992, Biocraft publicly announced that its Board of Directors
had authorized Wertheim Schroder to assist it in exploring various strategic
options in order to enhance the value of Biocraft to its stockholders. Its
announcement also stated that the options being considered included a sale of
Biocraft through a merger or other business combination.
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The companies identified by Biocraft and Wertheim Schroder were then
contacted by Wertheim Schroder, on behalf of Biocraft, to explore a possible
strategic transaction. Concurrently, Biocraft and Wertheim Schroder were
contacted by other companies that had become aware of Biocraft's interest in
exploring potential strategic transactions. None of the discussions with any of
such companies progressed beyond the exploratory stage.
In August 1993, Biocraft initially engaged Goldman Sachs as its new
financial advisor in connection with a possible sale of Biocraft. Biocraft
decided to hire a financial advisor in light of what management of Biocraft
perceived as an accelerating pace in consolidations in the generic
pharmaceutical industry at that time. Biocraft, with the assistance of Goldman
Sachs, identified a number of companies that it believed were likely candidates
for a strategic alliance with Biocraft and, along with Goldman Sachs, commenced
contacting them. As in the earlier period, Biocraft was, from time to time,
contacted directly by companies that had an interest in exploring a potential
strategic transaction.
Among the exploratory discussions which Biocraft had in late 1993 were
discussions with William Fletcher, President of Lemmon Company, Teva's U.S.
generic drug subsidiary ('Lemmon'). In February 1994 these preliminary
discussions proceeded sufficiently that Teva and Biocraft entered into
confidentiality agreements pursuant to which confidential information would be
exchanged for the purpose of evaluating a possible transaction.
On the basis of the mutual preliminary investigation conducted by the
companies through September 1994, in October 1994, Mr. and Mrs. Snyder and Mr.
Eli Hurvitz, President and Chief Executive Officer of Teva, met to explore a
possible merger transaction. Those meetings focused on a possible stock merger
in which Biocraft would be combined with Teva and in which Biocraft stockholders
would receive Teva Ordinary Shares in the form of Teva ADSs. While no agreement
was reached at that time concerning the material terms of a transaction,
including the rate at which shares of Biocraft Common Stock would be converted
in a merger to Teva ADSs, Mr. and Mrs. Snyder and Mr. Hurvitz agreed to pursue
further mutual investigation with the assistance of advisors and to begin to
authorize counsel for the two companies to begin developing the form of merger
and associated agreements pursuant to which a transaction could be effected
when, as and if further discussions yielded agreement on such material terms.
Mr. and Mrs. Snyder met with Mr. Hurvitz again in January 1995. At that
time, the discussions related to the possibility of a cash transaction, but were
inconclusive. In May 1995 and again in September 1995, Mr. and Mrs. Snyder met
with Mr. Hurvitz to reconsider a possible stock merger but reached no consensus
on the material terms of a transaction. Significant fluctuations in the
respective trading prices of the companies' securities and a lack of a
definitive resolution of Biocraft's ongoing efforts to establish to the FDA's
satisfaction its compliance with FDA's cGMP Regulations hampered efforts
throughout this period to reach agreement upon the relative values of the
companies.
During 1994 and 1995, Mr. and Mrs. Snyder and Biocraft's advisors continued
to have exploratory discussions with other potential strategic partners
concerning a range of transactions, but none of such discussions led to a
definitive offer by any of such parties.
On January 25, 1996 Mr. and Mrs. Snyder again met with Mr. Hurvitz and on
the basis of negotiations on that day, agreed to recommend to the Biocraft and
Teva Boards, respectively, a merger transaction at a fixed conversion ratio of
0.461 Teva ADSs for each share of Biocraft Common Stock. On January 28, 1996 and
January 29, 1996, the Boards of Directors of Biocraft and Teva, respectively,
approved the Merger Agreement.
RECOMMENDATION OF THE BIOCRAFT BOARD AND BIOCRAFT'S REASONS FOR THE MERGER
At the meeting of the Biocraft Board of Directors held on January 28, 1996,
the Biocraft Board determined that the terms of the Merger are fair to and in
the best interests of Biocraft and its stockholders and adopted the Merger
Agreement and authorized and directed the appropriate officers of Biocraft to
execute the Merger Agreement on behalf of Biocraft.
THE BIOCRAFT BOARD HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT, DETERMINED
THAT THE MERGER IS IN THE BEST INTERESTS OF BIOCRAFT AND ITS STOCKHOLDERS, AND
RECOMMENDS THAT THE STOCKHOLDERS OF BIOCRAFT VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT.
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In making its determination, the Biocraft Board considered, among other
factors, the opinion received from Goldman Sachs (see ' -- Opinion of Financial
Advisor'), the respective operating performances and capital resources of
Biocraft and Teva, and economic and competitive conditions in the industry. The
Board, assisted by Goldman Sachs, also reviewed publicly available data
concerning Teva and considered reports of interviews with Teva senior management
concerning Teva's recent financial performance and future plans. These
considerations reinforced the Board's view that due to increasing industry
competitiveness and Biocraft's limited capital resources, successful expansion
of its business would be difficult and Biocraft stockholders might receive
greater long-term benefits through a sale or merger with a business having
greater capital resources, a broader market for its products and the potential
for synergistic combination with Biocraft's operations.
Based on the foregoing, the Board concluded that Teva, because of its
greater size and capital resources, profitable operating performance and strong
competitive position within the industry, was an attractive merger partner and
that the consideration offered in the Merger was fair and in the best interest
of the stockholders of Biocraft. There can be no assurance, however, that any or
all of the objectives described above will be achieved if the Merger is
consummated.
CERTAIN ADVANTAGES AND DISADVANTAGES OF THE
MERGER TO BIOCRAFT AND ITS STOCKHOLDERS
In considering the proposed Merger, the Board of Directors of Biocraft also
considered the following additional actual and potential material advantages and
disadvantages of the Merger to Biocraft and its stockholders:
ADVANTAGES:
More effective selling of Biocraft products as part of a broader line
of generic drug offerings when combined with those of Lemmon.
Increased utilization of Biocraft's bulk pharmaceutical manufacturing
capacity in connection with the manufacture of certain of Teva's
dosage form products and the expansion of Teva's existing bulk
pharmaceutical chemical product line.
Efficiencies achievable through the elimination of certain expenses
that would be redundant as a result of the Merger.
Greater capital and other resources for, among other activities,
research and development of new generic and other drug products.
No recognition for Biocraft and its stockholders of any gain or loss
for tax purposes except with respect to any cash received in lieu of
a fractional share interest.
Participation by Biocraft stockholders in the potential future growth
of a larger enterprise.
Likely greater liquidity for Biocraft stockholders as holders of Teva
ADSs by virtue of the much larger number of outstanding securities of
Teva.
DISADVANTAGES:
The management challenges presented by the tasks of combining the
operations of Biocraft and Teva and achieving the hoped for
synergistic benefits.
The inability of the former stockholders of Biocraft, as a group, to
control the management of Teva as a result of their minority interest
in Teva upon completion of the Merger.
The potential business risks associated with Teva's operations
outside the United States as they may be affected by economic,
political and military conditions in those foreign countries, and
currency exchange rate fluctuations and exchange control regulations.
TEVA'S REASONS FOR THE MERGER
Teva believes that the Merger will substantially broaden both its product
offerings and its market presence in the U.S. market for generic drugs and
enable it to compete more effectively in the rapidly
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changing market for health care products in the United States. The U.S. market
for pharmaceutical products is being shaped to an ever greater degree by managed
care organizations, pharmaceutical benefit managers, cooperative buying
organizations and large drug store chains. Teva believes that as these
organizations increase in size, they will seek to purchase generic drugs
directly from manufacturers who will be able to supply a broad base of generic
products and establish and maintain a reputation for reliability and service.
The combination of Teva and Biocraft will create one of the largest
manufacturers of generic drugs in the United States. Given that the product
lines of the two companies are largely complementary, the Merger will permit a
consolidated sales force to offer a very broad base of generic products. In
addition, Biocraft's bulk pharmaceutical production capacity will both permit
Teva to increase the extent of the vertical integration of its finished dose
pharmaceutical production and permit Teva to expand its worldwide bulk
pharmaceutical chemical product line.
Teva plans to cause Biocraft and Lemmon to be managed as a single unit
under the direction of William Fletcher, the President and Chief Executive
Officer of Lemmon, and become part of the same U.S. consolidated tax return
group. Teva is currently exploring the possibility of eventually merging Lemmon
into Biocraft.
OPINION OF FINANCIAL ADVISOR
Goldman Sachs delivered its oral opinion on January 28, 1996 to the Board
of Directors of Biocraft that as of such date the Exchange Ratio pursuant to the
Merger is fair to the holders of Biocraft Common Stock. Goldman Sachs confirmed
its oral opinion by delivery of its written opinion dated January 29, 1996. In
addition, Goldman Sachs subsequently confirmed its earlier opinion by delivery
of its written opinion dated as of the date hereof.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED AS OF THE DATE
HEREOF, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX II TO
THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS
OF BIOCRAFT COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS
ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
(i) the Registration Statement, including the Proxy Statement/Prospectus; (ii)
the Merger Agreement; (iii) Annual Reports to Stockholders and Annual Reports on
Form 10-K of Biocraft for the five years ended March 31, 1995; (iv) Annual
Reports to Shareholders and Annual Reports on Form 20-F of Teva for the six
years ended December 31, 1995; (v) certain interim reports to stockholders and
Quarterly Reports on Form 10-Q and Reports on Form 6-K of Biocraft and Teva,
respectively; (vi) certain other communications from Biocraft and Teva to their
respective stockholders; and (vii) certain internal financial analyses and
forecasts for Biocraft and Teva prepared by their respective managements.
Goldman Sachs also held discussions with members of the senior management of
Biocraft and Teva regarding the past and current business operations, financial
condition and future prospects of their respective companies as well as the
future outlook of the combined entity. In addition, Goldman Sachs reviewed the
reported price and trading activity for the Biocraft Common Stock and the Teva
ADSs, compared certain financial and stock market information for Biocraft and
Teva with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. In addition, Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities of Biocraft or Teva or any
of their respective subsidiaries and Goldman Sachs has not been furnished with
any such evaluation or appraisal. Goldman Sachs assumed, with the consent of
Biocraft's Board of Directors, that the consummation of the Merger would be
recorded as a pooling of interests under generally accepted accounting
principles.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its January 29, 1996 opinion to
Biocraft's Board of Directors. Goldman Sachs
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used substantially the same type of financial analyses in connection with
providing the written opinion attached hereto as Annex II.
(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the Biocraft Common Stock. In
addition, Goldman Sachs analyzed the consideration to be received by
holders of Biocraft Common Stock pursuant to the Merger Agreement in
relation to the per share closing price on the day prior to the public
announcement of the Merger (January 26, 1996) of $13.63. Such analysis
indicated that based on the Exchange Ratio and the closing price of Teva
ADSs on January 26, 1996 of $45.25, the aggregate consideration payable
pursuant to the Merger represented a premium of 53.1%.
(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to Biocraft to corresponding
financial information, ratios and public market multiples for seven
publicly traded corporations: A.L. pharma, Inc., Barr Laboratories Inc.,
Copley Inc., Forest Laboratories Inc., IVAX Corp., Mylan Laboratories Inc.
and Watson Pharmaceuticals Inc. (the 'Selected Companies'). The Selected
Companies were chosen because they are publicly traded companies with
operations that for purposes of analysis may be considered similar to
Biocraft. Goldman Sachs calculated and compared various financial multiples
and ratios. The multiples of Biocraft were calculated using a price of
$13.63 per share of Biocraft Common Stock, the closing price of the shares
on the NYSE on the day prior to public announcement of the Merger (January
26, 1996). The multiples and ratios for Biocraft, Teva and each of the
Selected Companies were based on the most recent publicly available
information. With respect to the Selected Companies, Goldman Sachs
considered levered market capitalization (i.e., market value of common
equity plus book value of debt less cash) as a multiple of Latest Twelve
Months ('LTM') sales and as a multiple of LTM earnings before interest,
taxes, depreciation and amortization ('EBITDA'). Goldman Sachs' analyses of
the Selected Companies indicated levered multiples of: LTM sales, which
ranged from 0.5x to 5.1x; and LTM EBITDA, which ranged from 9.5x to 36.3x,
compared to 1.8x and 54.7x, respectively, for Biocraft, and 4.1x and 20.4x,
respectively, for Teva. Goldman Sachs also considered for the Selected
Companies estimated calendar years 1995, 1996 and 1997 price/earnings
ratios derived from an aggregation of estimates reported by the
Institutional Broker Estimate Service ('IBES') and stock prices as of
January 26, 1996, which ranged from 12.6x to 43.9x for estimated calendar
year 1995, 10.1x to 32.8x for estimated calendar year 1996 and 8.6x to
25.5x for estimated calendar year 1997, compared to 25.7x in 1997 and
multiples in 1995 and 1996 for Biocraft which could not be calculated due
to projected losses, and 29.2x, 21.0x and 13.9x, respectively, for Teva;
and five-year compound annual growth rate of Earnings Per Share ('EPS') for
the five fiscal years ending in 2001 ranging from 17% to 30%, compared to
10% for Biocraft and 25% for Teva.
(iii) Discounted Cash Flow Analysis. Goldman Sachs performed a
discounted cash flow analysis under the following two scenarios: (a) using
Biocraft's management projections with the impact of generic drugs from
Biocraft's product pipeline (the 'Base Case Plus') and (b) using Biocraft's
management without the impact of the generic drugs in Biocraft's product
pipeline (the 'Base Case'). Goldman Sachs calculated a net present value of
free cash flows for the fiscal years 1997 through 2001 using discount rates
ranging from 15% to 25%. Goldman Sachs calculated Biocraft's terminal
values in the year 2001 based on multiples ranging from 16x EBIT to 24x
EBIT. These terminal values were then discounted to present value using
discount rates from 15% to 25%.
Goldman Sachs also assumed an annual revenue growth rate of 5% in both
the Base Case Plus and the Base Case and assumed operating margins of 15%,
13% and 11% for estimated fiscal years 1999, 2000 and 2001, respectively,
in the Base Case Plus and an assumed operating margin of 10% for estimated
fiscal years 1999-2001 in the Base Case. Goldman Sachs, utilizing the above
analyses, calculated implied per share values which ranged from $8.73 to
$22.05 in the Base Case Plus and from $5.19 to $16.03 in the Base Case.
In connection with the foregoing, Goldman Sachs also reviewed certain
EPS projections of Biocraft's management for estimated fiscal years 1995
and 1996. The projections reviewed were at various dates from September 14,
1994 to December 13, 1995. Goldman Sachs compared these
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management projections to actual data, in the case of fiscal year 1995, and
to street estimates reported by IBES, in the case of fiscal year 1996.
Goldman Sachs' analyses indicated (A) that management EPS projections for
estimated fiscal year 1995 ranged from $0.20 per share of Biocraft Common
Stock on September 14, 1994 to negative $0.20 per share of Biocraft Common
Stock on January 7, 1995, compared to an actual EPS of negative $0.17 per
share of Biocraft Common Stock and (B) that management EPS projections for
estimated fiscal year 1996 were $1.02 per share of Biocraft Common Stock on
September 14, 1994, $1.79 per share of Biocraft Common Stock on January 7,
1995 and negative $0.31 per share of Biocraft Common Stock on December 13,
1995.
(iv) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma
analyses of the financial impact of the Merger using earnings estimates for
Biocraft and Teva prepared by their respective managements for the years
1996 and 1997 (which were calendarized for Biocraft) (a) assuming no
synergies and (b) assuming $15 million of pre-tax synergies. Based on such
analyses, the proposed transaction would be accretive to Teva's
shareholders in the years 1996 and 1997, assuming $15 million of pre-tax
synergies and in 1997, assuming no synergies, while the proposed
transaction would be dilutive in 1996, assuming no synergies. Goldman Sachs
also prepared pro forma analyses of the financial impact of the Merger
using earnings estimates for Biocraft and Teva provided by IBES for the
years 1996 and 1997 (calendarized for Biocraft) (a) assuming no synergies
and (b) assuming $15 million of pre-tax synergies. Based on such analyses,
the proposed transaction would be dilutive to Teva's shareholders in the
years 1996 and 1997 (under both scenarios).
(v) Contribution Analysis. Goldman Sachs reviewed certain historical
and estimated future operating and financial information (including, among
other things, sales, EBIT, net income, book equity and total assets) for
Biocraft, Teva and the combined entity resulting from the Merger based on
Biocraft's and Teva's managements' financial forecasts for Biocraft and
Teva, respectively. The analysis indicated that the Biocraft stockholders
would receive 10.6% of the outstanding common equity of the combined entity
after the Merger (based on the number of (i) outstanding shares of Biocraft
Common Stock reported on Biocraft's Quarterly Report on Form 10-Q dated
September 30, 1995 and (ii) outstanding Teva Ordinary Shares reported in
Teva's Report on Form 6-K dated September 28, 1995). Goldman Sachs also
analyzed the relative income statement contribution of Biocraft and Teva to
the combined entity on a pro forma basis based on estimated years 1995,
1996 and 1997 (calendarized for Biocraft), based on financial data provided
to Goldman Sachs by Biocraft and Teva managements. This analysis indicated
that in estimated calendar years 1995, 1996 and 1997 Biocraft would have
contributed 18.1%, 16.3% and 16.1%, respectively, to combined sales,
negative 1.4%, 11.1% and 14.3%, respectively, to combined EBIT, and
negative 5.0%, 7.3% and 11%, respectively, to combined net income.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is identical to Biocraft
or Teva or the contemplated transaction. The analyses were prepared solely for
purposes of Goldman Sachs' providing its opinion to the Biocraft Board of
Directors as to the fairness of the Exchange Ratio to the stockholders of
Biocraft and do not purport to be appraisals or necessarily reflect the prices
at which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Biocraft, Teva, Goldman Sachs or any other
person assumes responsibility if future results are materially different from
those forecasts. As described above, Goldman Sachs' opinion to the Board of
Directors of Biocraft was one of many factors taken into consideration by the
Biocraft Board of Directors in making its determination to approve the Merger
Agreement. The foregoing summary does not purport to be a complete description
of the analysis performed by Goldman Sachs and is qualified in its entirety by
reference to the written opinion of Goldman Sachs set forth in Annex II to this
Proxy Statement/Prospectus.
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Goldman Sachs, 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. Biocraft selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions similar
to the Merger. Goldman Sachs is familiar with Biocraft having acted as its
financial advisor in connection with, and having participated in, certain of the
negotiations leading to the Merger Agreement.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Biocraft and/or Teva for its own account and for the account of
customers.
Pursuant to a letter agreement dated January 5, 1995 (the 'Engagement
Letter'), Biocraft engaged Goldman Sachs to act as its financial advisor in
connection with a possible sale of Biocraft. Pursuant to the terms of the
Engagement Letter, Biocraft has agreed to pay Goldman Sachs upon consummation of
the Merger a transaction fee of 1.25% of the aggregate consideration paid in the
Merger (which is to be based on the average of the last sales price for Biocraft
Common Stock on the five trading days ending five days prior to the consummation
of the Merger). Biocraft has agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including reasonable attorneys' fees, and to
indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the United States Federal securities laws.
EFFECTIVE TIME
The Merger will become effective at such time as a Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware, or at such
other time as Teva and Biocraft agree should be specified in such certificate.
The Merger Agreement provides that Merger Sub and Biocraft will execute and file
such certificate or other appropriate documents as soon as practicable after the
last of the conditions to the Merger have been fulfilled. See 'TERMS OF THE
MERGER AGREEMENT -- Conditions to the Merger'.
EXCHANGE RATIO
At the Effective Time, each share of Biocraft Common Stock issued and
outstanding immediately prior to the Effective Time, other than shares of
Biocraft Common Stock owned by Biocraft in the form of treasury shares, will be
converted into the right to receive that number of validly issued, fully paid
and nonassessable Teva ADSs representing Teva Ordinary Shares equal to the
Exchange Ratio.
As of the Effective Time, all shares of Biocraft Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
Biocraft Common Stock shall cease to have any rights with respect thereto,
except the right to receive Teva ADSs representing Ordinary Shares and any cash
in lieu of fractional Teva ADSs to be issued or paid in consideration therefor
upon surrender of such certificate, in each case without interest. Any treasury
shares of Biocraft Common Stock will automatically be canceled and retired and
will cease to exist as of the Effective Time.
EXCHANGE AGENT; EXCHANGE PROCEDURES; DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED
SHARES; NO FURTHER OWNERSHIP RIGHTS IN BIOCRAFT COMMON STOCK; NO FRACTIONAL TEVA
ADSS
Exchange Agent. The Merger Agreement requires Teva to deposit as of the
Effective Time, with The Bank of New York (the 'Exchange Agent'), for the
benefit of the holders of shares of Biocraft Common Stock, Teva Ordinary Shares
to be represented by Teva ADSs issuable in exchange for Biocraft Common Stock.
Exchange Procedures. As soon as reasonably practicable after the Effective
Time, Teva shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Biocraft Common Stock (the
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'Certificates'), whose shares were converted into the right to receive Teva ADSs
pursuant to the Merger, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent, and shall be
in such form and have such other provisions as Teva may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for ADRs representing Teva ADSs. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor an ADR representing Teva ADSs (rounded down to the nearest
whole Teva ADS) which such holder has the right to receive after taking into
account all the shares of Biocraft Common Stock then held by such holder under
all such Certificates so surrendered, cash in lieu of fractional Teva ADSs and
any dividends or other distributions to which such holder is entitled, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Biocraft Common Stock that is not registered in the
transfer records of Biocraft, an ADR representing Teva ADSs may be issued to a
person other than the person in whose name the Certificate so surrendered is
registered, if, upon presentation to the Exchange Agent, such Certificate is
properly endorsed or otherwise is in proper form for transfer and the person
requesting such payment pays any transfer or other taxes required by reason of
the issuance of Teva ADSs to a person other than the registered holder of such
Certificate or establishes to the satisfaction of Teva that such tax has been
paid or is not applicable. Until so surrendered, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender an ADR representing Teva ADSs, cash in lieu of any
fractional Teva ADSs and any dividends or other distributions to which such
holder is entitled pursuant to the Merger Agreement. No interest will be paid or
will accrue on any cash payable pursuant to the Merger Agreement.
BIOCRAFT STOCKHOLDERS SHOULD NOT FORWARD BIOCRAFT STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS. BIOCRAFT STOCKHOLDERS
SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Teva Ordinary Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the Teva ADSs represented thereby and no cash payment in lieu of
fractional Teva ADSs shall be paid to any such holder until the holder of record
of such Certificate shall surrender such Certificate. Following surrender of any
such Certificate, there shall be paid to the record holder of the ADRs
representing Teva ADSs issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
Teva ADS and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole Teva ADSs,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time, but prior to such
surrender, and a payment date subsequent to such surrender payable with respect
to such whole Teva ADSs.
No Further Ownership Rights in Biocraft Common Stock. All Teva ADSs issued
upon the surrender for exchange of shares of Biocraft Common Stock in accordance
with the terms of the Merger Agreement (including any cash paid) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Biocraft Common Stock, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Biocraft Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in the Merger Agreement.
No Fractional Teva ADSs. No ADRs representing fractional Teva ADSs shall be
issued upon the surrender for exchange of Certificates. Each holder of shares of
Biocraft Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a Teva ADS (after taking into account all
Certificates delivered by such holder) will receive, in lieu thereof, cash
(without interest) in an amount equal to such stockholder's proportionate
interest in the net proceeds
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from the sale by the Exchange Agent on behalf of all such holders of the
aggregate of the fractions of ADSs which would otherwise be issued.
ADMISSION FOR TRADING ON NASDAQ NATIONAL MARKET
Teva ADSs are presently admitted for trading on the NASDAQ National Market.
It is a condition to each party's obligation to effect the Merger that the Teva
ADSs issuable to Biocraft's stockholders pursuant to the Merger Agreement shall
have been admitted for trading on the NASDAQ National Market, subject to
official notice of issuance. See 'TERMS OF THE MERGER AGREEMENT -- Conditions to
the Merger'.
CESSATION OF NYSE TRADING AND DEREGISTRATION OF BIOCRAFT COMMON STOCK AFTER THE
MERGER
If the Merger is consummated, the Biocraft Common Stock will cease to be
traded on the NYSE and will be deregistered under the Exchange Act. After such
delisting and deregistration, Biocraft will no longer be subject to any
reporting obligations under the Exchange Act.
CERTAIN SIGNIFICANT CONSIDERATIONS
In considering whether to approve and adopt the Merger Agreement providing
for the Merger, stockholders of Biocraft should carefully consider those factors
described under 'RISK FACTORS' as well as the fact that the Exchange Ratio is
fixed and will not be adjusted based on changes in the price of the Teva ADSs,
and the price of the Teva ADSs at the Effective Time may vary from the price as
of the date of this Proxy Statement/Prospectus or the date on which stockholders
of Biocraft vote on the Merger due to changes in the business, operations or
prospects of Teva, market assessments of the likelihood that the Merger will be
consummated and the timing thereof, general market and economic conditions, and
other factors.
CERTAIN TAX CONSEQUENCES OF THE MERGER
The Merger is intended to be a 'tax-free reorganization' for United States
Federal income tax purposes under section 368(a)(1)(A) and section 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended (the 'Code'). As a consequence:
1. Neither Teva, Merger Sub nor Biocraft will recognize any gain or
loss in the Merger.
2. A holder of Biocraft Common Stock who, in the Merger, exchanges
shares of Biocraft Common Stock for Teva ADSs will not recognize any gain
or loss upon such exchange, except that (as noted in paragraph 5 below)
gain or loss may be recognized with respect to cash received in lieu of a
fractional share interest. However, a United States resident or citizen or
domestic corporation that owns (directly, indirectly or constructively)
Teva ADSs and Teva Ordinary Shares representing in the aggregate five
percent or more of the Teva Ordinary Shares outstanding immediately after
the Effective Time may have to recognize gain under section 367(a) of the
Code unless certain requirements relating to a gain recognition agreement
with the Internal Revenue Service are satisfied.
3. The aggregate adjusted tax basis of the Teva ADSs received in such
exchange (including a fractional share interest deemed received, as
explained in paragraph 5 below) will be equal to the aggregate adjusted tax
basis of the shares of Biocraft Common Stock surrendered therefor.
4. If the shares of Biocraft Common Stock are held as capital assets
at the Effective Time, the holding period of the Teva ADSs will include the
holding period of the shares of Biocraft Common Stock exchanged therefor.
5. A holder of shares of Biocraft Common Stock who receives cash in
the Merger in lieu of a fractional Teva ADS will be treated as having
received such fractional share in such exchange and then having received
cash in redemption of such fractional share interest by Teva. The receipt
of such cash should cause the recipient to recognize capital gain or loss,
provided the shares of Biocraft Common Stock surrendered for such
fractional share interest were held as capital assets at the Effective
Time, equal to the difference between the amount of cash received and the
portion of
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such holder's adjusted tax basis in the shares of Biocraft Common Stock
allocable to the fractional share interest.
The obligations of the parties to consummate the Merger are subject to the
receipt by Biocraft of an opinion of its counsel and the receipt by Teva of an
opinion of its counsel, each to the effect that the Merger will be a 'tax-free
reorganization' for United States Federal income tax purposes under section
368(a) of the Code. Each such opinion is based on current law and various other
assumptions as set forth in the copies of such opinions filed as exhibits to the
Registration Statement of which this Proxy Statement/Prospectus forms a part.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED UPON PRESENT UNITED STATES FEDERAL LAW. EACH BIOCRAFT STOCKHOLDER
SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER TO HIM OR HER, INCLUDING THE APPLICATION AND EFFECT OF UNITED STATES
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN UNITED STATES FEDERAL LAW OR OTHER TAX LAWS. THE FOREGOING DISCUSSION
MAY NOT BE APPLICABLE WITH RESPECT TO TEVA ADSS RECEIVED BY CURRENT OR FORMER
BIOCRAFT EMPLOYEES IN THE MERGER THROUGH THE OPERATION OF BIOCRAFT EMPLOYEE
STOCK OPTION PLANS.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is designed to qualify as 'pooling-of-interests' for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of Biocraft and Teva will be carried forward to Teva at
their recorded amounts; income of Teva will include income of Teva and Biocraft
for the entire fiscal year in which the Merger occurs; and the reported income
of the separate corporations for prior periods will be combined and restated as
income of the combined company. The obligations of the parties to the Merger
Agreement to consummate the Merger are subject to the receipt by Teva from
Kesselman & Kesselman, the independent auditors of Teva, and by Biocraft from
Ernst & Young LLP, the independent auditors of Biocraft, of their opinions that
there is no fact or circumstance known to them concerning Teva and Merger Sub,
on the one hand, or Biocraft, on the other hand, respectively, which would cause
the Merger not to be recorded for accounting purposes as a
'pooling-of-interests'. See 'TERMS OF THE MERGER AGREEMENT -- Conditions to the
Merger'.
ABSENCE OF APPRAISAL RIGHTS
Holders of Teva Ordinary Shares will not be entitled to appraisal rights
under Israeli law in connection with the Merger.
Delaware law does not provide a stockholder with appraisal rights with
respect to any merger in which holders of stock traded on the NYSE are only
required to accept for such stock shares of stock of a corporation which are
traded on the NASDAQ National Market. Teva ADSs are, and it is anticipated will
be at the Effective Time, traded on the NASDAQ National Market. Accordingly,
Biocraft stockholders will not be entitled to appraisal rights under Delaware
law in connection with the Merger. See 'COMPARISON OF STOCKHOLDER
RIGHTS -- Appraisal Rights'.
IRREVOCABLE PROXY AND TERMINATION RIGHTS AGREEMENT
As an inducement for Teva to enter into the Merger Agreement, each of
Harold Snyder, Biocraft's current Chairman, Chief Executive Officer and
President, Beatrice Snyder, Biocraft's current Senior Vice President and
Secretary, and their children as trustees for certain trusts which Mr. and Mrs.
Snyder have established, holding in the aggregate approximately 60% of the
outstanding shares of Biocraft Common Stock, has executed the Irrevocable Proxy
whereby, among other things, such stockholder has irrevocably appointed Teva as
agent, attorney and proxy to vote such stockholder's shares (i) in favor of the
Merger, (ii) in favor of the Merger Agreement, (iii) against any Takeover
Proposal (as defined in the Merger Agreement) (other than the Merger) or other
proposal which provides for any merger, sale of assets or other business
combination between Biocraft and any other person or entity or which would
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make it impractical for Teva to effect a merger or other business combination of
Biocraft with Teva or a wholly owned subsidiary of Teva and (iv) against any
other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Biocraft
under the Merger Agreement or which could result in any of Biocraft's
obligations under the Merger Agreement not being fulfilled.
In addition, pursuant to the Irrevocable Proxy, if the Merger Agreement is
terminated in certain specified circumstances and a stockholder who is a party
to the Irrevocable Proxy sells or otherwise disposes of any of such
stockholder's Biocraft Common Stock pursuant to a Third Party Acquisition (as
defined in the Merger Agreement), then, such stockholder is obligated to pay, or
cause to be paid, in same day funds (to the extent of cash received and
otherwise payable in kind) to Teva upon demand an amount equal to (x) such
stockholder's Profit per Share multiplied by (y) the aggregate number of shares
of Biocraft Common Stock sold or otherwise disposed of by such stockholder. As
used in the Irrevocable Proxy, 'Profit per Share' in connection with a sale or
other disposition of shares of Biocraft Common Stock by a stockholder means on a
per share basis the amount by which (A) the sum of (1) if such sale or other
disposition is for or made in cash, the cash received by the stockholder in
respect of each share of Biocraft Common Stock, (2) if such sale or other
disposition is for or made in marketable securities, the fair market value at
the time such securities are received by the stockholder of the securities
received in respect of each share of Biocraft Common Stock, (3) if such sale or
other disposition is for or made in property other than cash or marketable
securities, the fair market value at the time such property is received by the
stockholder of the property received in respect of each share of Biocraft Common
Stock (or any combination of the consideration referred to in clauses (1), (2)
and (3)), and (4) without duplication, any dividends or interest received by the
stockholder in respect of each share of Biocraft Common Stock exceeds (B) the
higher of the fair market value of 0.461 Teva ADSs on January 29, 1996 and on
the date that the Merger Agreement is terminated. As used therein, the term
'fair market value' means, in the case of marketable securities, the closing
sale price of the security on the principal securities exchange on which such
security is listed, if such security is listed on any such exchange, or the
closing bid quotation with respect to the security on the National Association
of Securities Dealers, Inc. automated quotations system or any similar system
then in general use, if such quotations are available, and, in the case of other
property, the fair market value thereof as agreed to by the parties, or, if they
are unable to agree, as determined by a third party appraiser selected by the
parties.
The Irrevocable Proxy will terminate on the earlier of the Effective Time
or 24 months following the date of termination of the Merger Agreement, provided
that the appointment of Teva as agent, attorney and proxy will terminate upon
the termination of the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Directors and Officers of the Surviving Corporation. At the Effective Time,
the Board of Directors of the Surviving Corporation will consist of: Harold
Snyder, Biocraft's current Chairman, Chief Executive Officer and President;
Beatrice Snyder, Biocraft's current Senior Vice President and Secretary; Eli
Hurvitz, the President and Chief Executive Officer of Teva; William Fletcher,
the President and Chief Executive Officer of Lemmon; Peter H. Jakes, U.S. legal
counsel to Teva; and Elon Kohlberg, a professor of business administration at
Harvard University. Each such director will hold office until his or her
successor is duly appointed and qualified. At the Effective Time, William
Fletcher will serve as President and Chief Executive Officer of the Surviving
Corporation, and Peter Terreri, Vice President and Chief Financial Officer of
Lemmon, will serve as Vice President, Chief Financial Officer and Treasurer.
Pursuant to the employment agreements referred to below under ' -- Employment
Agreements', Harold Snyder will serve as Senior Vice President and Beatrice
Snyder will serve as Vice President -- Cost Accounting and Inventory and
Secretary of the Surviving Corporation. Harold Snyder and Beatrice Snyder are
husband and wife. Other current officers will continue to serve as officers of
the Surviving Corporation at the discretion of the Board.
Representation on the Board of Teva. The Board of Directors of Teva has
adopted a resolution nominating Harold Snyder for election at the next annual
meeting following the Effective Time as a director of Teva for a three-year
term, recommending that upon his election to the Board, he be
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designated as a member of the Executive Committee of Teva's Board and
recommending to the Board as reconstituted after each of the following two
annual meetings to continue to designate Mr. Snyder as a member of the Executive
Committee while he continues to serve on the Teva Board. In addition, pursuant
to the terms of Teva's Articles of Association, the Snyder family will be
entitled to appoint a director of Teva by virtue of their holding in excess of
4% of Teva's outstanding share capital. The Snyder family has advised Teva that
they intend to select Beatrice Snyder to serve as this director.
Employment Agreements. The Surviving Corporation will, as a condition
precedent to the Merger, execute employment agreements (the 'Employment
Agreements') with Harold Snyder and Beatrice Snyder (each, an 'Executive'), to
take effect at the Effective Time. The Employment Agreements provide for an
employment term of three years from the Effective Time. The Executives will
continue to receive their current annual base salary ($500,000 in the case of
Harold Snyder and $173,414 in the case of Beatrice Snyder). If the Executive's
employment is terminated prior to the expiration of the three-year term by the
Surviving Corporation other than as a result of the death or disability of the
Executive or for 'Cause' (as such term is defined in the Employment Agreements),
the Surviving Corporation is obligated to pay the Executive an amount equal to
the Executive's unearned base salary for the remainder of the three-year term of
the applicable Employment Agreement. In addition, if the Executive terminates
employment for 'Good Reason' (as such term is defined in the Employment
Agreements), the Executive is also entitled to payment of such amount. The
Executive will be entitled to participate in, or receive benefits under, any
employee benefit plan, arrangement or perquisite generally made available by the
Surviving Corporation during the three-year term of the Employment Agreements to
its executives and key management employees.
Severance and Indemnification. The Merger Agreement provides for the
payment of certain severance benefits to executive officers and employees of
Biocraft. In addition, pursuant to the Merger Agreement the Surviving
Corporation will maintain, for a period of six years after the Effective Time,
certain rights to indemnification in favor of present and former directors,
officers and employees of Biocraft. See 'THE MERGER -- Severance Payments;
Effect on Employee Benefit and Stock Option Plans; Indemnification'.
OPERATIONS AFTER THE MERGER
At the Effective Time, Merger Sub will be merged with and into Biocraft,
and Biocraft, as the Surviving Corporation in the Merger, will become a wholly
owned subsidiary of Teva. Teva plans to cause Biocraft and Lemmon, Teva's U.S.
generic drug subsidiary, to be managed as a single unit under the direction of
William Fletcher, the President and Chief Executive Officer of Lemmon, and
become part of the same U.S. consolidated tax return group. Teva is currently
exploring the possibility of eventually merging Lemmon into Biocraft.
Neither Teva nor Biocraft has any present plans for dispositions of
material assets. There can be no assurance, however, that in the future either
Teva or Biocraft, or both, may not deem it advisable to dispose of material
assets. Pursuant to the terms of the Merger Agreement, however, Teva will not,
(i) after the Effective Time, make any disposition of the assets of the
Surviving Corporation or any equity interest in the Surviving Corporation which
would prevent the Merger from being recorded as a pooling of interest
transaction or (ii) prior to the third anniversary of the Effective Time (or
under certain circumstances the fifth anniversary), make any disposition of the
assets of the Surviving Corporation that would cause any recognition of gain
under a gain recognition agreement with the Internal Revenue Service by any
former Biocraft shareholder who is a 'five percent transferee shareholder' (as
defined in the U.S. Treasury regulations), except in certain specified
circumstances.
Teva has in the past paid cash dividends. The payment and amount of future
dividends, if any, will be determined by the Teva Board based upon conditions
then existing, including Teva's earnings, if any, and financial condition, tax
expense, capital requirements and other relevant factors.
EFFECT ON DIVIDEND REINVESTMENT PLAN
Biocraft has, pursuant to the Merger Agreement, amended the Stockholders
Dividend Reinvestment and Stock Purchase Plan to terminate the supplemental
payment investment option offered
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thereunder. Teva does not have a comparable plan; accordingly no dividend
reinvestment plan will be available following the Merger to former holders of
Biocraft Common Stock.
SEVERANCE PAYMENTS; EFFECT ON EMPLOYEE BENEFIT AND STOCK OPTION PLANS;
INDEMNIFICATION
Severance Payments. The Merger Agreement provides that Teva will cause the
Surviving Corporation to adopt a severance plan providing for payment to each
Biocraft employee, whose tenure and conditions of employment are not covered by
a collective bargaining agreement, and whose employment is terminated within one
year after the Effective Time a severance benefit in cash in an amount equal to:
(i) in the case of Vice Presidents and Assistant Vice Presidents of Biocraft,
twelve (12) months base salary, payable in equal monthly installments, and (ii)
in the case of other non-union employees, such employee's regular weekly base
pay multiplied by the number of years of employment such employee has had with
Biocraft up to ten (10) years of employment, plus two times such weekly salary
multiplied by the number of years of such employment beyond the tenth year (such
payment to be paid on a weekly basis in an amount not exceeding such regular
weekly base pay, and reduced by any applicable withholding and payroll taxes).
The Surviving Corporation, however, is free to include customary provisions in
such severance plan including, without limitation, provisions which preclude
payment in the event of a termination for cause and payment as a result of
inter-plant transfers among Biocraft's New Jersey facilities. Any such employee
whose employment is terminated after the first anniversary of the Effective Time
will be entitled to the same severance benefits as are payable to other
non-union employees of Teva's U.S. generic drug subsidiary.
Employee Benefit Plans. The Merger Agreement further provides that, at the
Effective Time, subject to applicable law, all of the Employee Benefit Plans (as
defined therein) as of the date of the closing of the Merger (the 'Closing
Date'), other than those involving stock of Biocraft ('Current Benefits') and
all employment agreements between Biocraft and any of its employees in effect as
of the Closing Date will continue, and for not less than one year from and after
the Closing Date, Teva will provide for the employees of the Surviving
Corporation to continue to participate in the Current Benefits and to be
provided aggregate benefits thereunder that are not less than those provided
thereunder during Biocraft's most recent fiscal year. Teva may effect any change
after such one-year period on a prospective basis in any Employee Benefit Plan
or Pension Plan (as defined therein) or terminate such plans, provided that to
the extent it terminates any Employee Benefit Plan after the Effective Time, and
any U.S. generic drug subsidiary of Teva has in place a benefit plan providing
benefits of the same general type as the terminated Employee Benefit Plan to its
similarly situated subsidiaries' employees, Teva will thereafter permit the
employees of the Surviving Corporation to participate in such employee benefit
plan of its U.S. subsidiary or a similar plan.
Stock Option Plans. Certain officers, directors and employees of Biocraft
have received options to acquire Biocraft Common Stock ('Biocraft Options')
pursuant to the Biocraft Incentive Stock Option Plan and the 1987 Directors'
Stock Option Plan (the 'Biocraft Stock Plans'). Pursuant to the Merger
Agreement, prior to the Effective Time the Biocraft Board will terminate the
Biocraft Stock Plans and each holder of Biocraft Options pursuant to such plans
will, in accordance with the terms of his or her option agreements, have the
right to exercise, by written notice, all such options, whether or not then
exercisable by the terms of the applicable option agreement. Options as to which
no notice of exercise is received by Biocraft will be converted into the right
to receive promptly after the Effective Time, as to each share of Biocraft
Common Stock covered thereby (without regard to any then applicable restrictions
on the exercise of such options), the number of Teva ADSs determined by (i)
multiplying the Exchange Ratio by the fair market value of a Teva ADS on the
Effective Date, (ii) subtracting from the product of such multiplication the sum
of the applicable per share exercise price plus applicable per share withholding
for taxes (which will be appropriately remitted to the applicable tax authority
on behalf of such optionee) and (iii) dividing the amount obtained in clause
(ii) by the fair market value of an ADS on the Effective Date. For such purpose,
the fair market value of a Teva ADS on the NASDAQ National Market shall mean the
average of the last sale prices of a Teva ADS on the NASDAQ on each of the ten
trading days ending two trading days prior to the Effective Date. In addition,
prior to the Effective Time, but subject to the Merger, the Biocraft Board will
cause Biocraft's Restricted Stock Purchase Plan to be amended to (a) provide
that no further restricted stock grants be
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made after the Effective Time and (b) provide that the terms and conditions of
such Plan will apply to the Teva ADSs and Teva Ordinary Shares issued upon the
Merger to the holders of restricted stock under such Plan, and such holders
shall thereafter hold such Teva ADSs and Teva Ordinary Shares subject to the
terms and conditions of such Plan, including without limitation any requirement
for the legending of certificates evidencing such securities.
The following table sets forth with respect to each of the current
directors of Biocraft and all executive officers thereof as a group (i) the
number of shares of Biocraft Common Stock subject to stock options held by them
as of April 22, 1996, (ii) the number of shares subject to options held by them
that had not vested prior to April 22, 1996 (all of which will be automatically
vested and immediately exercisable at the Effective Time) and (iii) the average
exercise price per share of Biocraft Common Stock subject to such stock options
as of April 22, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
BIOCRAFT COMMON
NUMBER OF SHARES OF STOCK SUBJECT TO
BIOCRAFT COMMON OPTIONS THAT HAD AVERAGE
STOCK SUBJECT NOT VESTED BEFORE EXERCISE PRICE
NAME TO OPTIONS APRIL 22, 1996 PER SHARE
- ------------------------------------------------------ ------------------- ------------------- --------------
<S> <C> <C> <C>
Beryl Snyder.......................................... 13,350 -- $ 8.75
Brian Snyder.......................................... 12,450 -- 9.02
Jay Snyder............................................ 12,450 -- 9.02
All executive officers and directors as a group....... 117,400 1,850 $10.25
</TABLE>
Indemnification of Directors and Officers Pursuant to the Merger Agreement.
Pursuant to the Merger Agreement, for a period of six years after the Effective
Time, the Surviving Corporation will, subject to applicable law, maintain all
rights to indemnification existing on the date of the Merger Agreement under
Biocraft's Certificate of Incorporation and By-laws in favor of the present and
former directors, officers and employees of Biocraft with respect to matters
occurring prior to the Effective Time, and Teva has guaranteed the performance
in full of such indemnification obligations of the Surviving Corporation. Teva
has agreed to use its best efforts to cause the Surviving Corporation to
maintain for three years from the Effective Time, the current policies of
directors' and officers' liability insurance maintained by Biocraft covering
those persons who are currently covered by Biocraft's directors' and officers'
liability insurance policy, provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms no
less advantageous to such directors, officers and employees and the Surviving
Corporation is not required to pay an annual premium therefor in excess of 150%
of the last annual premium paid by Biocraft prior to the date of the Merger
Agreement ('Biocraft's Current Premium'). If such premiums for such insurance at
any time exceed 150% of Biocraft's Current Premium, then the Surviving
Corporation will cause to be maintained policies of insurance which, in the
Surviving Corporation's good faith determination, provide the maximum coverage
available at an annual premium equal to 150% of Biocraft's Current Premium and
the indemnified parties have the right to provide funds to the Surviving
Corporation to fund premiums to the extent they exceed 150% of Biocraft's
Current Premium.
REGULATORY FILINGS AND APPROVALS
Antitrust. The Merger is subject to the requirements of the HSR Act and the
rules and regulations thereunder, which provide that certain transactions may
not be consummated until required information and materials have been furnished
to the Antitrust Division and the FTC and certain waiting periods have expired
or been terminated. Teva and Biocraft filed the required information and
materials with the Antitrust Division and the FTC on March 1, 1996. Early
termination of the statutory waiting period under the HSR Act was granted on
March 28, 1996.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the Effective Time, either the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, or certain other persons could take action under the antitrust
laws, including seeking to enjoin the Merger.
Israeli Regulatory Approvals. The consummation of the Merger is conditioned
upon (i) there being in effect the consent of the Controller of Foreign Currency
to the Merger, the issuance of Teva Ordinary
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Shares and certain of the transactions contemplated in connection with the
Merger, (ii) Teva having received the required permit from the Israeli
Securities Authority to publish a prospectus in connection with the Merger or
having obtained an exemption from such requirement and (iii) consent in
principle having been granted by the TASE to list the Teva Ordinary Shares to be
issued in connection with the Merger. Teva has obtained the consent of the
Controller of Foreign Currency to the Merger, the issuance of the Teva Ordinary
Shares and the transactions contemplated thereby. Teva has obtained from the
Israeli Securities Authority an exemption from the requirement to publish a
prospectus in connection with the Merger. Both the Listing and the Executive
Committees of the TASE have recommended to the TASE Board of Directors to
consent in principle to list the Teva Ordinary Shares to be issued pursuant to
this Proxy Statement/Prospectus. The TASE Board of Directors is scheduled to
consider the matter on May 2, 1996.
RESALE OF TEVA ADSS
All Teva ADSs received by holders of Biocraft Common Stock in the Merger
will have been registered under the Securities Act and will be freely
transferable, except that Teva ADSs received by persons who are deemed to be
affiliates of Biocraft (for purposes of Rule 145 under the Securities Act or for
purposes of qualifying the Merger for pooling of interests accounting treatment
under Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations) prior to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 promulgated under the Securities
Act (or Rule 144 in the case of such persons who become affiliates of Teva) or
as otherwise permitted by the Securities Act. Persons who may be deemed to be
affiliates of Biocraft or Teva generally include individuals or entities that
control, are controlled by, or are under common control with, such party and may
include certain officers and directors of such party as well as principal
shareholders of such party. The rights of affiliates of Biocraft to receive Teva
ADSs in the Merger are conditioned upon the execution by each of such affiliates
of a written agreement to the effect that such person will not offer or sell or
otherwise dispose of any of the Teva ADSs or Teva Ordinary Shares represented by
such ADSs issued to such person in the Merger either in violation of the
Securities Act or the rules and regulations promulgated thereunder or at any
time during the period beginning 30 days before the Merger and ending when
financial results covering at least 30 days of post-merger operations of the
combined entity have been published. The ADRs received in the Merger by such
affiliates will bear a restrictive legend to such effect. Pursuant to the
written agreements described above, Harold and Beatrice Snyder and the trusts
which they have established for the benefit of their children have received
certain registration rights from Teva.
RIGHT OF THE BIOCRAFT BOARD TO WITHDRAW RECOMMENDATION
Under the Merger Agreement, the Biocraft Board may not (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Teva or Merger
Sub, the Biocraft Board's approval or recommendation of the Merger Agreement or
the Merger, (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, if the Biocraft Board receives a
Takeover Proposal that, in the exercise of its fiduciary obligations (as
determined in good faith by the Biocraft Board, after reviewing the advice of
outside counsel) it determines to be a Superior Proposal, the Biocraft Board may
withdraw or modify its approval or recommendation of the Merger Agreement or the
Merger, approve or recommend any Superior Proposal, enter into an agreement with
respect to such Superior Proposal or terminate the Merger Agreement, in each
case at any time after the second business day following Teva's receipt of
written notice advising Teva that the Biocraft Board has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal. In addition, if
Biocraft proposes to enter into an agreement with respect to any Takeover
Proposal, it shall concurrently with entering in into such agreement pay, or
cause to be paid, to Teva the fees and expenses described below under 'TERMS OF
THE MERGER AGREEMENT -- Certain Fees and Expenses'.
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DESCRIPTION OF TEVA
Teva develops, manufactures and markets branded, generic (off-patent) and
branded generic pharmaceutical products. As the largest branded pharmaceutical
company in Israel, Teva has successfully utilized its integrated production,
manufacturing and research capabilities to establish a worldwide pharmaceutical
business focusing on the growing demand for generic drugs and the opportunities
for proprietary branded products for niche therapeutic categories. Teva also
manufactures and sells bulk pharmaceutical chemicals, hospital supplies,
veterinary products, yeast and alcohol. Approximately 44% of its $667.7 million
sales in 1995 were in North America and 17% were in Europe and other markets
outside of Israel.
During 1995, Teva acquired two companies in Europe. In October 1995, Teva
acquired Industrie Chimiche Italiane S.p.A. -- a bulk pharmaceutical
manufacturer located in Milan, Italy. In November 1995, Teva acquired 78% of
Biogal Pharmaceutical Works Ltd. ('Biogal') -- a Hungarian pharmaceutical
manufacturer as well as producer of bulk pharmaceuticals. Subsequently Teva
acquired additional shares of Biogal on the open market and currently holds 87%
of Biogal.
Through its wholly owned U.S. subsidiary, Lemmon, Teva is a major
participant in the U.S. generic pharmaceutical market. Lemmon's sales reached
$240.2 million in 1995, and it currently markets over 50 generic products. In
1995, Teva and Lemmon received 12 generic drug approvals and began marketing
eight of such products. As of March 1, 1996, Teva had 17 generic drug
applications pending before the FDA and has product development programs for
approximately 50 additional products.
Teva possesses a significant bulk pharmaceutical chemical manufacturing
operation. As both a supplier and end user of pharmaceutical raw materials, Teva
believes that its experience complying with stringent FDA requirements and
proven manufacturing expertise are significant competitive advantages relative
to many of its smaller competitors.
Teva uses a combination of its own research and development personnel and
its access to the major research institutions in Israel to develop innovative
drug products for selected niche markets. To date these development efforts have
primarily focused on products for neurological disorders, primarily Copaxone'r'
(COP-1), a treatment for multiple sclerosis. During 1995, the NDA file for
Copaxone'r' was submitted to the FDA, and similar applications were submitted to
the Medicines Control Agency in the United Kingdom and to the Ministry of Health
in Israel.
Teva's operations are conducted directly and through subsidiaries in
Israel, Europe and the United States. Teva was incorporated in Israel on
February 13, 1944 and is the successor to a number of Israeli corporations, the
oldest of which was established in 1901. Teva grew through a series of mergers
and acquisitions commencing in the 1960s which consolidated part of the
fragmented pharmaceutical industry in Israel, thereby resulting in increased
efficiency and greater production capacity.
Teva's executive offices are located at 5 Basel Street, P.O. Box 3190,
Petach Tikva 49131 Israel, telephone number 011-972-3-9267267, telefax number
011-972-3-9234050.
DESCRIPTION OF BIOCRAFT
Biocraft develops, manufactures and markets generic drugs. Its dosage form
product line comprises 22 prescription drug products and one prescription
veterinary product, constituting an aggregate of 70 products sold in various
oral dosage forms, including compressed tablets, two-piece hard-shell capsules,
powders for oral solution or suspension and liquids. FDA approvals were required
and obtained for each of these products.
More than half of Biocraft's dosage form products have been semi-synthetic
penicillin or cephalosporin products. Biocraft also manufactures and markets a
range of other oral dosage form generic products, including other types of
antibiotics, anti-infectives, anti-depressants, bronchial dilators, a
cardiovascular drug, a gastrointestinal drug, an analgesic and an anti-spasmodic
drug.
Biocraft also manufactures at its Waldwick, New Jersey facility the bulk
product it uses in its semi-synthetic penicillin drugs and produces bulk form
Cephalexin at its Mexico, Missouri facility. Chemical intermediates also
manufactured in Biocraft's Mexico, Missouri facility are used in Biocraft's
production of certain antibiotics and are also sold at times to third parties.
Biocraft is currently in the
37
<PAGE>
<PAGE>
second year of a three-year supply agreement with Eli Lilly and Company ('Eli
Lilly') with respect to one such chemical intermediate. Under the agreement,
Biocraft supplies Eli Lilly with substantial quantities of a product
manufactured at Biocraft's Missouri facility and Eli Lilly supplies Biocraft
with substantial quantities of a raw material at a fixed exchange ratio.
Biocraft's primary product development strategies are to manufacture and
sell in generic form antibiotic drugs for which Biocraft can maintain certain
cost controls by manufacturing the chemical intermediates and/or active
ingredients in bulk. Biocraft also is developing other types of products in
order to broaden its product line. In so doing, it selects products for which it
expects initially limited competition as a result of approval requirements,
complexity of manufacture or other factors, and products in which the total
generic market is anticipated to be large enough to allow for multiple generic
versions. Biocraft's research and development generally consists of activities
related to new generic drug product development and research for developing new
bulk manufacturing processes and products.
Biocraft sells its products, primarily through its internal sales staff, to
approximately 300 customers. More than half of Biocraft's gross sales of drugs
in dosage form is made under its own label and the balance is made under
customers' labels; however, in all cases Biocraft is named on the label as the
manufacturer. Sales of drugs in dosage forms are made primarily to distributors,
drug wholesalers, drugstore chains, mass merchandisers, other drug
manufacturers, health care institutions and government agencies, almost all of
which are located in the United States.
COMPARATIVE STOCK PRICES AND DIVIDENDS
The following table sets forth the high and low sales prices per Teva ADS
on the NASDAQ National Market and per share of Biocraft Common Stock on the NYSE
(on a historical and equivalent per share basis) on January 26, 1996, the last
trading day in the United States before the public announcement of the execution
of the Merger Agreement:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Teva ADSs........................................................ $46.00 $45.25
Biocraft Common Stock
Historical.................................................. $13.63 $12.75
Equivalent share basis(1)................................... 21.21 20.86
</TABLE>
- ------------
(1) Equivalent share basis is determined by multiplying the applicable Teva ADS
price by 0.461 to reflect the terms of the Merger Agreement.
The last reported sales price of the Teva Ordinary Shares on the Tel Aviv
Stock Exchange on January 28, 1995, the last trading day on such exchange prior
to public announcement of the signing of the Merger Agreement, was $4.58. Each
Teva ADS represents 10 Teva Ordinary Shares.
TEVA ADSS
Teva ADSs have been traded in the United States since 1982 and were
admitted to trading on the NASDAQ National Market in October 1987. Teva ADSs are
quoted under the symbol TEVIY. The Bank of New York serves as Depositary for the
ADSs. Each Teva ADS represents 10 Teva Ordinary
38
<PAGE>
<PAGE>
Shares. The table below sets forth the high and low last reported sale prices
for Teva ADSs during the indicated fiscal quarters.
<TABLE>
<CAPTION>
HIGH LOW HIGH LOW
---------- ------------- ---------- -----
(IN DOLLARS) (IN DOLLARS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994: Year ending December 31, 1996:
First quarter.................... 34 1/4 25 First quarter ........................ 46 1/8 37 7/8
Second quarter................... 27 3/8 22 1/2 Second quarter (through
Third quarter.................... 30 3/4 23 1/4 April 26, 1996 ....................... 45 1/2 37 15/16
Fourth quarter................... 29 1/4 22 7/8
Year ended December 31, 1995:
First quarter.................... 30 3/4 21 9/16
Second quarter................... 38 3/8 29 3/8
Third quarter.................... 43 35 3/4
Fourth quarter................... 47 1/8 34 7/8
</TABLE>
On April 26, 1996, the last reported sale price for the Teva ADSs on the
NASDAQ National Market was $45.50. As of April 25, 1996, there were 831 record
holders of Teva ADSs, which in total represented approximately 66% of the total
outstanding Teva Ordinary Shares, and 819 of such record holders were in the
United States.
On February 14, 1994, the American Stock Exchange, the Chicago Options
Exchange and the Pacific Stock Exchange began quoting options on Teva ADSs under
the symbol TEVIY.
Since May 1994, the Teva ADSs have also been traded on SEAQ International
in London.
TEVA ORDINARY SHARES
Teva Ordinary Shares have been listed on the Tel Aviv Stock Exchange since
1951. The table below sets forth the high and low last reported sale prices of
the Teva Ordinary Shares on the Tel Aviv Stock Exchange during the indicated
fiscal quarters as reported by such exchange. The translation into United States
dollars is based on the daily representative rate of exchange published by the
Bank of Israel then in effect.
<TABLE>
<CAPTION>
HIGH LOW HIGH LOW
----- ----- ----- -----
(IN DOLLARS) (IN DOLLARS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994: Year ending December 31, 1996:
First quarter..................... 3.40 2.60 First quarter ......................... 4.58 3.74
Second quarter.................... 2.75 2.19 Second quarter (through
Third quarter..................... 2.98 2.22 April 28, 1996) ....................... 4.48 3.70
Fourth quarter.................... 2.90 2.42
Year ended December 31, 1995:
First quarter..................... 3.03 2.15
Second quarter.................... 3.73 2.92
Third quarter..................... 4.25 3.67
Fourth quarter.................... 4.66 3.52
</TABLE>
On April 28, 1996, the last reported sale price of Teva Ordinary Shares on
the Tel Aviv Stock Exchange was $4.48. As of April 25, 1996, there were 196
record holders of Teva Ordinary Shares.
DIVIDENDS ON TEVA ORDINARY SHARES
For over 30 years Teva has paid dividends, and since 1987 Teva has paid
dividends on a regular quarterly basis. Future dividend policy will be reviewed
by the Board of Directors based upon conditions then existing, including Teva's
earnings, financial condition, capital requirements and other factors. Dividends
are declared and paid in New Israeli Shekels ('NIS'). Such dividends are
converted into dollars and paid by the Depositary of the ADSs for the benefit of
owners of ADSs.
39
<PAGE>
<PAGE>
Dividends paid by an Israeli company to shareholders residing outside
Israel are currently subject to withholding of Israeli income tax at a rate of
up to 25%. In the case of Teva, the applicable withholding tax rate will depend
on the particular facilities which have generated the earnings that are the
source of the dividend and, accordingly, the applicable rate will change from
time to time. The rate of tax withheld on Teva's dividends has typically been at
25%. United States persons who become owners of Teva ADSs must include the
entire amount of any dividend paid by Teva with respect to the Teva Ordinary
Shares (not reduced by any Israeli income taxes withheld) in their gross income
for U.S. Federal income tax purposes. United States corporations holding Teva
ADSs will not be entitled to the 70% dividends received deduction under the
Code. Residents of the United States generally will have withholding tax in
Israel deducted by Teva. Such persons may be entitled to relief from United
States taxation under the Code, using such tax either as a reduction of taxable
income or as a dollar-for-dollar credit against United States tax subject to
certain limitations.
The following table sets forth the amounts of the dividends paid in respect
of each period indicated prior to deductions for applicable Israeli withholding
taxes:
<TABLE>
<CAPTION>
CENTS PER TEVA ADS CENTS PER TEVA ADS
- ------------------------------------------------------ ------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1991: Year ended December 31, 1994:
1st interim................................ 2.1 1st interim..................................... 6.6
2nd interim................................ 2.2 2nd interim..................................... 6.6
3rd interim................................ 2.2 3rd interim..................................... 6.6
4th interim................................ 2.5 4th interim..................................... 6.7
Year ended December 31, 1992: Year ended December 31, 1995:
1st interim................................ 2.5 1st interim..................................... 6.7
2nd interim................................ 2.5 2nd interim..................................... 6.6
3rd interim................................ 2.3 3rd interim..................................... 6.5
4th interim................................ 3.6 4th interim..................................... 6.4
Year ended December 31, 1993: Year ending December 31, 1996
1st interim................................ 3.7 1st interim..................................... 5.0
2nd interim................................ 5.2
3rd interim................................ 5.1
4th interim................................ 6.6
</TABLE>
BIOCRAFT COMMON STOCK
Biocraft Common Stock is listed on the NYSE under the symbol BCL. The table
below sets forth the high and low last reported sale prices for Biocraft Common
Stock on the NYSE during the indicated fiscal quarters.
<TABLE>
<CAPTION>
HIGH LOW HIGH LOW
--------- --------- ------------ -----
(IN DOLLARS) (IN DOLLARS)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994: Year ended March 31, 1996:
First quarter..................... 26 1/2 15 3/4 First quarter.......................... 22 1/2 17 5/8
Second quarter.................... 35 26 1/8 Second quarter......................... 21 1/4 16 7/8
Third quarter..................... 37 5/8 18 7/8 Third quarter.......................... 17 1/4 12 5/8
Fourth quarter.................... 21 3/4 14 3/4 Fourth quarter......................... 20 5/8 12 3/4
Year ended March 31, 1995: Year ending March 31, 1997:
First quarter..................... 18 1/8 13 5/8 First quarter (through
Second quarter.................... 17 1/8 11 3/4 April 26, 1996)........................ 21 17 3/8
Third quarter..................... 19 1/4 14 7/8
Fourth quarter.................... 19 1/4 15 1/4
</TABLE>
On April 26, 1996, the last reported sale price for Biocraft Common Stock
on the NYSE was $21.00. As of April 22, 1996, there were 761 record holders of
Biocraft Common Stock.
40
<PAGE>
<PAGE>
DIVIDENDS ON BIOCRAFT COMMON STOCK
Biocraft has not paid a cash dividend on its Common Stock since November
1994 and does not currently anticipate paying cash dividends in the foreseeable
future. On August 8, 1994, Biocraft declared a cash dividend of $.10 per share
on its Common Stock, which was paid on November 22, 1994. A cash dividend of
$.10 per share on Biocraft Common Stock had also been paid on November 18, 1993.
The payment of dividends is subject to the discretion of the Board of Directors
of Biocraft and is dependent upon many factors, including Biocraft's earnings,
its capital needs and its general financial condition. In addition, Biocraft's
credit agreement with General Electric Capital Corporation restricts Biocraft's
ability to pay dividends unless certain conditions are satisfied and in any
event prohibits the payment of dividends in excess of $1.5 million per annum.
41
<PAGE>
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed balance sheet at
December 31, 1995 gives effect to the Merger of Biocraft into Teva as if it had
occurred as of December 31, 1995. The following unaudited pro forma combined
condensed statements of operations for each of the three years in the period
ended December 31, 1995 gives effect to the acquisitions by Teva, in the fourth
quarter of 1995, of Biogal Pharmaceutical Works Ltd. and Industrie Chimiche
Italiane S.p.A. (the 'Acquisitions') as if they had occurred on January 1, 1995
and to the Merger as if it had occurred on January 1, 1993. The pro forma
financial statements give effect to the above mentioned transactions as follows:
The Merger is accounted for under the 'pooling of interests' method, while the
Acquisitions are accounted for under the 'purchase' method.
Biocraft's historical financial statements and/or summary financial
information derived therefrom, presented herein or incorporated by reference are
presented on the basis of fiscal years ending on March 31. For purposes of the
pro forma information, Biocraft's statements of operations for all periods
presented have been recast to reflect the results of operations on a calendar
year basis, prior to the combination of those statements with the statements of
Teva.
These unaudited pro forma statements have been prepared from, and should be
read in conjunction with, the historical consolidated financial statements and
the notes thereto of Teva and Biocraft, which are incorporated by reference in
this Proxy Statement/Prospectus.
The pro forma data are presented for informational purposes only and are
not necessarily indicative of the operating results or financial position that
would have occurred had the Merger and the Acquisitions been consummated at the
dates indicated nor are they necessarily indicative of future operating results
or financial position.
42
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TEVA BIOCRAFT ADJUSTMENTS COMBINED
------- -------- ----------- ---------
(IN THOUSANDS US DOLLARS)
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents.............................. 63,396 1,469 64,865
Short-term investments................................. 10,273 10,273
Accounts receivable.................................... 204,169 30,750 234,919
Inventories............................................ 188,661 56,229 (9,184)(3a) 235,206
(500)(3b)
Other current assets................................... 3,686 (66)(3a) 3,620
------- -------- ----------- ---------
Total current assets.............................. 466,499 92,134 (9,750) 548,883
Investments and non-current receivables..................... 47,890 180 48,070
Property, plant and equipment
Cost................................................... 423,549 137,148 (4,053)(3a) 556,644
Less accumulated depreciation.......................... 131,968 47,229 (571)(3a) 178,626
------- -------- ----------- ---------
291,581 89,919 (3,482) 378,018
Intangibles and other assets................................ 65,324 1,042 (700)(3c) 65,666
------- -------- ----------- ---------
Total assets...................................... 871,294 183,275 (13,932) 1,040,637
------- -------- ----------- ---------
------- -------- ----------- ---------
LIABILITIES:
Current Liabilities:
Short-term credit...................................... 250,376 4,218 254,594
Current maturities of long-term debt................... 4,848 4,848
Accounts payable and accrued expenses.................. 151,331 27,923 12,800(3d) 192,054
------- -------- ----------- ---------
Total current liabilities......................... 401,707 36,989 12,800 451,496
Long-term debt.............................................. 40,763 52,402 93,165
Deferred taxes.............................................. 11,052 4,133 (4,965)(3a) 7,320
(2,900)(3e)
Other liabilities........................................... 10,210 10,210
------- -------- ----------- ---------
Total liabilities................................. 463,732 93,524 4,935 562,191
Minority interest........................................... 4,679 4,679
Shareholders' equity:
Share capital.......................................... 122,173 43,680 (1,305)(3f) 164,548
Other capital surplus.................................. 9,129 9,129
Retained earnings...................................... 282,593 47,376 (7,767)(3a) 311,102
(11,100)(3e)
Treasury stock......................................... (11,012) (1,305) 1,305(3f) (11,012)
------- -------- ----------- ---------
Total shareholders' equity........................ 402,883 89,751 (18,867) 473,767
------- -------- ----------- ---------
Total liabilities and shareholders' equity.................. 871,294 183,275 (13,932) 1,040,637
------- -------- ----------- ---------
------- -------- ----------- ---------
</TABLE>
43
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995 PRO FORMA ADJUSTED PRO FORMA PRO FORMA
TEVA ACQUISITIONS ADJUSTMENTS TEVA BIOCRAFT ADJUSTMENTS COMBINED
------- ------------ ----------- -------- -------- ----------- ---------
(IN THOUSANDS US DOLLARS EXCEPT PER ADS DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales............................... 667,677 83,174 750,851 144,632 (1,029)(2e) 894,454
Costs of sales...................... 389,519 63,884 453,403 122,721 3,106(2a) 578,374
173(2b)
(1,029)(2e)
------- ------------ -------- -------- ----------- ---------
Gross profit.................... 278,158 19,290 297,448 21,911 (3,279) 316,080
Research and development expenses:
Total expenses.................. 67,934 4,324 72,258 11,129 822(2c) 84,209
Less grants and participations.. (36,345) (36,345 ) (36,345)
------- ------------ -------- -------- ----------- ---------
31,589 4,324 35,913 11,129 822 47,864
Selling, general and 131,411 10,167 236(2f) 141,814 14,035 155,849
administrative....................
Write-off in accordance with General
Health Fund debt arrangement...... 4,745 4,745 4,745
------- ------------ ----- -------- -------- ----------- ---------
Operating income.................... 110,413 4,799 (236) 114,976 (3,253) (4,101) 107,622
Financial expenses, net............. 8,475 3,834 12,309 4,275 16,584
Other income, net................... 4,766 2,970 7,736 143 7,879
------- ------------ ----- -------- -------- ----------- ---------
Income before income taxes.......... 106,704 3,935 (236) 110,403 (7,385) (4,101) 98,917
Income taxes........................ 27,906 1,583 29,489 (2,922) (1,599)(2d) 24,968
------- ------------ ----- -------- -------- ----------- ---------
78,798 2,352 (236) 80,914 (4,463) (2,502) 73,949
Share in profits of associated
companies......................... 27 27 27
Minority interest................... 967 967 967
------- ------------ ----- -------- -------- ----------- ---------
Net income before extraordinary 79,792 2,352 (236) 81,908 (4,463) (2,502) 74,943
item..............................
Extraordinary item.................. (125) (125)
------- ------------ ----- -------- -------- ----------- ---------
Net income.......................... 79,792 2,352 (236) 81,908 (4,588) (2,502) 74,818
------- ------------ ----- -------- -------- ----------- ---------
------- ------------ ----- -------- -------- ----------- ---------
Earnings per ADS.................... 1.46 1.22
Weighted average number of ADSs
outstanding....................... 55,112 6,566 61,678
</TABLE>
44
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TEVA BIOCRAFT ADJUSTMENTS COMBINED
------- -------- ----------- ---------
(IN THOUSANDS US DOLLARS EXCEPT PER ADS DATA)
<S> <C> <C> <C> <C>
Sales...................................................... 587,711 137,377 (231)(2e) 724,857
Cost of sales.............................................. 329,238 112,163 1,809(2a) 443,009
30(2b)
(231)(2e)
------- -------- ----------- ---------
Gross profit............................................... 258,473 25,214 (1,839) 281,848
Research and development expenses:
Total expenses........................................ 50,814 11,300 400(2c) 62,514
Less grants and participations........................ (14,264) (14,264)
------- -------- ----------- ---------
36,550 11,300 400 48,250
Selling, general and administrative........................ 115,193 14,450 129,643
------- -------- ----------- ---------
Operating income........................................... 106,730 (536) (2,239) 103,955
Financial expenses, net.................................... 10,994 3,715 14,709
Other income, net.......................................... 2,251 155 2,406
------- -------- ----------- ---------
Income before income taxes................................. 97,987 (4,096) (2,239) 91,652
Income taxes............................................... 27,022 (2,270) (873)(2d) 23,879
------- -------- ----------- ---------
70,965 (1,826) (1,366) 67,773
Share in profits of associated companies................... 685 685
Minority interest.......................................... (4) (4)
------- -------- ----------- ---------
Net income................................................. 71,646 (1,826) (1,366) 68,454
------- -------- ----------- ---------
------- -------- ----------- ---------
Earnings per ADS........................................... 1.32 1.12
Weighted average number of ADSs outstanding................ 54,968 6,566 61,534
</TABLE>
45
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TEVA BIOCRAFT ADJUSTMENTS COMBINED
------- -------- ----------- ---------
(IN THOUSANDS US DOLLARS EXCEPT PER ADS DATA)
<S> <C> <C> <C> <C>
Sales...................................................... 501,975 147,534 (782)(2e) 648,727
Cost of sales.............................................. 288,120 108,850 38(2a) 396,216
(10)(2b)
(782)(2e)
------- -------- ----------- ---------
Gross profit............................................... 213,855 38,684 (28) 252,511
Research and development expenses:
Total expenses........................................ 31,289 10,140 61(2c) 41,490
Less grants and participations........................ (6,604) (6,604)
------- -------- ----------- ---------
24,685 10,140 61 34,886
Selling, general and administrative........................ 101,189 11,949 113,138
------- -------- ----------- ---------
Operating income........................................... 87,981 16,595 (89) 104,487
Financial expenses, net.................................... 5,255 4,109 9,364
Other income, net.......................................... 2,475 1,691 4,166
------- -------- ----------- ---------
Income before income taxes................................. 85,201 14,177 (89) 99,289
Income taxes............................................... 27,526 5,032 (35)(2d) 32,523
------- -------- ----------- ---------
57,675 9,145 (54) 66,766
Share in profits of associated companies................... 0 0
Minority interest.......................................... (200) 0 (200)
------- -------- ----------- ---------
Net income before cumulative effect of an accounting
change................................................... 57,475 9,145 (54) 66,566
Cumulative effect of an accounting change.................. 30 30
------- -------- ----------- ---------
Net income................................................. 57,475 9,175 (54) 66,596
------- -------- ----------- ---------
------- -------- ----------- ---------
Earnings per ADS........................................... 1.07 1.10
Weighted average number of ADSs outstanding................ 54,950 6,566 61,516
</TABLE>
46
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
1. The unaudited pro forma combined condensed financial statements reflect the
issuance of approximately 6.6 million Teva ADSs in exchange for all of the
shares of Biocraft Common Stock. This reflects an Exchange Ratio of 0.461
Teva ADS for each outstanding share of Biocraft Common Stock which represents
an indicated value of $20.86 per share of Biocraft Common Stock based on the
closing price of $45 1/4 of Teva ADSs at January 26, 1996.
2. Pro forma adjustments relating to the pro forma statements of operations:
(a) an adjustment to Biocraft's cost of sales to conform to Teva's
inventory valuation policies (principally an adjustment for the
change from 'Last-in-First-Out' to 'First-in-First-Out');
(b) an adjustment to Biocraft's cost of sales to conform
Biocraft's policy of capitalizing certain costs in
construction projects, primarily internal labor, benefits
and overhead to Teva's policy of expensing similar costs;
(c) an adjustment to Biocraft's research and development expenses
to conform to Teva's policy of valuing raw materials for
products prior to regulatory approval at their expected
replacement costs versus Biocraft's policy of valuing such
inventory at the lower of cost or market and to conform to
Teva's policy of not capitalizing certain materials and
supplies used in production prior to regulatory approval;
(d) the above conforming adjustments have been tax effected at the
overall expected rate;
(e) inter-company sales have been eliminated;
(f) an adjustment to the 1995 statements of operations of the
Acquisitions to reflect the amortization of the goodwill which
arose in these acquisitions in the period in 1995 prior to the
acquisition by Teva; the statements of income of the
Acquisitions do not reflect non-recurring charges resulting
from their acquisition by Teva.
3. Pro forma adjustments relating to the pro forma balance sheet:
(a) inventories, property plant and equipment, other assets,
deferred taxes and retained earnings were adjusted as a result
of the conforming adjustments described in adjustments 2a, b, c
and d;
(b) inventories have been adjusted to reflect Teva's expected
discontinuance of certain product presentations and packaging
lines after the completion of the Merger;
(c) other assets have been adjusted to write-off certain deferred
costs, principally loan origination costs, to reflect Teva's
expected repayment of such loans after completion of the
Merger;
(d) other accrued expenses have been adjusted to reflect (i)
estimated professional fees and other expenses directly related
to the Merger, (ii) Teva's planned approach for handling
litigation claims after the completion of the Merger and (iii)
severance costs related to the anticipated restructuring costs
resulting from the elimination of certain redundant personnel
after the completion of the Merger;
(e) to reflect in retained earnings and deferred taxes adjustments
3b, c and d;
(f) Biocraft treasury stock has been eliminated.
47
<PAGE>
<PAGE>
TERMS OF THE MERGER AGREEMENT
The following description of certain provisions of the Merger Agreement is
only a summary and does not purport to be complete. This discussion is qualified
in its entirety by reference to the complete text of the Merger Agreement, which
is attached to this Proxy Statement/Prospectus as Annex I and incorporated by
reference herein.
THE MERGER; EXCHANGE AND CONVERSION OF SHARES
Pursuant to and subject to the terms and conditions of the Merger
Agreement, at the Effective Time Merger Sub will be merged with and into
Biocraft. Biocraft will be the surviving corporation in the Merger (the
'Surviving Corporation'). All shares of Biocraft Common Stock, other than shares
owned by Biocraft as treasury stock, shall be converted into and shall be
canceled in exchange for the right to receive 0.461 Teva ADSs, each Teva ADS
representing 10 Teva Ordinary Shares, duly issued and credited as fully paid.
All such shares of Biocraft Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the Teva ADSs to be
issued in exchange therefor upon the surrender of such certificate, without
interest. All shares of Biocraft Common Stock which are held in Biocraft's
treasury shall be canceled and retired prior to the Effective Time and no share
capital or other consideration shall be delivered in exchange therefor. In
consideration of the issue to Teva by the Surviving Corporation of shares of
common stock of the Surviving Corporation and the cancellation of Biocraft
Shares, Teva will allot, in exchange for the issue to Teva of all the unissued
shares of common stock of the Surviving Corporation, the Teva Ordinary Shares to
be issued to the Exchange Agent on behalf of such persons as Biocraft shall
nominate for the purpose of giving effect to the conversion and exchange
referred to above.
Based on the number of shares of Biocraft Common Stock outstanding as of
April 22, 1996, assuming that all Biocraft stock options are exercised, the Teva
ADSs to be issued in the Merger will represent 66,163,610 Teva Ordinary Shares,
or approximately 10.7% of the outstanding Teva Ordinary Shares. See
' -- Treatment of Biocraft Stock Options'.
No fraction of a Teva ADS will be issued in connection with the Merger. If
a holder of shares of Biocraft Common Stock would otherwise be entitled at the
Effective Time to a fraction of a Teva ADS, such stockholder will be entitled to
receive from the Exchange Agent an amount in cash in lieu of such fractional
Teva ADS, representing such holder's proportionate interest in the net proceeds
from the sale on the NASDAQ National Market of the aggregate of the fractions of
ADSs which would otherwise have been issued by the Exchange Agent on behalf of
all such holders.
EXCHANGE OF SHARE CERTIFICATES
At the Effective Time, certificates representing shares of Biocraft Common
Stock ('Biocraft Certificates') will be deemed to represent solely the right to
receive the number of Teva Ordinary Shares represented by Teva ADSs determined
as described above.
As soon as practicable after the Effective Time, Teva will cause the
Exchange Agent to mail or make available a notice and letter of transmittal to
each holder of record of shares of Biocraft Common Stock at the Effective Time,
advising such holder of the effectiveness of the Merger and the procedures for
surrendering to the Exchange Agent any Biocraft Certificates for exchange. If
any Teva ADSs are to be issued to a person other than the person in whose name
the Biocraft Certificate is registered, it shall be a condition to such issuance
that the Biocraft Certificate shall be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such issuance must pay
to the Exchange Agent any transfer or other taxes required as a result of such
issuance to a person other than the registered holder or must establish to the
satisfaction of the Exchange Agent that such tax either has been paid or is not
payable.
Each holder of shares of Biocraft Common Stock so converted, upon surrender
to the Exchange Agent of one or more Biocraft Certificates for cancellation
together with a properly completed letter of transmittal, will be entitled to
receive ADRs representing 0.461 Teva ADSs in respect of each share of Biocraft
Common Stock and cash in lieu of any fractional Teva ADSs in an amount
calculated as
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described above. The Exchange Agent will not issue ADRs in respect to shares of
Biocraft Common Stock which have not been surrendered within six months of the
Effective Time. Thereafter, holders of shares of Biocraft Common Stock may look
only to Teva and the Surviving Corporation for issuance of ADRs in respect of
such shares. Notwithstanding the foregoing, neither Teva nor the Surviving
Corporation shall be liable to any holder of shares of Biocraft Common Stock for
any securities delivered or any amount paid to a public official pursuant to
applicable abandoned property laws. Any Teva ADSs remaining unclaimed by holders
of shares of Biocraft Common Stock three years after the Effective Time (or such
earlier date immediately prior to such time as such securities would otherwise
escheat to or become property of any governmental entity or as is otherwise
provided by applicable law) shall, to the extent permitted by applicable law, be
free and clear of any claims or interest of any person previously entitled
thereto.
No dividends, interest or other distributions with respect to securities of
Teva or the Surviving Corporation issuable with respect to shares of Biocraft
Common Stock shall be paid to the holder of any unsurrendered Biocraft
Certificates until such Biocraft Certificates are surrendered. Upon such
surrender, there shall be paid, without interest, to the person in whose name
the Teva ADSs are registered, all dividends 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.
TREATMENT OF BIOCRAFT STOCK OPTIONS
Prior to the Effective Time, the Biocraft Board will take all reasonably
necessary action to (i) terminate the Biocraft Incentive Stock Option Plan (and
all options thereunder), the Biocraft 1987 Directors' Stock Option Plan (and all
options thereunder) and all other Biocraft plans or agreements providing for the
grant of stock options, (ii) notify the holder of options terminated under (i)
above, and (iii) offer the holder of each such option the right by written
notice to exercise, by written notice, all such options, whether or not then
exercisable by the terms of the applicable option agreement. Options as to which
no notice of exercise is received by Biocraft will be converted into the right
to receive promptly after the Effective Time, as to each share of Biocraft
Common Stock covered thereby (without regard to any then applicable restrictions
on the exercise of such options), the number of Teva ADSs determined by (a)
multiplying the Exchange Ratio by the fair market value of an ADS on the
Effective Date, (b) subtracting from the product of such multiplication the sum
of the applicable per share exercise price plus applicable per share withholding
for taxes (which will be appropriately remitted to the applicable tax authority
on behalf of such optionee) and (c) dividing the amount obtained in clause (b)
by the fair market value of a Teva ADS on the Effective Date. For such purpose,
the fair market value of a Teva ADS on the NASDAQ National Market shall mean the
average of the last sale prices of a Teva ADS on the NASDAQ National Market on
each of the ten trading days ending two trading days prior to the Effective
Date. In addition, prior to the Effective Time, but subject to the Merger, the
Biocraft Board will cause Biocraft's Restricted Stock Purchase Plan to be
amended to (i) provide that no further restricted stock grants be made after the
Effective Time and (ii) provide that the terms and conditions of such Plan will
apply to the Teva ADSs and Teva Ordinary Shares issued upon the Merger to the
holders of restricted stock under such Plan, and such holders shall thereafter
hold such Teva ADSs and Teva Ordinary Shares subject to the terms and conditions
of such Plan, including without limitation any requirement for the legending of
certificates evidencing such securities.
EFFECTIVE TIME
The Effective Time of the Merger, at which time the closing of the Merger
will occur and the conversion of the shares of Biocraft Common Stock will become
effective, will be the time of the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware or at such later time as is provided
in the Certificate of Merger. This filing will occur as soon as practicable
following the approval of the Merger Agreement by the stockholders of Biocraft
and the satisfaction or waiver of other conditions precedent set forth in the
Merger Agreement, but in no event later than the fifth business day after the
satisfaction or waiver of all conditions or at such other time and place and on
such other date as Teva and Biocraft mutually agree. The Effective Time is
currently expected to take place on or about May 31, 1996. See ' -- Termination
Rights' and ' -- Conditions to the Merger'.
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TERMINATION RIGHTS
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time (whether before or after approval of the
Merger by the stockholders of Biocraft) by mutual consent of Biocraft, on the
one hand, and of Teva and Merger Sub, on the other hand, or by either Teva or
Biocraft, if:
(i) the Effective Time shall not have occurred by August 31, 1996;
(ii) there shall be any law or regulation of any competent authority
that makes consummation of the Merger illegal or otherwise prohibited or if
any judgment, injunction, order or decree of any competent authority
prohibiting such transaction is entered and such judgment, injunction,
order or decree shall have become final and nonappealable; or
(iii) there has been a material breach of any covenant or a breach of
any representation or warranty in the Merger Agreement on the part of the
other, which breach of representation or warranty individually or, together
with all other such breaches, materially and adversely affects the value of
the breaching party, provided that any such breach of a covenant or
representation or warranty has not been cured within 15 business days
following receipt by the breaching party of notice of such breach.
The Merger Agreement may be terminated by Biocraft if Biocraft receives a
Takeover Proposal and its Board of Directors reasonably determines that such
Takeover Proposal (as defined below in 'No Solicitation of Other Offers') is a
Superior Proposal (as defined below in 'No Solicitation of Other Offers') after
the second business day following receipt by Teva of notice of such Superior
Proposal specifying the material terms and conditions of the Superior Proposal
and identifying the person making such Superior Proposal; provided that
termination under this clause is not effective until Biocraft has made payment
in full of the Termination Fee (as defined below in 'No Solicitation of Other
Offers').
The Merger Agreement may be terminated by Teva if:
(a) the required approval of the Merger by the stockholders of
Biocraft shall not have been obtained by reason of the failure to obtain
the required vote at a duly held meeting of the stockholders or at any
adjournment thereof;
(b) the Special Meeting is canceled or is otherwise not held prior to
August 15, 1996 (except as a result of a judgment, injunction, order or
decree of any competent authority or events or circumstances beyond the
reasonable control of Biocraft); or
(c) the Biocraft Board of Directors shall have withdrawn or modified
in a manner adverse to Teva its approval or recommendation to Biocraft
stockholders of the Merger Agreement or the Merger or shall have approved
or recommended to Biocraft stockholders that they accept the terms of any
Takeover Proposal or shall have resolved to take any of the foregoing
actions or a Third Party Acquisition shall have occurred; provided,
however, that Biocraft is obligated to pay the termination fee described in
' -- Certain Fees and Expenses'. 'Third Party Acquisition' is defined in
the Merger Agreement as the occurrence of any of the following events: (x)
the acquisition of Biocraft by merger, tender offer or otherwise by any
person other than Teva, Merger Sub or any affiliate thereof (a 'Third
Party'); (y) the acquisition by a Third Party of 20% or more of the total
assets of Biocraft and its subsidiaries, taken as a whole; or (z) the
acquisition by a Third Party of 20% or more of the outstanding Biocraft
Common Stock.
Upon termination, the Merger Agreement shall become void and have no
effect, and there shall be no liability thereunder on the part of Teva, Merger
Sub or Biocraft, except for liability for breach and except that the provisions
governing confidentiality and costs and expenses shall survive any termination
of the Merger Agreement.
CERTAIN FEES AND EXPENSES
Except as provided below, all fees and expenses incurred in connection with
the Merger, the Merger Agreement and the consummation of the transactions
contemplated thereby shall be paid by the party incurring such costs and
expenses, whether or not the Merger is consummated.
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If the Merger Agreement is terminated due to a material breach of
covenants, representations or warranties, then the breaching party must pay all
actual out-of-pocket costs and expenses of the non-breaching party incurred in
connection with the Merger Agreement and the transactions contemplated thereby,
including, without limitation, legal, professional and service fees and expenses
(the 'Expenses'). If the Merger Agreement is terminated by Biocraft in
accordance with the provisions described under 'THE MERGER -- Right of the
Biocraft Board to Withdraw Recommendation' or is terminated by Teva as a result
of (i) the failure of Biocraft to obtain the required vote of stockholders or
hold the Special Meeting by August 15, 1996 (except as a result of a judgment,
injunction, order or decree of any competent authority or events or
circumstances beyond the reasonable control of Biocraft), (ii) the withdrawal or
modification by the Biocraft Board of its recommendation of the Merger or the
recommendation of a Takeover Proposal, or the adoption of a resolution with
respect thereto, or (iii) the occurrence of a Third Party Acquisition, then
Biocraft must pay the Expenses of Teva and Merger Sub.
The Merger Agreement requires Biocraft to pay promptly to Teva a
termination fee in the amount of $6 million if the Merger Agreement is
terminated by Biocraft in accordance with the provisions described under 'THE
MERGER -- Right of the Biocraft Board to Withdraw Recommendation' or is
terminated by Teva as a result of (i) the withdrawal or modification by the
Biocraft Board of its approval or recommendation of the Merger to Biocraft's
stockholders or its approval or recommendation to Biocraft's stockholders of any
Takeover Proposal, or its resolution to do the foregoing, (ii) the occurrence of
a Third Party Acquisition, or (iii) a material breach of any covenant,
representation or warranty of Biocraft in the Merger Agreement or the Special
Meeting being canceled or not being held by August 15, 1996 (except as a result
of a judgment, injunction, order or decree of any competent authority or events
beyond the reasonable control of Biocraft) and, within 12 months of such
termination, a transaction constituting a Third Party Acquisition is consummated
involving any person with whom Biocraft or its agents had any discussions with
respect to a Third Party Acquisition, to whom Biocraft or its agents furnished
information with respect to or with a view to a Third Party Acquisition or who
had submitted a Takeover Proposal or expressed any interest publicly or to
Biocraft in a Third Party Acquisition, in each case prior to such termination.
The Merger Agreement also requires Teva to promptly pay to Biocraft a
termination fee in the amount of $6 million if the Merger Agreement is
terminated due to a material breach of a covenant, representation or warranty of
Teva in the Merger Agreement and, within 12 months after such termination, Teva
is acquired by merger, tender offer or otherwise, or a person acquires 20% or
more of Teva's total assets or outstanding Ordinary Shares or Teva enters into
an agreement with respect to the foregoing.
CONDITIONS TO THE MERGER
The parties' obligations to effect the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of various conditions,
including: (i) approval of the Merger Agreement by the requisite holders of the
Biocraft Common Stock in accordance with applicable law and Biocraft's
Certificate of Incorporation and By-laws; (ii) any waiting period (and any
extension thereof) under the HSR Act applicable to the Merger having expired or
been terminated; (iii) no preliminary or permanent injunction or other order
having been issued by any court or by any governmental or regulatory agency,
body or authority which enjoins, restrains or prohibits the consummation of the
Merger or has the effect of making the Merger illegal and which is in effect at
the Effective Time (each party has agreed to use its best efforts to have any
such injunction or order lifted); (iv) the absence of any statute, rule,
regulation, executive order, decree or order of any kind which prohibits the
consummation of the Merger or has the effect of making the Merger illegal; (v)
consent in principle having been granted by the TASE to list the Teva Ordinary
Shares to be issued in connection with the Merger; (vi) the admission for
trading of the Teva ADSs on the NASDAQ National Market upon official notice of
issuance; (vii) the effectiveness of the Registration Statement and the absence
of any stop order or proceeding for a stop order; (viii) Teva having received
the required permit from the Israeli Securities Authority to publish a
prospectus in connection with the Merger or having obtained an exemption from
such requirement; (ix) consent of the Controller of Foreign Currency of the Bank
of Israel having been obtained to the Merger, the issuance of the Teva Ordinary
Shares in connection therewith and the other transactions contemplated by the
Merger Agreement; (x) consents having been
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obtained from government bodies and authorities, including the Insurance
Commissioner of the State of Hawaii which are required in order to consummate
the Merger and the other transactions contemplated by the Merger Agreement and
the failure to obtain which would have a material adverse effect on the
condition (financial or otherwise) of Teva and its subsidiaries taken as a whole
after giving effect to the Merger; (xi) Biocraft having received an opinion in
form and substance satisfactory to it from Proskauer Rose Goetz & Mendelsohn
LLP, counsel to Biocraft, and Teva having received the opinion of Willkie Farr &
Gallagher, counsel to Teva, to the effect that the Merger will be treated for
United States Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and that Biocraft, Teva and Merger Sub will each
be a party to that reorganization within the meaning of Section 368(b) of the
Code; (xii) no general suspension or limitation of trading having been imposed
on the Teva Ordinary Shares or Teva ADSs or on securities generally on the
NASDAQ National Market; and (xiii) the execution of employment agreements with
Biocraft by Harold Snyder and Beatrice Snyder.
Further conditions precedent to the obligations of Teva and Merger Sub to
effect the Merger are: (i) the accuracy in all material respects of the
representations and warranties of Biocraft in the Merger Agreement unless the
failure of such representations and warranties to be accurate does not
materially and adversely affect the value of Biocraft and its subsidiaries taken
as a whole; (ii) the performance in all material respects of all obligations,
agreements, covenants and conditions of Biocraft contained in the Merger
Agreement to be performed or complied with prior to the Closing Date; (iii) all
persons who are 'affiliates' of Biocraft for purposes of Rule 145 under the
Securities Act having delivered a written agreement in form and substance
satisfactory to Teva with respect to Rule 145 of the Securities Act; (iv) Teva
having received an opinion of Proskauer Rose Goetz & Mendelsohn LLP, counsel to
Biocraft, in the form annexed to the Merger Agreement; (v) Teva having received
a comfort letter from Ernst & Young LLP, independent auditors to Biocraft, in
form and substance satisfactory to Teva; (vi) Teva having received an opinion
from Kesselman & Kesselman, independent auditors to Teva, stating that there is
no fact or circumstance concerning Teva or Merger Sub known to them which would
cause the Merger not to be recorded for accounting purposes as a pooling of
interests under both Israel GAAP and US GAAP; (vii) Biocraft having received for
each real property owned or operated by Biocraft or any of its subsidiaries
located in the State of New Jersey, either a Letter of Non-Applicability,
approval by the New Jersey Department of Environmental Protection and Energy
('DEP') of a Negative Declaration submitted by Biocraft, a no further action
letter from DEP, the filing by Biocraft of a De Minimis Quantity Exemption
Affidavit, a letter of authorization for the transfer of ownership from DEP or
approval by DEP of a Remediation Agreement (any of the foregoing, 'ISRA
Clearance') pursuant to the New Jersey Industrial Site Recovery Act, N.J.S.A.
13:1K-6 et seq. and the regulations of DEP promulgated thereunder (collectively,
'ISRA'); and (viii) Teva having received any necessary permit from the Israeli
Securities Authority or an exemption from such requirement.
Further conditions precedent to the obligations of Biocraft to effect the
Merger are: (i) the accuracy in all material respects of the representations and
warranties of Teva and Merger Sub in the Merger Agreement unless the failure of
such representations and warranties to be accurate does not materially and
adversely affect the value of Teva and its subsidiaries taken as a whole; (ii)
the performance in all material respects of all obligations, agreements,
covenants and conditions of Teva and Merger Sub contained in the Merger
Agreement to be performed or complied with prior to the Closing Date; (iii)
Biocraft having received opinions of Willkie Farr & Gallagher, United States
counsel to Teva, and S. Horowitz & Co., Israeli counsel to Teva, in the form
annexed to the Merger Agreement; (iv) Biocraft having received a comfort letter
from Kesselman & Kesselman, independent auditors to Teva, in form and substance
satisfactory to Biocraft; (v) Biocraft having received an opinion of Ernst &
Young LLP, independent auditors of Biocraft, stating that there is no fact or
circumstance concerning Biocraft or its subsidiaries known to them which would
cause the Merger not to be recorded for accounting purposes as a pooling of
interests under US GAAP; (vii) Teva having executed the agreements referred to
above with the affiliates of Biocraft; and (viii) Teva having delivered
undertakings from each of its officers and directors to refrain from effecting
sales of Teva Ordinary Shares or Teva ADSs until after the publication of
financial statements reflecting the combined operating results of Biocraft and
Teva for a period of not less than 30 days after the Effective Time.
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The foregoing conditions may be waived, to the extent permitted by
applicable law, by the party or parties affected by such waiver.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties relating to, among other things, (i) each of Biocraft's and Teva's
organization, capital structure and similar corporate matters, (ii) the
financial statements of each of Biocraft and Teva, (iii) the authorization of
the Merger Agreement by each of Biocraft and Teva and related matters, (iv) the
absence of any conflicts under charters or by-laws, receipt of required consents
or approvals, and absence of violations of any instruments or law, (v) documents
filed by Biocraft and Teva with the SEC and the accuracy of information
contained therein, (vi) the absence of a material adverse change in the
business, properties, assets, liabilities, operations, results of operations or
condition (financial or otherwise) of Biocraft and its subsidiaries taken as a
whole and Teva and its subsidiaries taken as a whole, each since certain
specified dates, (vii) in the case of Biocraft, retirement and other employee
plans and matters, (viii) certain FDA matters, (ix) certain environmental
matters, (x) litigation, (xi) compliance with law, (xii) in the case of
Biocraft, the stockholder vote required and (xiii) broker's or finder's fees.
The representations and warranties in the Merger Agreement (other than those
relating to broker's or finder's fees) will not survive the Effective Time.
INDEMNIFICATION; OFFICERS' AND DIRECTORS' LIABILITY INSURANCE
Biocraft, the surviving corporation in the Merger, for a period of six
years commencing at the Effective Time, will, to the extent permitted by law,
maintain all rights to indemnification now existing in favor of the directors,
officers or employees of Biocraft as provided in Biocraft's Certificate of
Incorporation or By-Laws with respect to acts and omissions occurring through
the Effective Time, and Teva has guaranteed the due and prompt performance of
such indemnification obligations of the surviving corporation. During a period
of three years from the Effective Time, Teva will use its best efforts to cause
Biocraft to maintain the current policy or policies of directors' and officers'
liability insurance covering directors and officers of Biocraft with respect to
acts and omissions occurring prior to the Effective Time; provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage (with carriers comparable to Biocraft's existing carriers) containing
terms and conditions which are no less advantageous to the officers and
directors and (ii) the Surviving Corporation shall not be required to pay a
premium at a rate for such insurance in excess of 150% of the annual premium
rate represented by the last premium paid prior to the date of the Merger
Agreement, but in such case shall purchase as much coverage as possible for such
amount and (iii) any or all of the officers and directors shall have the right
to provide funds to the Surviving Corporation to fund premiums to the extent
they exceed such 150% level.
CERTAIN COVENANTS OF BIOCRAFT
Biocraft has agreed, among other things, that during the period from the
date of the Merger Agreement until the Effective Time, Biocraft and its
subsidiaries will conduct their operations in all material respects in the
ordinary and usual course and will use their reasonable efforts to preserve
intact their business organizations, to keep available the services of their
directors, officers and employees, preserve in full force and effect all
material licenses and approvals held by them and maintain satisfactory
relationships with suppliers, distributors, clients and others having material
business relationships with them. In addition, Biocraft has agreed that without
the prior written consent of Teva neither it nor any of its subsidiaries will
during such period (i) make any change in or amendment to its charter or
by-laws; (ii) issue or sell any shares of its capital stock or share capital
(other than in connection with (A) Biocraft's Stockholder Dividend Reinvestment
and Stock Purchase Plan or (B) the exercise of options granted under employee
and directors' stock option plans outstanding on the date of the Merger
Agreement) or any of its other securities, or issue any securities convertible
into, or options, warrants or rights to purchase or subscribe to, or enter into
any arrangement or contract with respect to the issuance or sale of, any shares
of its capital stock or any of its other securities, or make any other changes
in its capital structure; (iii) declare, pay or make any dividend or other
distribution or payment
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with respect to, or split, combine, redeem or reclassify, any shares of its
capital stock or share capital other than in accordance with Biocraft's
Restricted Stock Purchase Plan or Shareholder Dividend Reinvestment and Stock
Purchase Plan; (iv) enter into any contract or commitment with respect to
capital expenditures in excess of certain specified contracts or commitments or
in excess of $100,000, individually, or $200,000, in the aggregate, or enter
into any other material contracts or commitments except contracts in the
ordinary course of business; (v) acquire assets (other than as contemplated by
clause (iv) above), other than in the ordinary course of business, in an amount
in excess of $100,000, individually, or $200,000, in the aggregate, or dispose
of (including by way of sale, lease or encumbrance), other than in the ordinary
course of business, a material amount of assets or release or relinquish any
material rights under any material contract; (vi) except as contemplated by the
Merger Agreement, amend any employee or non-employee benefit plan or program,
employment agreement, license agreement or retirement agreement, or pay any
bonus or contingent compensation, except in each case in the ordinary course of
business consistent with past practice prior to the date of the Merger
Agreement; (vii) incur any indebtedness for borrowed money (other than by
drawing under current revolving credit agreements (as such agreements are in
effect on the date of the Merger Agreement and without givingeffect to any
waivers of any of the provisions of such agreements)) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of Biocraft or any of its subsidiaries or guarantee
any debt securities of others; (viii) make any material change in its method of
accounting or record keeping not otherwise required by US GAAP; (ix) agree to
the settlement of any material litigation for any amounts in excess of those
reserved on Biocraft's books and records; or (x) purchase or acquire, or offer
to purchase or acquire, any shares of its capital stock, other than in
connection with Biocraft's Restricted Stock Purchase Plan and Stockholder
Dividend Reinvestment and Stock Purchase Plan. Until the Effective Time,
Biocraft has also agreed, upon reasonable notice, to afford to Teva and its
authorized representatives reasonable access to its properties, books and
records during normal business hours and to furnish information as Teva will
from time to time request.
CERTAIN COVENANTS OF TEVA
Teva has agreed that during the period from the date of the Merger
Agreement until the Effective Time, it will (i) upon reasonable notice, afford
Biocraft and its authorized representatives reasonable access to its properties,
books and records during normal business hours and to furnish information as
Biocraft will from time to time request; (ii) make application to the Tel Aviv
Stock Exchange for the listing on such exchange of the Teva Ordinary Shares to
be issued pursuant to the Merger Agreement; (iii) cause the Teva ADSs issued
pursuant to the Merger to be admitted for trading on the NASDAQ National Market,
subject to official notice of issuance; and (iv) exercise its rights under the
Irrevocable Proxy to vote in the Special Meeting in favor of the Merger
Agreement and the Merger. Both Biocraft and Teva also agree to cooperate in
filing the Registration Statement of which this Proxy Statement/Prospectus is a
part and to use their best efforts to procure its effectiveness. In addition,
Teva has agreed (a) to indemnify the former stockholders of Biocraft who held
Biocraft Common Stock immediately prior to the Effective Time from, and hold
them harmless against, any federal, state, local and foreign tax liability that
they may incur if Teva or any of its affiliates effects any merger,
consolidation, reorganization, issuance, transfer, assignment, conveyance,
disposition or other transaction with respect to the Surviving Corporation, its
capital stock or its assets after the Effective Time, which, without regard to
Section 367 of the Code, results in the Merger being treated other than as a
tax-free reorganization under the Code and (b) that it shall not (1) after the
Effective Time make any disposition of the assets of the Surviving Corporation
or any equity interest in the Surviving Corporation which would prevent the
Merger from being recorded as a pooling of interest transaction or (2) prior to
the third anniversary (or a longer period up to the fifth anniversary provided
certain conditions are met) of the Effective Time, make any disposition of the
assets of the Surviving Corporation or any equity interests in the Surviving
Corporation that would cause any recognition of gain under a gain recognition
agreement entered into with the Internal Revenue Service under Section 367(a) of
the Code and Section 1.367(a)-3T of the U.S. Temporary Treasury Income Tax
Regulations by any former stockholder of Biocraft who is a 'five percent
transferee shareholder' (as defined in Section 1.367(a)-3T(c)(6)(ii)), except a
disposition described in Section 1.367(a)-3T(g)(7) as
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to which Teva provides the five percent transferee shareholders, on a timely
basis, with notice of the disposition and all information they require in order
to comply with the requirements of subdivision (i) of that section.
NO SOLICITATION OF OTHER OFFERS
Biocraft and its subsidiaries shall not, directly or indirectly, take (nor
shall Biocraft authorize or permit its subsidiaries, officers, directors,
investment bankers, attorneys, or other representatives, to take) any action to
(i) solicit, initiate or encourage the submission of any Takeover Proposal, or
(ii) participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal; provided, however, that, to the
extent required by the fiduciary obligations of the Board of Directors of
Biocraft, as determined in good faith by the Board of Directors after reviewing
the advice of outside counsel, Biocraft may, (A) in response to an unsolicited
request therefor, furnish information with respect to Biocraft to any person
pursuant to a customary confidentiality agreement (as determined by Biocraft's
outside counsel) and discuss (1) such information (but not the terms of any
possible Takeover Proposal) and (2) the terms of the nonsolicitation provisions
of the Merger Agreement with such person and (B) upon receipt by Biocraft of a
Takeover Proposal, following delivery to Teva of the notice required,
participate in discussions or negotiations regarding such Takeover Proposal.
'Takeover Proposal' means any proposal for a merger or other business
combination involving Biocraft or any proposal or offer to acquire in any
manner, directly or indirectly, an equity interest in, not less than 20% of the
outstanding voting securities of, or assets representing not less than 20% of
the annual revenues of Biocraft, other than the transactions contemplated by the
Merger Agreement.
In the event the Board of Directors of Biocraft receives a Takeover
Proposal that, in the exercise of its fiduciary obligations (as determined in
good faith by the Board of Directors after reviewing the advice of outside
counsel), it determines to be a Superior Proposal, the Board of Directors may
(subject to the following sentences) withdraw or modify its approval or
recommendation of the Merger Agreement or the Merger, approve or recommend any
such Superior Proposal, enter into an agreement with respect to such Superior
Proposal or terminate the Merger Agreement, in each case at any time after the
second business day following Teva's receipt of written notice (a 'Notice of
Superior Proposal') advising Teva that the Board of Directors has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal. 'Superior
Proposal' means any bona fide Takeover Proposal on terms which the Board of
Directors of Biocraft determines in its good faith reasonable judgment (after
reviewing the advice of a financial advisor of nationally recognized reputation)
to be more favorable to Biocraft's stockholders than the Merger.
AMENDMENTS
Any provision of the Merger Agreement may be amended or waived in writing
by the appropriate parties thereto before the Effective Time (notwithstanding
any stockholder approval) by action taken by the respective Boards of Directors
of Teva, Merger Sub and Biocraft, provided that after any such stockholder
approval, no such amendment or waiver shall be made which by law requires
further approval by such stockholders without such further approval.
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DESCRIPTION OF TEVA ORDINARY SHARES
The par value of the Teva Ordinary Shares is NIS 0.01 per share and all
issued and outstanding Teva Ordinary Shares are fully paid and non-assessable.
Holders of paid-up Teva Ordinary Shares are entitled to participate equally in
the payment of dividends and other distributions and, in the event of
liquidation, in all distributions after the discharge of liabilities to
creditors.
The Teva Board of Directors may declare interim dividends and propose the
final dividend with respect to any fiscal year out of profits available for
dividends after statutory appropriation to capital reserves. Declaration of a
final dividend (not exceeding the amount proposed by the Board) requires
shareholder approval through the adoption of an ordinary resolution. All Teva
Ordinary Shares represented by the Teva ADSs will be issued in registered form
only. Teva Ordinary Shares do not entitle their holders to preemptive rights.
Voting is on the basis of one vote per share, either by a showing of hands
or, if the Chairman, two shareholders present in person, or shareholders present
in person or by proxy and holding at least 5% of the outstanding share capital
demand, by secret ballot. An ordinary resolution (for example, resolutions for
the approval of the financial statements, the approval of final dividends and
the appointment of auditors) requires a majority affirmative vote of
shareholders present in person or by proxy but a special resolution (for
example, resolutions amending the Articles of Association and authorizing
changes in capitalization, and other major changes as specified in the Israeli
Companies Ordinance) requires the affirmative vote of shareholders present in
person or by proxy and holding shares conferring in the aggregate at least 75%
of the votes actually cast on the special resolution. Certain actions or
arrangements between major shareholders, directors and officers and Teva require
shareholder approval by majority vote. See 'COMPARISON OF STOCKHOLDER RIGHTS --
Business Combinations'.
Each shareholder (or shareholders) of outstanding Teva Ordinary Shares
representing 4% of the fully paid-up share capital has the power to appoint a
director.
Neither Teva's Memorandum of Association, the Articles of Association, nor
the laws of the State of Israel restrict in any way the ownership or voting of
Teva Ordinary Shares by nonresidents or persons who are not citizens of Israel,
except with respect to citizens or residents of countries that are in a state of
war with Israel.
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
Set forth below is a summary of certain provisions of the Deposit
Agreement, as amended (the 'Deposit Agreement'), among Teva, The Bank of New
York, as depositary (the 'Depositary'), and the holders from time to time of
ADRs representing Teva ADSs. This summary does not purport to be complete and is
qualified in its entirety by the Deposit Agreement, a copy of which has been
incorporated by reference into the Registration Statement of which this Proxy
Statement/Prospectus forms a part. Additional copies of the Deposit Agreement
are available for inspection at the Corporate Trust Office of the Depositary,
101 Barclay Street, New York, New York 10286, and at the principal Tel Aviv
office of Bank Leumi Le-Israel Ltd., 2-4 Lilienblum Street, Tel Aviv, Israel,
and the principal Tel Aviv office of Israel Discount Bank Limited, 27-31 Yehunda
Halevi Street, Tel Aviv, Israel (collectively, the 'Custodian').
AMERICAN DEPOSITARY RECEIPTS
ADRs evidencing a specified number of Teva ADSs are issuable by the
Depositary pursuant to the Deposit Agreement. Each Teva ADS represents 10 Teva
Ordinary Shares (or evidence of rights to receive 10 Teva Ordinary Shares)
deposited with the Custodian.
DEPOSIT AND WITHDRAWAL OF TEVA ORDINARY SHARES
The Depositary has agreed that, upon deposit with the Custodian of Teva
Ordinary Shares (or evidence of rights to receive such Teva Ordinary Shares)
accompanied by an appropriate instrument or instruments of transfer or
endorsement in form satisfactory to the Custodian and any certifications as
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may be required by the Depositary or the Custodian and subject to the terms of
the Deposit Agreement, the Depositary will execute and deliver at its Corporate
Trust Office, upon payment of the fees, charges and taxes provided in the
Deposit Agreement, to or upon the written order of the person or persons
entitled thereto, an ADR registered in the name of such person or persons for
the number of Teva ADSs issuable in respect of such deposit.
Every person depositing Teva Ordinary Shares under the Deposit Agreement
shall be deemed to represent and warrant that such Teva Ordinary Shares and each
certificate therefor are validly issued, fully paid, nonassessable of
outstanding Teva Ordinary Shares and that such person is duly authorized to make
such deposit, and the deposit of such Ordinary Shares or sale of ADRs evidencing
Teva ADSs by that person is not restricted under the Securities Act.
Upon surrender of ADRs at the Corporate Trust Office of the Depositary, and
upon payment of the fees provided in the Deposit Agreement and subject to the
terms and conditions of the Deposit Agreement, ADR holders are entitled to
delivery to them or upon their order at the principal office of the Custodian or
at the Corporate Trust Office of the Depositary of certificates representing the
Teva Ordinary Shares and any other securities, property or cash that the
surrendered ADRs evidence the right to receive. Delivery to the Corporate Trust
Office of the Depositary shall be made at the risk and expense of the ADR holder
surrendering ADRs.
The Depositary may execute and deliver ADRs prior to the receipt of Teva
Ordinary Shares ('Pre-Release'). The Depositary may deliver Teva Ordinary Shares
upon the receipt and cancellation of ADRs that have been Pre-Released, whether
or not such cancellation is prior to the termination of such Pre-Release or the
Depositary knows that such ADR has been Pre-Released. Each Pre-Release will be
(a) accompanied by a written representation from the person to whom ADRs are to
be delivered that such person, or its customer, owns the Teva Ordinary Shares or
ADRs to be remitted, as the case may be, (b) at all times fully collateralized
with cash or such other collateral as the Depositary deems appropriate, (c)
terminable by the Depositary on not more than five (5) business days' notice,
and (d) subject to such further indemnities and credit regulations as the
Depositary deems appropriate. The number of Teva ADSs outstanding at any time as
a result of Pre-Releases will not normally exceed thirty percent (30%) of the
Teva Ordinary Shares deposited with the Depositary; provided, however, that the
Depositary reserves the right to change or disregard such limit from time to
time as it deems appropriate.
DIVIDENDS, OTHER DISTRIBUTIONS AND RIGHTS
The Depositary is required to convert or cause to be converted into U.S.
dollars, to the extent that in its judgment it can do so on a reasonable basis
and can transfer the resulting U.S. dollars to the United States, all cash
dividends and other cash distributions denominated in a currency other than U.S.
dollars that it receives in respect of the deposited Teva Ordinary Shares, and
to distribute the amount received, subject to the terms of the Deposit Agreement
and net of any expenses incurred by the Depositary in connection with
conversion, to the holders of ADRs in proportion to the number of Teva ADSs that
are evidenced by such ADRs. The amount distributed will be reduced by any
amounts to be withheld by Teva or the Depositary for applicable taxes net of
expenses of conversion into U.S. dollars. If the Depositary determines that in
its reasonable judgment any foreign currency received by it cannot be so
converted on a reasonable basis and transferred, or if any required approval or
license of any government or agency thereof is denied or not obtained within a
reasonable period of time as determined by the Depositary, the Depositary may
distribute such foreign currency (or an appropriate document evidencing their
right to receive such foreign currency) received by it or, in its discretion,
hold such foreign currency uninvested and without liability for interest thereon
for the respective accounts of the ADR holders entitled to receive the same. If
any conversion of foreign currency, in whole or in part, cannot be effected for
distribution to some of the holders of ADRs entitled thereto, the Depositary may
in its discretion make such conversion and distribution in U.S. dollars to the
extent permissible to the holders of ADRs entitled thereto and may distribute
the balance of the foregoing currency received by the Depositary to, or hold
such balance uninvested and without liability for interest thereon for the
respective accounts of the holders of ADRs entitled thereto.
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If any distribution upon any Teva Ordinary Shares deposited or deemed
deposited under the Deposit Agreement consists of a dividend in, or free
distribution of, additional Teva Ordinary Shares, the Depositary shall, only if
Teva so requests, distribute to the holders of outstanding ADRs entitled
thereto, in proportion to the number of Teva ADSs that are evidenced by such
ADRs, additional ADRs evidencing an aggregate number of Teva ADSs that represent
the number of Teva Ordinary Shares received as such dividend or free
distribution subject to the terms of the Deposit Agreement. In lieu of Teva
delivering ADRs for fractional Teva ADSs in the event of any such distribution,
the Depositary will sell the amount of Teva Ordinary Shares represented by the
aggregate of such fractions and will distribute the net proceeds to holders of
ADRs in accordance with the Deposit Agreement. If additional ADRs are not so
distributed, each Teva ADS shall thereafter also represent the additional Teva
Ordinary Shares distributed together with the Teva Ordinary Shares represented
by such Teva ADS prior to such distribution.
If Teva offers or causes to be offered to the holders of Teva Ordinary
Shares any rights to subscribe for additional Teva Ordinary Shares or any rights
of any other nature, the Depositary shall have discretion as to the procedure to
be followed in making such rights available to holders of ADRs or in disposing
of such rights for the benefit of such holders and making the net proceeds
available to such holders or, if the Depositary may neither make such rights
available nor dispose of such rights and make the net proceeds available to such
holders, the Depositary shall allow the rights to lapse; provided, however, that
the Depositary will, if requested by Teva, take action as follows (i) if at the
time of the offering of any rights the Depositary determines in its discretion
that it is lawful and feasible to make such rights available to all holders of
ADRs or to certain holders of ADRs but not to other holders of ADRs, the
Depositary may distribute to any holder of ADRs to whom it determines the
distribution to be lawful and feasible, in proportion to the number of Teva ADSs
held by such holder of ADRs, warrants or other instruments therefor in such form
as it deems appropriate or (ii) if the Depositary determines in its discretion
that it is not lawful and feasible to make such rights available to certain
holders of ADRs, it may sell the rights, warrants or other instruments in
proportion to the number of Teva ADSs held by the holder of ADRs to whom it has
determined it may not lawfully or feasibly make such right available, and
allocate the net proceeds of such sales (net of the fees of the Depositary and
all taxes and governmental charges and subject to the terms of the Deposit
Agreement) for the account of such holders of ADRs otherwise entitled to such
rights, warrants or other instruments, upon an averaged or other practical basis
without regard to any distinctions among such holders of ADRs because of
exchange restrictions or the date of delivery of any ADR or otherwise. The
Depositary shall not be responsible for any failure to determine that it may be
lawful and feasible to make such rights available to holders of ADRs in general
or any holder in particular.
If a holder of ADRs requests the distribution of warrants or other
instruments in order to exercise the rights allocable to the Teva ADSs of such
holder, the Depositary will make such rights available to such holder upon
written notice from Teva to the Depositary that Teva has elected in its sole
discretion to permit such rights to be exercised and such holder has executed
such documents as Teva has determined in its sole discretion are reasonably
required under applicable law. Upon instruction pursuant to such warrants or
other instruments to the Depositary from such holder to exercise such rights,
upon payment by such holder to the Depositary for the account of such holder of
an amount equal to the purchase price of the Teva Ordinary Shares to be received
upon the exercise of the rights, and upon payment of the fees of the Depositary
as set forth in such warrants or other instruments, the Depositary shall, on
behalf of such holder, exercise the rights and purchase the Teva Ordinary
Shares, and Teva shall cause the Teva Ordinary Shares so purchased to be
delivered to the Depositary on behalf of such holder. As agent for such holder,
the Depositary will cause the Teva Ordinary Shares so purchased to be deposited
under the Deposit Agreement, and shall issue and deliver to such holder legended
ADRs, restricted as to transfer under applicable securities laws.
The Depositary will not offer to the holders of ADRs any rights to
subscribe for additional Teva Ordinary Shares or rights of any other nature,
unless and until such a registration statement is in effect with respect to the
rights and the securities to which they relate, or unless the offering and sale
of such securities to the holders of such ADRs are exempt from registration
under the provisions of the Securities Act and an opinion of counsel
satisfactory to the Depositary and Teva has been obtained.
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If the Depositary determines that any distribution of property in respect
of the Teva Ordinary Shares (including Teva Ordinary Shares or rights to
subscribe therefor) is subject to any tax or other governmental charge that the
Depositary is obligated to withhold, the Depositary may be public or private
sale in Israel dispose of all or a portion of such property including Teva
Ordinary Shares and Rights to subscribe therefor in such amounts and in such
manner as the Depositary deems necessary and practicable to pay any such taxes
or charges, and the Depositary will distribute the net proceeds of any such sale
and after deduction of any taxes or charges to the ADR holders entitled thereto.
Subject to the terms of the Deposit Agreement, upon any change in nominal
value, change in par value, split-up, consolidation or any other
reclassification of Teva Ordinary Shares, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting Teva or to
which it is a party, any securities that shall be received by the Depositary or
the Custodian in exchange for or in conversion of or in respect of Teva Ordinary
Shares shall be treated as newly deposited Teva Ordinary Shares under the
Deposit Agreement, and Teva ADSs shall thenceforth represent the new Teva
Ordinary Shares so received in respect of Teva Ordinary Shares, unless
additional ADRs are delivered or the Depositary calls for the surrender of
outstanding ADRs to be exchanged for new ADRs.
RECORD DATES
Whenever any cash dividend or other cash distribution shall become payable,
and distribution other than cash shall be made or rights shall be issued with
respect to the Teva Ordinary Shares, or whenever for any reason the Depositary
causes a change in the number of Teva Ordinary Shares that are represented by
each Teva ADS, or whenever the Depositary shall receive notice of any meeting of
holders of Teva Ordinary Shares, the Depositary shall fix a record date (a) for
the determination of the holders of ADRs who shall be entitled (i) to receive
such dividend, distribution or rights, or the net proceeds of the sale thereof,
or (ii) to give instructions for the exercise of voting rights at any such
meeting, or (b) on or after which each Teva ADS will represent the changed
number of Teva Ordinary Shares.
REPORTS AND OTHER COMMUNICATIONS
Teva will furnish to the Depositary and the Custodian all notices of
shareholders' meetings and other reports and communications that are made
generally available to the holders of Teva Ordinary Shares and English
translations of the same. The Depositary will make such notices, reports and
communications available for inspection by ADR holders at its Corporate Trust
Office when furnished by Teva pursuant to the Deposit Agreement and, upon
request by Teva, will mail such notices, reports and communications to ADR
holders at Teva's expense.
VOTING OF THE UNDERLYING TEVA ORDINARY SHARES
Upon receipt of notice of any meeting or solicitation of consents or
proxies of holders of Teva Ordinary Shares, if requested in writing, the
Depositary shall, as soon as practicable thereafter, mail to the ADR holders a
notice containing (a) such information as is contained in the notice received by
the Depositary and (b) a statement that the holders of ADRs as of the close of
business on a specified record date will be entitled, subject to applicable law
and the provisions of the Memorandum and Articles of Association of Teva, to
instruct the Depositary as to the exercise of voting rights, if any, pertaining
to the amount of Teva Ordinary Shares represented by their respective Teva ADSs.
Upon the written request of an ADR holder on such record date, received on or
before the date established by the Depositary for such purpose, the Depositary
shall endeavor, insofar as is practicable and permitted under applicable law and
the provisions of the Memorandum and Articles of Association of Teva, to vote or
cause to be voted the amount of Teva Ordinary Shares represented by the Teva
ADSs evidenced by such ADR in accordance with the instructions set forth in such
request. If no instructions are received by the Depositary from a holder of an
ADR, the Depositary shall give a discretionary proxy for the Ordinary Shares
represented by such holder's ADR to a person designated by Teva.
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AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of the ADRs and the terms of the Deposit Agreement may at any time
be amended by agreement between Teva and the Depositary. Any amendment that
imposes or increases any fees or charges (other than taxes or other governmental
charges), or that otherwise prejudices any substantial existing right of holders
of ADRs shall, however, not become effective until the expiration of three
months after notice of such amendment has been given to the holders of
outstanding ADRs. Every holder of an ADR at the time such amendment becomes
effective will be deemed, by continuing to hold such ADR, to consent and agree
to such amendment and to be bound by the Deposit Agreement as amended thereby.
In no event will any amendment impair the right of any ADR holder to surrender
the ADRs held by such holder and receive therefor the underlying Teva Ordinary
Shares and any other property represented thereby, except in order to comply
with mandatory provisions of applicable law.
Whenever so directed by Teva, the Depositary has agreed to terminate the
Deposit Agreement by mailing notice of such termination to the holders of all
ADRs then outstanding at least 30 days prior to the date fixed in such notice
for such termination. The Depositary may likewise terminate the Deposit
Agreement if at any time 60 days shall have expired after the Depositary shall
have delivered to the holders of all ADRs then outstanding and Teva a written
notice of its election to resign and a successor depositary shall not have been
appointed and accepted its appointment. On and after the date of termination, an
ADR holder, upon surrender of such ADR at the Corporate Trust Office of the
Depositary, upon payment of the fees of the Depositary, and upon payment of any
applicable tax or governmental charges, will be entitled to delivery to him or
upon his order of the amount of Teva Ordinary Shares and other property
represented by such ADR. If any ADRs remain outstanding after the date of
termination, the Depositary thereafter will discontinue the registration of
transfers of ADRs, will suspend the distribution of dividends to the holders
thereof and will not give any further notices or perform any further acts under
the Deposit Agreement, except (i) the collection of dividends and other
distributions, (ii) the sale of rights and other property, and (iii) the
delivery of Teva Ordinary Shares, together with any dividends or other
distributions received with respect thereto and the net proceeds of the sale of
any rights or other property, in exchange for surrendered ADRs, subject to the
terms of the Deposit Agreement. At any time after the expiration of one year
from the date of termination, the Depositary may sell the underlying Teva
Ordinary Shares and hold uninvested the net proceeds, together with any cash
then held by it under the Deposit Agreement, unsegregated and without liability
for interest, for the pro rata benefit of the holders of ADRs that have not
theretofore surrendered their ADRs and such holders shall become general
creditors of the Depositary with respect to such net proceeds. After making such
sale, the Depositary shall be discharged from all obligations under the Deposit
Agreement, except to account for net proceeds and other cash (after deducting
certain fees of the Depositary) and except for certain obligations for
indemnification set forth in the Deposit Agreement. Upon the termination of the
Deposit Agreement, Teva will also be discharged from all obligations thereunder,
except for certain obligations to the Depositary.
CHARGES OF DEPOSITARY
Teva will pay the fees, reasonable expenses and out-of-pocket charges of
the Depositary and those of any registrar only in accordance with agreements in
writing entered into between the Depositary and Teva from time to time. The
following charges shall be incurred by any party depositing or withdrawing Teva
Ordinary Shares or by any party surrendering ADRs or to whom ADRs are issued
(including, without limitation, issuance pursuant to a stock dividend or stock
split declared by Teva or an exchange of stock regarding the ADRs or deposited
Teva Ordinary Shares or a distribution of ADRs pursuant to the terms of the
Deposit Agreement): (i) the fees of the Depositary for the execution and
delivery, transfer, or surrender of ADRs, or the making of any cash
distribution, pursuant to the Deposit Agreement, (ii) any applicable taxes and
other governmental charges, (iii) any applicable transfer or registration fees,
(iv) certain cable, telex and facsimile transmission charges as provided in the
Deposit Agreement, (v) any expenses incurred in the conversion of foreign
currency and (vi) a fee of $5.00 or less per 100 ADRs (or portion thereof) for
the delivery of ADRs in connection with the deposit of Teva Ordinary Shares or
distributions on Teva Ordinary Shares on the surrender of ADRs. The Depositary
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has advised Teva that it will waive the fee described in (vi) above in
connection with the issuance of ADRs contemplated by the Merger.
The Depositary, subject to the Deposit Agreement, may own and deal in any
class of securities of Teva and its affiliates and in ADRs.
LIABILITY OF HOLDERS FOR TAXES, DUTIES OR OTHER CHARGES
Any tax or other governmental charge with respect to ADRs or any deposited
Teva Ordinary Shares represented by any ADR shall be payable by the holder of
such ADR to the Depositary. The Depositary may refuse to effect transfer of such
ADR or any withdrawal of deposited Teva Ordinary Shares represented by such ADR
until such payment is made, and may withhold any dividends or other
distributions or may sell for the account of the holder thereof any part or all
of the deposited Teva Ordinary Shares represented by such ADR and may apply such
dividends or distributions or the proceeds of any such sale in payment of any
such tax or other governmental charge and the holder of such ADR shall remain
liable for any deficiency.
TRANSFER OF AMERICAN DEPOSITARY RECEIPTS
The ADRs are transferable on the books of the Depositary, provided that the
delivery of ADRs against deposits of Teva Ordinary Shares generally or against
deposits of particular Teva Ordinary Shares may be suspended, or the transfer of
ADRs in particular instances may be refused, or the registration of transfer of
outstanding ADRs generally may be suspended, during any period when the transfer
books of the Depositary are closed, or if any such action is deemed necessary or
advisable by the Depositary or Teva at any time or from time to time because of
any requirement of law or of any government or governmental body or commission,
or under any provision of the Deposit Agreement, or for any other reason,
subject to the terms of the Deposit Agreement. The surrender of outstanding ADRs
and withdrawal of deposited Teva Ordinary Shares may not be suspended subject
only to (i) temporary delays caused by closing the transfer books of the
Depositary or Teva, the deposit of Teva Ordinary Shares in connection with
voting at a shareholders' meeting or the payment of dividends, (ii) the payment
of fees, taxes and similar charges and (iii) compliance with the United States
or foreign laws or governmental regulations relating to the ADRs or to the
withdrawal of the deposited Teva Ordinary Shares. Without limitation of the
foregoing, the Depositary shall not knowingly accept for deposit under the
Deposit Agreement any Teva Ordinary Shares required to be registered under the
provisions of the Securities Act, unless a registration statement is in effect
as to such Teva Ordinary Shares. As a condition precedent to the execution and
delivery, registration of transfer, split-up, combination or surrender of any
ADR or withdrawal of Teva Ordinary Shares, the Depositary, the Custodian or the
registrar may require payment from the person presenting the ADR or the
depositor of the Teva Ordinary Shares of a sum sufficient to reimburse it for
any tax or other governmental charge and any stock transfer or registration fee
with respect thereto, payment of any applicable fees payable by the holders of
ADRs, may require the production of proof satisfactory to the Depositary as to
the identity and genuineness of any signature and may also require compliance
with any regulations the Depositary may establish consistent with the provisions
of the Deposit Agreement. The Depositary may refuse to execute and deliver ADRs,
register the transfer of any ADR or make any distribution on, or related to,
Teva Ordinary Shares until it or the Custodian has received proof of citizenship
or residence, exchange control approval or other information as it may deem
necessary or proper. Holders of ADRs may inspect the transfer books of the
Depositary at any reasonable time, provided, that such inspection shall not be
for the purpose of communicating with holders of ADRs in the interest of a
business or object other than the business of Teva or a matter related to the
Deposit Agreement or ADRs.
GENERAL
Neither the Depositary nor Teva nor any of their directors, officers,
employees, agents or affiliates will be liable to the holders of ADRs if by
reason of any present or future law or regulation of the United States or any
other country or of any government or regulatory authority or any stock
exchange,
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any provision, present or future, of Teva's Memorandum and Articles of
Incorporation or any circumstance beyond its control, the Depositary or Teva or
any of their respective directors, officers, employees, agents or affiliates is
prevented or delayed in performing its obligations or exercising its discretion
under the Deposit Agreement or is subject to any civil or criminal penalty on
account of performing its obligations. The obligations of Teva and the
Depositary under the Deposit Agreement are expressly limited to performing their
obligations specifically set forth in the Deposit Agreement without negligence
or bad faith.
COMPARISON OF STOCKHOLDER RIGHTS
The following is a summary of material differences between the rights of
holders of Biocraft Common Stock and holders of Teva Ordinary Shares and between
the Delaware General Corporation Law (the 'DGCL') and the Israeli Companies
Ordinance (the 'Companies Ordinance') which may affect the rights and interests
of stockholders.
VOTE REQUIRED FOR CERTAIN ACTIONS
Under the DGCL, a merger, consolidation, sale of all or substantially all
assets, dissolution or amendment to the certificate of incorporation must be
approved by vote at a meeting at which a quorum is present or by written consent
of a majority of the outstanding shares entitled to vote thereon (except mergers
involving a corporation and its subsidiary in which the parent corporation owns
at least 90% of the outstanding shares of the subsidiary, in which case no
stockholder vote or written consent is required).
Under the Companies Ordinance, settlements and arrangements between a
company and any class of its shareholders (or any class of its creditors)
involving certain types of mergers, reorganizations, sales of assets and
dissolutions require (i) the approval at an extraordinary meeting of a majority
in number of the shareholders representing 75% of the relevant class of shares
present and voting in person or by proxy, and (ii) the sanction of the District
Court. Once so approved and sanctioned, all shareholders of the relevant class
are bound by the arrangement. The Companies Ordinance also provides that where
an offer is made by one company (the 'Offering Company') via plan or contract
for all the shares, or a class of shares, of another company, and shareholders
of such company holding at least nine-tenths of the value of such shares approve
such plan or such contract within four months after it was proposed, the
Offering Company may, within two months of reaching the nine-tenths level, by
notice require dissenting shareholders to transfer their shares on the terms of
the plan or contract. A dissenting shareholder may apply to the District Court
within one month of the date on which notice was given objecting to the transfer
on the proposed terms. The District Court may order that the shareholder shall
not be required to transfer his shares, or may specify such terms of the
transfer as it finds appropriate. For the vote required for other actions, see
'DESCRIPTION OF TEVA ORDINARY SHARES'.
APPRAISAL RIGHTS
Under the DGCL, a stockholder of a constituent corporation in a merger may,
under certain circumstances and upon meeting certain requirements, dissent from
the merger by demanding payment in cash for his/her shares equal to the 'fair
value' (excluding any appreciation or depreciation as a consequence or in
expectation of the transaction) of such shares, as determined by agreement with
the corporation or by an independent appraiser appointed by a court in an action
timely brought by the corporation or the dissenters.
Delaware law grants dissenters' appraisal rights only in the case of
certain mergers and not in the case of a sale or transfer of assets or a
purchase of assets for stock regardless of the number of shares being issued.
Delaware law does not grant appraisal rights in a merger to holders of shares
listed on a national securities exchange or designated as a national market
system security by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 shareholders unless the plan of merger converts
such shares into anything other than stock of the surviving corporation or stock
of another corporation which is listed on a national securities exchange or
designated as a national market system security by the National Association of
Securities Dealers, Inc. or held of record by more than
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2,000 shareholders (or cash in lieu of fractional shares or some combination of
the above). Therefore, as described under 'THE MERGER -- Appraisal Rights,'
appraisal rights will not be available to Biocraft stockholders in the Merger.
While the Companies Ordinance does not provide for appraisal rights per se,
if a shareholder applies to a court as described under ' -- Vote Required for
Certain Actions,' the court may specify the terms for the acquisition as it
deems appropriate.
STOCKHOLDERS' MEETING
Under the DGCL, meetings of stockholders may be held at such place as may
be designated by or in the manner provided in the by-laws or, if not so
designated, at the registered office of the corporation in Delaware. The
stockholder meetings may be held within Delaware or outside Delaware. An annual
meeting of stockholders is specifically mandated by the DGCL, which directs
every corporation to convene a meeting of its stockholders annually for the
election of directors on a date either designated in its bylaws or fixed in the
manner provided in the bylaws. Under the Biocraft By-laws, an annual meeting of
stockholders must be held once in every calendar. All other meetings are special
meetings as is discussed below. The presence of the holders of a majority of the
outstanding shares of Biocraft Common Stock constitutes a quorum for all
stockholder meetings.
Under the Companies Ordinance, a general meeting of the shareholders must
be held at least once in every calendar year within a period of not more than 15
months following the last preceding general meeting. The place of the meeting
may be either within or without Israel. If no meeting was held, the District
Court may, upon application by a shareholder, convene a meeting or order the
convening of a meeting. All meetings of the shareholders other than general
meetings are extraordinary meetings as discussed below. The presence of at least
two shareholders at a general meeting holding ten percent or more of the
outstanding share capital of Teva constitutes a quorum. Notice to shareholders
of at least seven days is required for all general and extraordinary meetings of
the shareholders, unless a special resolution is to be proposed in which case
notice of at least twenty-one days is required.
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
Under the DGCL, unless a certificate of incorporation provides otherwise,
stockholders may take action by written consent without a meeting as to any
matter for which stockholder approval is required or which is permitted to be
taken based on the approval of stockholders. Action by written consent requires
the consent of a percentage of all the outstanding shares eligible to vote equal
to the percentage that would be required for approval by shares present and
voting at a meeting. Under the Biocraft Certificate of Incorporation,
stockholders may take action by written consent without a meeting as to any
matter for which stockholder approval is required or which is permitted to be
taken on the approval of stockholders.
Under Israeli law, the articles of association of a company may permit
action by written consent of shareholders without a meeting. However, the Teva
Articles of Association do not permit action by written consent.
ELECTION OF DIRECTORS; CLASSES OF DIRECTORS; CUMULATIVE VOTING
Under the DGCL, a corporation's board of directors must consist of one or
more members, with the number fixed by the corporation's by-laws or certificate
of incorporation. Under the DGCL, directors are elected by a plurality of the
votes of shares represented by proxy at a meeting at which a quorum is present
and entitled to vote on the election of directors, and may be divided into one,
two or three classes. Under the Biocraft Certificate of Incorporation, the board
of directors of Biocraft shall consist of not less than six members, the exact
number to be determined by resolution of the Board. The Biocraft Board currently
has ten members. The Biocraft Certificate of Incorporation further provides that
directors shall be classified with respect to the time for which each director
holds office into three classes. Each class of directors of Biocraft consists,
as nearly as possible, of one-third of the total number of directors
constituting the entire Biocraft Board. A class of directors is elected at each
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annual meeting of stockholders. Each Biocraft director is elected to serve a
three-year term. The presence of a majority of directors in office constitute a
quorum for transacting business.
Under the DGCL, cumulative voting is not available unless so provided in
the corporation's certificate of incorporation. The Biocraft Certificate of
Incorporation does not provide for cumulative voting.
Under the Companies Ordinance, a public company must have at least two
directors. Under the Teva Articles of Association, the Teva Board is to consist
of a minimum of seven directors, the exact number to consist of the aggregate of
the directors appointed or elected as follows: (i) each shareholder or group of
shareholders holding 4% of the outstanding Teva Ordinary Shares is entitled to
appoint one director for a term of one year; (ii) the President of Teva serves
as a member of the Board during the period of his service as President; (iii)
the Companies Ordinance requires two independent public directors to serve as
members of Teva's Board for a term of five years; and (iv) additional directors
(the number of which is determined from time to time by the Board, provided that
such number may not exceed 15) are elected by Teva's shareholders at the annual
general meeting of shareholders to serve for three-year staggered terms
('Additional Directors'). There are currently 26 members on the Board of Teva.
Under the Teva Articles of Association, unless otherwise determined by the Teva
Board of Directors, the presence of seven directors constitutes a quorum for
transacting business. The Teva Ordinary Shares do not have cumulative voting
rights.
Under the Companies Ordinance, public Israeli companies whose shares are
traded in Israel must appoint two 'directors from the public' for five-year
terms and an 'audit committee.' Teva is subject to and complies with such
requirements.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Delaware law provides that, unless otherwise provided in the certificate of
incorporation or by-laws, vacancies and newly created directorships may be
filled by majority vote of the directors then in office, even if the number of
directors then in office is less than a quorum. In addition, if, at the time of
filling any vacancy or newly created directorship, the directors then in office
constitute less than a majority of the whole board, the Delaware Court of
Chancery may, upon application of stockholders holding at least 10% of the
shares outstanding at the time and entitled to vote, summarily order an election
to be held to fill any such vacancies or newly created directorships, or to
replace the directors chosen by the directors then in office. Such elections are
to be conducted in accordance with the procedures provided by Delaware law for
holding stockholder meetings.
Under the Teva Articles of Association, the Board is entitled at any time
to elect Additional Directors to serve until the following annual general
meeting of shareholders (subject to the maximum number of 15 Additional
Directors). Vacancies in the Teva Board may be filled by the vote of the
majority of the directors holding office in certain specified circumstances. If
the number of directors is less than the minimum number, then the directors may
either fill the vacancy or convene a general meeting of the shareholders, but
may take no other directorial action until the minimum number of directors is
achieved. In the event of one or more vacancies in the Teva Board not causing
the number of directors to be less than the minimum required, the directors
shall continue to fulfill all their directorial duties. The Teva Articles of
Association also provide a procedure for the appointment of substitute
directors.
REMOVAL OF DIRECTORS
Under the DGCL, unless provided otherwise in the certificate of
incorporation, in the case of a corporation whose board is classified (such as
Biocraft), a director can be removed only for cause by the holders of a majority
of shares then entitled to vote in an election of directors. Biocraft's
certificate of incorporation does not provide for removal of directors without
cause.
Under the Teva Articles of Association, the holders of seventy-five percent
of the voting power represented at a general meeting entitled to so vote may
remove any director.
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DIVIDENDS
The DGCL provides that a corporation may, unless otherwise restricted by
its certificate of incorporation, declare and pay dividends out of surplus, as
defined in the DGCL, or if no surplus exists, out of net profits for the current
or preceding fiscal year (provided that the amount of capital of the corporation
following the declaration and payment of the dividend is not less than the
aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets).
Additionally, the DGCL provides that a corporation may redeem or repurchase its
shares.
The Companies Ordinance does not define the source from which dividends may
be paid, although common law generally applied by the courts of Israel has been
interpreted to require that dividends be paid solely out of profits. The Teva
Articles of Association provide that no dividend shall be paid otherwise than
out of the profits of Teva.
TREASURY SHARES
Under the DGCL, Biocraft may directly or indirectly acquire its own shares
and hold such shares in treasury, although such shares may not be voted or
counted for quorum purposes.
Under Israeli law, Teva cannot acquire its own shares except in certain
limited circumstances.
BUSINESS COMBINATIONS
Delaware law prevents an 'interested stockholder' (defined as a holder who
acquires 15% or more of a corporation's stock) from entering into a business
combination with a corporation within three years after the date the stockholder
acquired such corporation's stock. However, a business combination is permitted
(i) if prior to the date the stockholder became an interested stockholder, the
board of directors of the corporation approved either the business combination
or such acquisition of stock, (ii) if, at the time the interested stockholder
acquired such 15% interest, it acquired 85% or more of the outstanding stock of
the corporation, excluding shares held by directors who are also officers and
shares held under certain employee stock plans, or (iii) if the business
combination is approved by the corporation's board of directors and two-thirds
of the outstanding shares voting at an annual or special meeting of
stockholders, excluding shares held by the interested stockholder. This
provision applies automatically to Delaware corporations except those
corporations with less than 2,000 stockholders of record and without voting
stock listed on a national exchange or listed for quotation with a registered
national securities association. Additional exceptions allow corporations, in
certain instances, to adopt certificates of incorporation or by-laws that elect
not to be governed by these provisions. Biocraft has not so elected.
Under the Companies Ordinance, transactions in which an 'Office Holder'
(defined as a director, managing director, general business manager, deputy
managing director, deputy general business manager, any other manager directly
subordinate to the managing director and any person assuming the
responsibilities of any of the foregoing positions without regard to such
person's corporate title) has a direct or indirect 'personal interest,' must be
approved by the company's Board of Directors. In the case of an 'unusual
transaction' (defined by the Companies Ordinance as one which is not in the
ordinary course of business, is not on market terms or is likely to
substantially affect the profitability, property or obligations of the company),
such transaction must be approved by the company's audit committee and its Board
of Directors and, under certain circumstances, its shareholders (e.g., if a
majority of the members of the audit committee or the Board of Directors have a
'personal interest' in the transaction). In addition, any transactions in which
interested directors holding, in the aggregate, 25% or more of the outstanding
share capital, and constituting a majority of the Board or involving officers
holding 25% or more of the share capital, must be authorized by a shareholder
resolution approved by a majority of the shareholders, which must include at
least one-third of the disinterested shareholders.
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LIMITATION ON DIRECTORS' LIABILITY; INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware law allows a corporation to limit or eliminate the personal
liability of directors to the corporation and its stockholders for monetary
damages for breaches of a director's fiduciary duty as a director. However, such
a limitation does not affect the liability of a director (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) for intentional or negligent payment of unlawful
dividends or stock redemptions or (iv) for any transaction from which the
director derived an improper personal benefit. Additionally, the corporation may
not limit or eliminate liability for acts or omissions occurring prior to the
effective date of such a provision in the certificate of incorporation. The DGCL
permits the indemnification of and the entering into of insurance contracts to
provide coverage of officers and directors. The Biocraft Certificate of
Incorporation limits the liability of Biocraft's directors to the fullest extent
permitted by Delaware law and the By-laws provide for indemnification of and the
entering into insurance contracts which would provide coverage of officers,
directors, employees and other agents for attorneys' fees and other expenses as
well as judgments or amounts paid in settlement of civil lawsuits, actual or
threatened.
The Companies Ordinance permits a company to amend its articles of
association to provide that (i) a company may obtain an insurance policy
providing insurance to an Office Holder (as defined above) in respect of
liabilities incurred by him as a result of the breach of his duty of care to the
company or to another person, or as a result of the breach of his duty of
loyalty to the company to the extent that he acted in good faith and had
reasonable cause to believe that the act would not prejudice the company, as
well as for monetary liabilities to a third party charged against him as a
result of an act or omission that he committed in connection with his serving as
an Office Holder of a company; and (ii) a company may indemnify an Office Holder
in connection with his activities as an Office Holder, for monetary liability to
a third party incurred pursuant to a judgment, including a settlement or
arbitration decision approved by a court, as well as for reasonable litigation
expenses, including attorneys' fees, incurred in an action brought against him
by, or on behalf of, the company or others, or as a result of a criminal charge
of which he was acquitted. A company may not indemnify an Office Holder nor
enter into an insurance contract which would provide coverage for any monetary
liability incurred as a result of the following: (a) a breach of the duty of
loyalty, except for a breach of such duty to the company while acting in good
faith and having reasonable cause to assume that such act would not prejudice
the interests of the company; (b) a willful breach of the duty of care or
reckless disregard for the circumstances or the consequences of a breach of the
duty of care; (c) an act done with the intent to unlawfully realize a personal
gain; or (d) a fine or bail imposed for an offense. Teva's Articles of
Association provide for the insurance and indemnification as described above and
Teva carries the said insurance and has entered into indemnification agreements.
LOANS TO DIRECTORS AND OFFICERS
Under Delaware law, a corporation may make loans to, guarantee the
obligations of or otherwise assist its officers or other employees and those of
its subsidiaries, including any officer or employee who is a director of a
corporation or any of its subsidiaries, when such action, in the judgment of the
corporation's directors, may reasonably be expected to benefit the corporation.
Under the Companies Ordinance, a company may contract as to terms of
employment (which may include the granting of loans) with its directors and
officers, provided that such transactions are approved by the company's board of
directors (in the case of officers) and by its audit committee, board of
directors and shareholders (in the case of directors). In the case of an
officer, the approval of the shareholders is also required if a majority of the
board of directors has an interest in the transaction. If the transaction is an
'unusual transaction', the procedures outlined in ' -- Business Combinations'
set forth above must be followed.
SPECIAL MEETINGS
Under Delaware law, special meetings of stockholders may be called by the
board of directors and by such other person or persons authorized to do so by
the corporation's certificate of incorporation or
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by-laws. Under Delaware law, if an annual meeting is not held within 30 days of
the date designated for such a meeting, or is not held for a period of 13 months
after the last annual meeting, the Delaware Court of Chancery may summarily
order a meeting to be held upon the application of any stockholder or director.
In Delaware, the number of shares represented at such meeting constitutes a
quorum without regard to other provisions of law.
The Biocraft Bylaws provide that special meetings of stockholders may be
called by the Chairman of the Biocraft Board or by the Biocraft Board.
Under the Companies Ordinance (and notwithstanding any provision to the
contrary in a company's articles of association), an extraordinary general
meeting of shareholders must be called by the board of directors upon request by
a minimum of two shareholders (unless the articles of association specify a
different minimum) holding not less than one-tenth of the paid-up capital of
Teva carrying voting rights at general meetings. An ordinary resolution requires
seven days notice (unless otherwise specified by the articles of association)
and a special resolution requires 21 days notice.
WARRANTS OR OPTIONS
Subject to any restrictions in the Certificate of Incorporation, under
Delaware law, rights or options to purchase shares of any class of stock may be
authorized by a corporation's board of directors. However, various other legal
requirements would generally make stockholder approval of stock option plans or
warrants desirable.
Under the Teva Articles of Association, the Teva Board has the power to
give to any person the option to acquire from Teva any shares, either at par or
at premium, or, subject to the provisions of the Companies Ordinance, at a
discount, during such time and for such consideration as the Teva Board may
think fit. Certain options, such as to directors, must be approved by the Teva
Board and shareholders.
STOCKHOLDER SUITS
Under Delaware law, a stockholder may institute a lawsuit on behalf of the
corporation. An individual stockholder may also commence a class action suit on
behalf of himself and other similarly situated stockholders where the
requirements for maintaining a class action under Delaware law have been met.
Under Israeli law, a shareholder may institute a lawsuit on behalf of the
corporation where the requirements for doing so have been met. A stockholder may
also commence a class action suit on behalf of himself and other similarly
situated stockholders where the requirements for maintaining a class action
under Israeli law have been met.
REGISTRATION OF SHARES IN NAME OF PLEDGEE
Under Delaware law, a stockholder who has transferred shares to a pledgee
and registered such transfer on the books of the corporation, is nevertheless
entitled to vote such shares unless such stockholder has expressly empowered the
pledgee to vote such shares.
Under the Companies Ordinance, an Israeli company is instructed to
recognize the person whose name appears in the share registry of Teva as the
person entitled to vote such shares. Thus, any stockholder of Biocraft with
stock presently registered in the name of a pledgee of such stockholder will
lose the right to vote such stock being replaced with Teva Ordinary Shares.
INSPECTION OF CORPORATE BOOKS AND RECORDS; SHAREHOLDER LISTS
Under the DGCL, a stockholder of a corporation has the right to inspect the
books and records of the corporation, either in person or through an attorney or
other agent, and to make copies or extracts therefrom, provided that such
stockholder has a 'proper purpose' for making such inspections. A 'proper
purpose' is defined to mean a purpose reasonably related to such person's
interest in the corporation as a stockholder. In addition, under the DGCL any
stockholder for any purpose germane to
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a meeting may examine, during ordinary business hours, for a period of ten (10)
days prior to such meeting the complete list of stockholders entitled to vote at
such meeting, arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Neither the Companies Ordinance nor the Teva Articles of Association
confers any right upon a shareholder to review corporate books and records.
However, the Companies Ordinance confers the right upon shareholders to inspect
Teva's register of shareholders as well as the minutes of Teva's general
meetings.
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND OWNERS OF 5% OR MORE OF BIOCRAFT COMMON STOCK
The following table sets forth, as of the Record Date, the number of shares
of Biocraft Common Stock beneficially owned by each director, executive officer
and 5% or more stockholder named below.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
NUMBER OF SHARES (* DESIGNATES LESS
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(A) THAN 1%)(B)
- ----------------------------------------------------------------------- --------------------- -------------------
<S> <C> <C>
Directors
Harold Snyder..................................................... 3,780,184 26.6%
Beatrice Snyder................................................... 3,780,186 26.6
Beryl L. Snyder................................................... 1,206,159(c) 8.5
Brian S. Snyder................................................... 1,187,450(c) 8.4
Jay T. Snyder..................................................... 1,184,150(c) 8.3
Gerald Klein...................................................... 1,000 *
James J. Rahal, Jr., M.D.......................................... 5,000 *
Madelon DeVoe Talley.............................................. 5,000 *
Marvin M. Thalenberg, M.D......................................... 1,500 *
G. Harold Welch, Jr............................................... 5,355 *
Executive Officers(d)
Melvin Kaufman.................................................... 10,000 *
Harmon Aronson.................................................... 14,150 *
All directors and executive officers as a group (consisting of
eighteen persons all of whom own Biocraft Common Stock)......... 9,220,434 64.5%
</TABLE>
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(a) Includes shares of Biocraft Common Stock which directors and officers have
currently exercisable rights to acquire through the exercise of options, in
the amount of 13,350 shares for Beryl L. Snyder, 12,450 shares each for
Brian S. Snyder and Jay T. Snyder, 1,000 shares for Mr. Klein, 5,000 shares
each for Dr. Rahal and Ms. Talley, 1,000 shares for Dr. Thalenberg, 5,000
shares for Mr. Welch, 10,000 shares for Mr. Kaufman, 14,150 shares for Mr.
Aronson and 115,550 shares for all directors and executive officers as a
group.
(b) The number of shares subject to options described in note (a) for each
individual were deemed to be outstanding for purposes of calculating the
percentage owned by such individual and by all directors and executive
officers as a group.
(c) Includes 1,000,000 shares of Common Stock held by trusts created by Harold
Snyder and Beatrice Snyder and as to which Beryl L. Snyder, Brian S. Snyder
and Jay T. Snyder, as trustees thereof, have joint dispositive and voting
control.
(d) Together with Harold Snyder, Beatrice Snyder, Beryl L. Snyder, Brian S.
Snyder and Jay T. Snyder, the most highly compensated executive officers.
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EXPERTS
The consolidated financial statements and schedules included or
incorporated by reference in Teva's Annual Report on Form 20-F for the year
ended December 31, 1995, which are incorporated by reference in this Proxy
Statement/Prospectus, have been audited by Kesselman & Kesselman, Certified
Public Accountants, Tel Aviv, Israel, as indicated in their report with respect
thereto and are incorporated herein in reliance upon the authority of that firm
as experts in accounting and auditing. The financial statements of consolidated
subsidiaries whose assets at December 31, 1995 and 1994 constitute 26% and 16%,
respectively, of total consolidated assets as of such dates and whose sales for
the years ended December 31, 1995, 1994 and 1993 constitute 20%, 17% and 26%,
respectively, of total consolidated sales for those years have been examined by
other certified accountants whose reports have been included in Teva's Annual
Report on Form 20-F for the year ended December 31, 1995, which is incorporated
by reference into this Proxy Statement/Prospectus.
The consolidated financial statements of Biocraft appearing in Biocraft's
Annual Report (Form 10-K as amended by Form 10-K/A-1) for the year ended March
31, 1995 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated in this Proxy
Statement/Prospectus by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the ADRs representing the Teva ADSs to be issued pursuant
to this Proxy Statement/Prospectus and certain U.S. tax matters will be passed
upon for Teva by Willkie Farr & Gallagher, United States counsel for Teva, and
the validity of the Teva Ordinary Shares to be issued pursuant to this Proxy
Statement/Prospectus will be passed upon for Teva by S. Horowitz & Co., Israeli
counsel for Teva. A partner of Willkie Farr & Gallagher beneficially owns 1,200
Teva ADSs representing 12,000 Ordinary Shares.
Certain U.S. tax matters will be passed upon for Biocraft by Proskauer Rose
Goetz & Mendelsohn LLP, counsel for Biocraft.
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ANNEX I
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- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TEVA PHARMACEUTICAL INDUSTRIES LIMITED,
GENCO MERGER CORPORATION
AND
BIOCRAFT LABORATORIES, INC.
DATED AS OF JANUARY 29, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
THE MERGER
1.01 The Merger......................................................................................... A-1
1.02 Effective Time of Merger........................................................................... A-1
1.03 Effects of the Merger.............................................................................. A-1
1.04 Certificate of Incorporation of the Surviving Corporation.......................................... A-1
1.05 By-Laws of the Surviving Corporation............................................................... A-2
1.06 Directors of the Surviving Corporation............................................................. A-2
1.07 Officers of the Surviving Corporation.............................................................. A-2
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Share................................................................................ A-2
2.02 Surrender of Certificates.......................................................................... A-2
2.03 Fractional ADSs.................................................................................... A-4
2.04 Closing............................................................................................ A-4
2.05 Stock Option Plans................................................................................. A-4
2.06 Restricted Stock Purchase Plan..................................................................... A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company...................................................... A-5
3.02 Representations and Warranties of Parent and Sub................................................... A-16
ARTICLE IV
CONDUCT OF BUSINESS; TRANSACTIONS PRIOR
TO CLOSING DATE; ADDITIONAL AGREEMENTS
4.01 Conduct of Business of the Company................................................................. A-20
4.02 Access to Information Concerning Business and Records.............................................. A-21
4.03 Confidentiality.................................................................................... A-21
4.04 Registration Statement/Proxy Statement; Listing on Tel Aviv Stock Exchange......................... A-21
4.05 Employee Benefits.................................................................................. A-23
4.06 Company Stockholder Approval; Recommendation....................................................... A-23
4.07 Stock Options...................................................................................... A-23
4.08 Letters of the Company's Accountants............................................................... A-23
4.09 Letters of Parent's Accountants.................................................................... A-24
4.10 Notices of Certain Events.......................................................................... A-24
4.11 Tel Aviv Stock Exchange Listing.................................................................... A-24
4.12 NASDAQ/NMS Admission............................................................................... A-24
4.13 HSR Act............................................................................................ A-24
4.14 Indemnification; Officers' and Directors' Insurance................................................ A-24
4.15 Best Efforts....................................................................................... A-25
4.16 Rule 145........................................................................................... A-25
4.17 No Solicitation.................................................................................... A-25
4.18 Post Merger Restructurings......................................................................... A-26
4.19 Voting of Shares Subject to Proxy.................................................................. A-26
4.20 Parent Shareholder Meeting......................................................................... A-26
4.21 Dispositions Contrary to Pooling................................................................... A-27
4.22 Dividend Reinvestment Plan......................................................................... A-27
</TABLE>
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ARTICLE V
CONDITIONS PRECEDENT TO MERGER
5.01 Conditions Precedent to Obligations of Parent, Sub and the Company................................. A-27
5.02 Conditions Precedent to Obligations of Parent and Sub.............................................. A-28
5.03 Conditions Precedent to Obligation of the Company.................................................. A-29
ARTICLE VI
TERMINATION AND ABANDONMENT
6.01 Termination........................................................................................ A-30
6.02 Effect of Termination.............................................................................. A-30
ARTICLE VII
MISCELLANEOUS
7.01 Fees and Expenses.................................................................................. A-31
7.02 Representations, Warranties and Agreements......................................................... A-31
7.03 Extension; Waiver.................................................................................. A-31
7.04 Public Announcements............................................................................... A-32
7.05 Notices............................................................................................ A-32
7.06 Entire Agreement................................................................................... A-33
7.07 Binding Effect; Benefit; Assignment................................................................ A-33
7.08 Amendment and Modification......................................................................... A-33
7.09 Further Actions.................................................................................... A-33
7.10 Headings........................................................................................... A-33
7.11 Counterparts....................................................................................... A-33
7.12 Applicable Law..................................................................................... A-33
7.13 Severability....................................................................................... A-33
7.14 'Person' Defined................................................................................... A-33
7.15 Submission to Jurisdiction......................................................................... A-33
</TABLE>
SCHEDULES
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Schedule I Designated Directors
Schedule II Designated Officers
EXHIBITS (NOT INCLUDED)
- -----------
Exhibit A Form of Basic Affiliate Agreement
Exhibit A-1 Form of Affiliate Agreement for Harold and Beatrice Snyder
Exhibit B-1 List of Employment Agreement Employees
Exhibit B-2 Form of Employment Agreement
Exhibit C Form of Opinion of Proskauer Rose Goetz & Mendelsohn LLP
Exhibit D-1 Form of Opinion of Willkie Farr & Gallagher
Exhibit D-2 Form of Opinion of S. Horowitz & Co.
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 29, 1996 (the
'Agreement'), by and among TEVA PHARMACEUTICAL INDUSTRIES LIMITED, a corporation
organized under the laws of the State of Israel ('Parent'), GENCO MERGER
CORPORATION, a Delaware corporation and a wholly owned subsidiary of Parent
('Sub'), and BIOCRAFT LABORATORIES, INC., a Delaware corporation (the
'Company').
WHEREAS, the respective Boards of Directors of the Company and Parent have
each determined unanimously that it is in the best interests of their respective
companies and stockholders that Parent acquire the business of the Company
pursuant to the terms and conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company,
and Parent acting as the sole stockholder of Sub, have approved the merger of
Sub into the Company (the 'Merger'), pursuant and subject to the terms and
conditions of this Agreement, whereby each issued and outstanding share of
common stock, par value $.01 per share, of the Company ('Company Common Stock')
will be converted into the right to receive 4.61 Ordinary Shares, par value NIS
0.01 each, of Parent ('Ordinary Shares') which will trade in the United States
in the form of American Depositary Shares ('ADSs'), evidenced by American
Depositary Receipts (the 'ADRs');
WHEREAS, the respective Boards of Directors of the Company and Parent have
each determined unanimously that the Merger is fair to, and in the best
interests of, their respective companies and stockholders and have approved the
Merger, and the Board of Directors of the Company has recommended the approval
and adoption of this Agreement by the Company's stockholders;
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the 'Code'); and
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests under United States generally accepted
accounting principles ('US GAAP');
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Subject to the terms and conditions of this Agreement, at
the time of the Closing (as defined in Section 2.04 hereof), a certificate of
merger (the 'Certificate of Merger') shall be duly executed and acknowledged by
Sub and the Company in accordance with the Delaware General Corporation Law (the
'DGCL') and shall be filed on the Closing Date (as defined in Section 2.04
hereof). The Merger shall become effective upon the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware or at such time
thereafter as is provided in the Certificate of Merger in accordance with the
provisions and requirements of the DGCL. The date and time when the Merger shall
become effective is hereinafter referred to as the 'Effective Time.'
1.02 Effective Time of Merger. At the Effective Time, Sub shall be merged
with and into the Company and the separate corporate existence of Sub shall
cease, and the Company shall continue as the surviving corporation under the
laws of the State of Delaware under the name of 'Biocraft Laboratories, Inc.'
(the 'Surviving Corporation').
1.03 Effects of the Merger. From and after the Effective Time, the Merger
shall have the effects set forth in Section 259(a) of the DGCL.
1.04 Certificate of Incorporation of the Surviving Corporation. Effective
as of the Effective Time, the Certificate of Incorporation of the Company shall
be amended and restated in its entirety so that upon such amendment it shall in
all respects be equivalent in its content to the Certificate of Incorporation of
Sub, as in effect immediately prior to the Effective Time, except that Paragraph
1 thereof read as follows:
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'The name of the corporation (the 'Corporation') is Biocraft
Laboratories, Inc.'
1.05 By-Laws of the Surviving Corporation. The By-Laws of Sub, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation.
1.06 Directors of the Surviving Corporation. At the Effective Time, the
Persons listed on Schedule I hereto shall, subject to the applicable provisions
of the Certificate of Incorporation and By-Laws of the Surviving Corporation, be
the directors of the Surviving Corporation until their respective successors
shall be duly elected or appointed and qualified.
1.07 Officers of the Surviving Corporation. At the Effective Time, the
Persons listed on Schedule II hereto shall, subject to the applicable provisions
of the Certificate of Incorporation and By-Laws of the Surviving Corporation, be
the officers of the Surviving Corporation until their respective successors
shall be duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of Company Common
Stock or any holder of capital stock of Sub:
(a) Capital Stock of Sub. Each share of capital stock of Sub then
issued and outstanding shall become one fully paid and nonassessable share
of common stock, $0.01 par value, of the Surviving Corporation which shares
shall be issued to Parent and shall constitute the only outstanding shares
of capital stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock. All shares of Company Common Stock
that are owned by the Company as treasury stock shall be canceled and
retired and shall cease to exist and no share capital of Parent or other
consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Common Stock. Each issued and
outstanding share of Company Common Stock (other than shares to be canceled
in accordance with Section 2.01(b)) shall be converted into and shall be
canceled in exchange for the right to receive 4.61 Ordinary Shares (the
'Exchange Ratio') duly issued and credited as fully paid (which will be
represented by ADSs in accordance with Section 2.02) (the 'Merger
Consideration'). If between the date of this Agreement and the Effective
Time the outstanding Ordinary Shares of Parent shall be changed into a
different number of shares by reason of any stock dividend, subdivision,
reclassification, split-up, combination or the like, the Exchange Ratio
shall be appropriately adjusted.
(d) Cancellation of Company Common Stock. All shares of Company Common
Stock converted into Ordinary Shares pursuant to this Section 2.01 shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive Ordinary Shares to be issued in consideration therefor
upon the surrender of such certificate in accordance with Section 2.02,
without interest.
(e) Allotment of Ordinary Shares. In consideration of the issue to
Parent by the Surviving Corporation of shares of common stock of the
Surviving Corporation and the cancellation of shares of Company Common
Stock, Parent shall allot, in exchange for the issue to Parent of all the
unissued shares of common stock of the Surviving Corporation, Ordinary
Shares to be issued to the Exchange Agent (as defined in Section 2.02) on
behalf of such Persons as the Company shall nominate for the purpose of
giving effect to the conversion and exchange referred to in Section 2.01(c)
of this Agreement.
2.02 Surrender of Certificates. (a) Concurrently with or prior to the
Effective Time, the parties hereto shall designate The Bank of New York to act
as agent (the 'Exchange Agent') for purposes of exchanging certificates
representing shares of Company Common Stock as provided in Section 2.01. The
Exchange Agent currently acts as the Depositary for the ADSs (in such capacity,
the 'Depositary'). Each ADS represents a unit consisting of ten (10) Ordinary
Shares. As soon as practicable after the
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Effective Time, Parent shall cause the Exchange Agent to mail or make available
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock whose shares were converted into the right to receive Ordinary Shares
pursuant to Section 2.01 a notice and letter of transmittal advising such holder
of the effectiveness of the Merger and the procedure for surrendering to the
Exchange Agent such certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock in
exchange for the Merger Consideration deliverable in respect thereof pursuant to
this Article II. To the extent required, the Exchange Agent will requisition
from the Depositary, from time to time, such number of ADRs evidencing ADSs as
are issuable in respect of shares of Company Common Stock properly delivered to
the Exchange Agent. At the Effective Time, the Surviving Corporation shall issue
to Parent the shares of common stock of the Surviving Corporation referred to in
Section 2.01(a). The Parent shall, prior to the Effective Time, conditionally
allot Ordinary Shares referred to in Sections 2.01(c) and 2.01(e) subject to the
terms and conditions of this Agreement.
(b) Each holder of shares of Company Common Stock that has been converted
into a right to receive the Merger Consideration, upon surrender to the Exchange
Agent of a certificate or certificates representing such Company Common Stock,
together with a properly completed letter of transmittal covering such shares of
Company Common Stock, will be entitled to receive ADRs representing 0.461 ADSs
in respect of each share of Company Common Stock surrendered. Until so
surrendered, each share of Company Common Stock shall, after the Effective Time,
represent for all purposes, only the right to receive ADRs evidencing 0.461
ADSs, each ADS representing ten (10) Ordinary Shares.
(c) If any ADSs are to be issued to a Person other than the registered
holder of the Company Common Stock represented by the certificate or
certificates surrendered with respect thereto, it shall be a condition to such
issuance 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 issuance shall pay to the Exchange Agent any transfer or other
taxes required as a result of such issuance to a Person other than the
registered holder of such Company Common Stock or establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
(d) As of the Effective Time, there shall be no further registration of
transfers of shares of Company Common Stock that were outstanding prior to the
Merger. After the Effective Time, certificates representing shares of Company
Common Stock presented to the Surviving Corporation for transfer shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article II.
(e) At the close of business on the Effective Time, the stock ledger of the
Company with respect to the issuance of Company Common Stock shall be closed.
Six months after the Effective Time, any Ordinary Shares made available to the
Exchange Agent pursuant to Section 2.01(e) and any portion of the Common Stock
Trust (as defined in Section 2.03) that remains unclaimed by the holders of
shares of Company Common Stock shall be returned to Parent upon demand. Any such
holder who has not delivered his shares of Company Common Stock to the Exchange
Agent in accordance with Section 2.02 prior to that time shall thereafter look
only to Parent and the Surviving Corporation for issuance of ADSs in respect of
shares of Company Common Stock. Notwithstanding the foregoing, neither Parent
nor the Surviving Corporation shall be liable to any holder of shares of Company
Common Stock for any securities delivered or any amount paid to a public
official pursuant to applicable abandoned property laws. Any Ordinary Shares
remaining unclaimed by holders of shares of Company Common Stock three years
after the Effective Time (or such earlier date immediately prior to such time as
such securities would otherwise escheat to or become property of any
governmental entity or as is otherwise provided by applicable law) shall, to the
extent permitted by applicable law, be free and clear of any claims or interest
of any Person previously entitled thereto.
(f) No dividends, interest or other distributions with respect to
securities of Parent or the Surviving Corporation issuable with respect to
Company Common Stock shall be paid to the holder of any unsurrendered
certificates representing Company Common Stock until such certificates are
surrendered as provided in this Section. Upon such surrender, there shall be
paid, without interest, to the Person in
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whose name the ADSs representing such securities are registered, all dividends
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.
2.03 Fractional ADSs. No fraction of an ADS will be issued and no dividend
or other distribution, stock split or interest with respect to Ordinary Shares
shall relate to any fractional ADS, and such fractional interest shall not
entitle the owner thereof to vote or to any rights as a security holder of
Parent. In lieu of any such fractional security, each holder of shares of
Company Common Stock otherwise entitled to a fraction of an ADS will be entitled
to receive at the time such holder receives ADRs pursuant to Section 2.02(b)
hereof and in accordance with the provisions of this Section 2.03 from the
Exchange Agent a cash payment representing such holder's proportionate interest
in the net proceeds from the sale by the Exchange Agent on behalf of all such
holders of the aggregate of the fractions of ADSs which would otherwise be
issued (the 'Excess ADSs'). The sale of the Excess ADSs by the Exchange Agent
shall be executed on the National Association of Securities Dealers Automated
Quotations National Market System ('NASDAQ/NMS') through one or more market
makers in the ADSs and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have been distributed
to the holders of shares of the Company Common Stock, the Exchange Agent will,
subject to Section 2.02(e), hold such proceeds in trust for the holders of
shares of Company Common Stock (the 'Common Stock Trust'). The Parent shall pay
all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation, of the Exchange Agent incurred in
connection with such sale of the Excess ADSs. The Exchange Agent shall determine
the portion of the Common Stock Trust to which each holder of shares of Company
Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Stock Trust by a fraction the
numerator of which is the amount of the fractional ADS interest to which such
holder of shares of Company Common Stock is entitled and the denominator of
which is the aggregate amount of fractional ADS interests to which all holders
of shares of Company Common Stock are entitled. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of shares of
Company Common Stock in lieu of any fractional ADS interests, the Exchange Agent
shall make available such amounts to such holders of shares of the Company
Common Stock without interest.
2.04 Closing. The closing of the Merger (the 'Closing') shall take place at
the offices of Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, New York 10022, as soon as practicable after the last of the
conditions set forth in Article V hereof is fulfilled or waived (subject to
applicable law) but in no event later than the fifth business day thereafter, or
at such other time and place and on such other date as Parent and the Company
shall mutually agree (the 'Closing Date').
2.05 Stock Option Plans. Prior to the Effective Time, but subject to the
consummation of the Merger, the Board of Directors of the Company and the
committee appointed by the Board to administer the Company's stock option plans
shall take all action reasonably necessary or appropriate to (i) terminate the
Company's Incentive Stock Option Plan and all options then outstanding
thereunder, (ii) terminate the Company's 1987 Directors' Stock Option Plan, and
all options outstanding thereunder, each such termination to be effective as of
the Effective Time, (iii) terminate all other Company plans, or agreements
providing for the grant of stock options or other rights to acquire Company
Common Stock to any person (the plans identified in clauses (i) and (ii) and
such other plans or agreements being collectively referred to herein as the
'Stock Option Plans'), (iv) give written notice of such action to the holder of
each option outstanding under the Stock Option Plans, (v) offer the holder of
each option outstanding under the Stock Option Plans the right, by written
notice delivered to the Company at least ten business days prior to the
Effective Time, to exercise all such options, whether or not then exercisable by
the terms of the applicable option agreements, and (vi) provide that each option
outstanding under the Stock Option Plans as to which no such notice of exercise
shall have been so delivered (other than options held by executive officers or
directors subject to Section 16 of the Exchange Act) shall represent the right
to receive promptly after the Effective Time, as to each share of Company Common
Stock covered thereby (without regard to any then applicable restrictions on the
exercise of such options), the number of ADSs of Parent determined by (i)
multiplying the Exchange Ratio by the fair market value of an ADS on the
Effective Date, (ii) subtracting from the product of
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such multiplication the sum of the applicable per share exercise price plus
applicable per share withholding for taxes (which will be appropriately remitted
to the applicable tax authority on behalf of such optionee) and (iii) dividing
the amount obtained in clause (ii) by the fair market value of an ADS on the
Effective Date. For purposes of this Section 2.05, the fair market value of an
ADS on the Effective Date shall mean the average of the last sale prices of an
ADS on the NASDAQ/NMS on each of the ten trading days ending two trading days
prior to the Effective Date.
2.06 Restricted Stock Purchase Plan. Prior to the Effective Time, but
subject to the consummation of the Merger, the Board of Directors of the Company
and the committee appointed by the Board to administer the Company's Restricted
Stock Purchase Plan shall cause such Plan to be amended to (a) provide that no
further restricted stock grants be made after the Effective Time of the Merger
and (b) provide that the terms and conditions of such Plan shall apply to the
ADSs and Ordinary Shares issued upon the Merger to the holders of restricted
stock under such Plan, and such holders shall thereafter hold such ADSs and
Ordinary Shares subject to the terms and conditions of such Plan, including
without limitation any requirement for the legending of certificates evidencing
such securities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Sub as follows:
(a) Due Organization, Good Standing and Power. Each of the Company and
the Subsidiaries (as that term is defined in Section 3.01(c)(ii) hereof) is
a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and each such corporation
has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each of the
Company and the Subsidiaries is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except in such jurisdictions where the
failure to be so qualified or licensed and in good standing would not have
a material adverse effect on the business, properties, assets, liabilities,
operations, results of operations or condition (financial or otherwise)
(the 'Condition') of the Company and the Subsidiaries taken as a whole.
(b) Authorization and Validity of Agreement. The Company has full
corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and, subject to obtaining any necessary
stockholder approval of the Merger, to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by the Company, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
action on the part of the Company, subject to the approval of the Merger by
the Company's stockholders in accordance with the DGCL. The Board of
Directors of the Company has taken all action necessary to render
inapplicable, as it relates to Parent, the provisions of Section 203 of the
DGCL. No other corporate action on the part of the Company is necessary to
authorize the execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby (other
than the approval of the Merger by the holders of at least 66 2/3% of the
Company Common Stock). To the Company's knowledge, other than the Insurance
Holding Company Systems law of the State of Hawaii, no other state takeover
statute or similar statute or regulation applies or purports to apply to
the Merger, this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and is a
valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except to the extent that its enforceability
may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(c) Capitalization. (i) The authorized capital stock of the Company
consists of 30,000,000 shares of Company Common Stock, $0.01 par value, and
2,000,000 shares of preferred stock, $1.00
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par value (the 'Preferred Stock'). As of January 5, 1996, (1) 14,182,691
shares of Company Common Stock were issued and outstanding, (2) 169,200
shares of Company Common Stock were reserved for issuance upon the exercise
of outstanding options granted under stock option plans, (3) no shares of
Preferred Stock were issued and outstanding, and (4) 59,331 shares of
Company Common Stock were held in the Company's treasury. All issued and
outstanding shares of Company Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable, and none of such
shares are subject to, nor were they issued in violation of, any preemptive
rights. Except as set forth in this Section 3.01(c) or on Schedule
3.01(c)(i) delivered to Parent by the Company, and except for changes since
January 5, 1996 resulting from the exercise of employee or director stock
options outstanding on such date, or the issuance or repurchase of shares
of Common Stock pursuant to the Company's Stockholder Dividend Reinvestment
and Stock Purchase Plan, (i) there are no shares of capital stock of the
Company authorized, issued or outstanding and (ii) there are not as of the
date hereof, and at the Effective Time there will not be, any outstanding
options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, convertible or exchangeable securities or other
commitments, contingent or otherwise, relating to Company Common Stock or
any other shares of capital stock of the Company, pursuant to which the
Company is or may become obligated to issue or purchase or otherwise
acquire shares of Company Common Stock, any other shares of its capital
stock or any securities convertible into, exchangeable for, or evidencing
the right to subscribe for, any shares of the capital stock of the Company.
(ii) Schedule 3.01(c)(ii) delivered to Parent by the Company lists all
of the Company's subsidiaries (except for subsidiaries with no material
assets or liabilities) (such subsidiaries listed on Schedule 3.01(c)(ii)
being herein referred to as the 'Subsidiaries'). Except as set forth on
Schedule 3.01(c)(ii), all issued and outstanding shares of capital stock of
the Subsidiaries have been validly issued, are fully paid and
nonassessable, are not subject to, nor were they issued in violation of,
any preemptive rights, and are owned, of record and beneficially, directly
or indirectly, by the Company, free and clear of all liens, encumbrances,
options or claims whatsoever. No shares of capital stock of any of the
Subsidiaries are reserved for issuance and there are no outstanding or
authorized options, warrants, rights, subscriptions, claims of any
character, agreements, obligations, convertible or exchangeable securities,
or other commitments, contingent or otherwise, relating to the capital
stock of any Subsidiary, pursuant to which such Subsidiary is or may become
obligated to issue or purchase or otherwise acquire any shares of capital
stock of such Subsidiary or any securities convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock
of such Subsidiary. Except as set forth in Schedule 3.01(c)(ii), there are
no restrictions of any kind which prevent the payment of dividends by any
of the Subsidiaries. Except (A) for the Subsidiaries, (B) as otherwise
listed on Schedule 3.01(c)(ii), (C) ordinary course portfolio investments
in marketable securities and cash equivalents and (D) subsidiaries of the
Company with no material assets or liabilities, the Company does not own,
directly or indirectly, any capital stock or other equity interest in any
Person (as defined in Section 7.14) or have any direct or indirect equity
or ownership interest in any Person and neither the Company nor any of the
Subsidiaries is subject to any obligation or requirement to make any
material loan, capital contribution, investment or similar expenditure to
or in any Person, except for loans, capital contributions, investments or
similar expenditures by the Company or any of the Subsidiaries to any
Subsidiary of the Company or to the Company.
(d) Consents and Approvals; No Violations. Assuming that (i) the
filings required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the 'HSR Act'), are made and the waiting period
thereunder has been terminated or has expired; (ii) the filing with the
Securities and Exchange Commission (the 'Commission') of a definitive proxy
statement (the 'Proxy Statement') relating to the meeting of the Company's
stockholders to be held in connection with the Merger is made; (iii) the
Registration Statement of Parent to be filed with the Commission on Form
F-4 in connection with the issuance of Ordinary Shares (which will be
represented by the ADSs) (the 'Registration Statement') is declared
effective and a Registration Statement on Form F-6 (the 'F-6 Registration
Statement') is declared effective; (iv) the filing of the Certificate of
Merger and other appropriate merger documents, if any, as required by the
laws of the State of
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Delaware, is made; (v) approval of the Merger by 66 2/3% of the holders of
Company Common Stock is obtained; (vi) approval of the insurance regulatory
authorities in the State of Hawaii is obtained; and (vii) for each real
property owned or operated by the Company or any Subsidiary located in the
State of New Jersey, either a Letter of Non-Applicability, approval by the
New Jersey Department of Environmental Protection and Energy ('DEP') of a
Negative Declaration submitted by the Company, a no further action letter
from DEP, the filing by the Company of a De Minimis Quantity Exemption
Affidavit, a letter of authorization for the transfer of ownership from DEP
or approval by DEP of a Remediation Agreement (any of the foregoing, 'ISRA
Clearance') is obtained pursuant to the New Jersey Industrial Site Recovery
Act, N.J.S.A. 13:1K-6 et seq. and the regulations of DEP promulgated
thereunder (collectively, 'ISRA'), the execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby will not: (1) violate any provision of the
Certificate of Incorporation, as amended, or By-Laws of the Company or any
of the Subsidiaries; (2) to the knowledge of the Company, violate any
statute, ordinance, rule, regulation, order or decree of any court or of
any governmental or regulatory body, agency or authority applicable to the
Company or any of the Subsidiaries or by which any of their respective
properties or assets may be bound, including without limitation, any
consent decrees, court orders or judgments; (3) require any filing with, or
permit, consent or approval of, or the giving of any notice to any
governmental or regulatory body, agency or authority, domestic or foreign,
including without limitation, any such bodies, agencies or authorities
regulating the pharmaceutical business of the Company (a 'Governmental
Entity'); or (4) except as set forth on Schedule 3.01(d)(4) delivered to
Parent by the Company, result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of the Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise,
permit, agreement, lease or other instrument or obligation to which the
Company or any of the Subsidiaries is a party, or by which it or any of
their respective properties or assets may be bound, excluding from the
foregoing clauses (2), (3) and (4) filings, permits, consents, approvals
and notices the absence of which, and violations, breaches, conflicts,
defaults and liens which, in the aggregate, would not have a material
adverse effect on the Condition of the Company and the Subsidiaries taken
as a whole.
(e) Company Reports and Financial Statements; Accounting Records. (i)
Since March 31, 1991, the Company has filed all forms, reports and
documents with the Commission required to be filed by it pursuant to the
U.S. federal securities laws and the rules and regulations promulgated
thereunder, and all forms, reports and documents filed with the Commission
have complied in all material respects with all applicable requirements of
the U.S. federal securities laws and the Commission rules and regulations
promulgated thereunder. The Company has heretofore delivered to Parent true
and complete copies of all forms, reports, registration statements and
other filings filed by the Company with the Commission since March 31, 1991
(such forms, reports, registration statements and other filings, together
with any amendments thereto, are sometimes collectively referred to as the
'Company Commission Filings'). As of their respective dates, the Company
Commission Filings did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(ii) The audited consolidated financial statements and the unaudited
interim financial statements of the Company included in the Company
Commission Filings comply as to form in all material respects with
applicable accounting requirements and with the rules and regulations of
the Commission with respect thereto, were prepared in accordance with US
GAAP (as in effect from time to time) applied on a consistent basis (except
as may be indicated therein or in the notes or schedules thereto) and
fairly present in all material respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof
and the results of their operations and changes in cash flows, as the case
may be, for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal and recurring year-end audit
adjustments, any other adjustments described therein and the fact that
certain information and
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notes have been condensed or omitted in accordance with the Securities
Exchange Act of 1934 (the 'Exchange Act'), and the rules promulgated
thereunder.
(iii) The Company and the Subsidiaries keep proper accounting records
in which all material assets and liabilities, and all material
transactions, of the Company and its subsidiaries are recorded in
conformity with applicable accounting principles. Except as described on
Schedule 3.01(e)(iii) delivered by the Company to Parent, no part of the
Company's or any Subsidiary's accounting system or records, or access
thereto, is under the control of a Person who is not an employee of the
Company or such Subsidiary.
(f) Absence of Certain Changes. Except as disclosed in Company
Commission Filings filed prior to the date hereof, or on Schedule 3.01(f)
delivered to Parent by the Company, since September 30, 1995 (i) there has
not been any material adverse change in the Condition of the Company and
the Subsidiaries taken as a whole; (ii) the businesses of the Company and
the Subsidiaries have been conducted in all material respects only in the
ordinary course; (iii) the Company and the Subsidiaries have not, other
than in the ordinary course of business, increased the compensation of any
officer or granted any general salary or benefits increase to their
employees; and (iv) neither the Company nor any of the Subsidiaries has
taken any action referred to in Section 4.01 hereof except as permitted or
required thereby.
(g) Regulatory Compliance. (i) Schedule 3.01(g) delivered by the
Company to Parent sets forth a list of each product manufactured, marketed,
sold or licensed by the Company or any Subsidiary (the 'Pharmaceutical
Products') as of January 1, 1996.
(ii) Schedule 3.01(g) delivered by the Company to Parent sets forth a
list of all (A) Pharmaceutical Products which have been recalled,
withdrawn, suspended or discontinued by the Company in the United States
and outside the United States (whether voluntarily or otherwise) during the
period commencing April 1, 1991 and ending on the date hereof and (B)
proceedings in the United States and outside of the United States of which
the Company has knowledge (whether completed or pending) seeking the
recall, withdrawal, suspension or seizure of any Pharmaceutical Product
pending against the Company at any time during the period commencing April
1, 1991 and ending on the date hereof.
(iii) Schedule 3.01(g) delivered by the Company to Parent sets forth a
list of each of the Company's pending and approved New Drug Applications
('NDAs'), Investigational New Drug applications ('INDs'), Abbreviated New
Drug Applications ('ANDAs'), New Animal Drug Applications ('NADAs'),
Abbreviated New Animal Drug Applications ('ANADAs') or Investigational New
Animal Drug applications ('INADs') as of the date hereof. True and complete
copies of such NDAs, INDs, ANDAs, NADAs, ANADAs and INADs, including all
supplements, amendments, and annual reports, have heretofore been made
available to Parent. Copies of correspondence from the FDA and the
Company's response have heretofore been made available to Parent. As to
each drug for which such an application has been approved, the Company is
in substantial compliance with 21 U.S.C. SSSS355, 357 or 360b, 21 C.F.R.
Parts 312, 314 or 430 et. seq., 512, or 514 et seq., respectively, and all
terms and conditions of such applications. As to each such drug, the
Company and any relevant Subsidiary, and the officers, employees or agents
of the Company or such Subsidiary have included in the application for such
drug, where required, the certification described in 21 U.S.C. SS335a(k)(1)
and the list described in 21 U.S.C. SS335a(k)(2), and such certification
and such list was in each case true and accurate when made and remained
true and accurate thereafter. In addition, the Company is in substantial
compliance with all applicable registration and listing requirements set
forth in 21 U.S.C. SS360 and 21. C.F.R. Part 207.
(iv) Each article of drug manufactured and/or distributed by the
Company or any Subsidiary is not adulterated within the meaning of 21
U.S.C. SS351 or misbranded within the meaning of 21 U.S.C. SS352, and is
not a product that is in violation of 21 U.S.C. SS355.
(v) Schedule 3.01(g) delivered by the Company to Parent sets forth a
list of (A) Form 483s, (B) Notices of Adverse Findings and (C) warning
letters or other correspondence from the FDA in which the FDA asserted that
the operations of the Company or any Subsidiary may not be in compliance
with applicable law, in each case received by the Company or such
Subsidiary from the
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FDA since April 1, 1991 to the date hereof and the response of the Company
or such Subsidiary to the FDA to such notices from the FDA. True and
complete copies of such Form 483s, Notices of Adverse Findings, letters and
other correspondence and the Company's or Subsidiary's responses have
heretofore been made available to Parent. Except as disclosed in the
Company Commission Filings or otherwise set forth in Schedule 3.01(g), all
manufacturing operations of the Company and the Subsidiaries have been and
are being conducted in substantial compliance with the good manufacturing
practice regulations set forth in 21 C.F.R. Parts 210 and 211.
(vi) Schedule 3.01(g) delivered by the Company to Parent sets forth
Adverse Reaction Reports filed by the Company with the FDA during the
period commencing April 1, 1991 and ending on the date hereof.
(vii) Neither the Company, nor any Subsidiary, nor any officer,
employee or agent of either the Company or any Subsidiary has made an
untrue statement of a material fact or fraudulent statement to the FDA,
failed to disclose a material fact required to be disclosed to the FDA, or
committed an act, made a statement, or failed to make a statement that, at
the time such disclosure was made, could reasonably be expected to provide
a basis for the FDA to invoke its policy respecting 'Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities', set forth
in 56 Fed. Reg. 46191 (September 10, 1991). Neither the Company nor any of
the Subsidiary, nor any officer, employee or agent of either the Company or
any Subsidiary has been convicted of any crime or engaged in any conduct
for which debarment is mandated by 21 U.S.C. SS335a(a) or authorized by 21
U.S.C. SS335a(b).
(viii) Except as disclosed in the Company Commission Filings, neither
the Company nor any Subsidiary has received any written notice that the FDA
has commenced, or threatened to initiate, any action to withdraw its
approval or request the recall of any product of the Company or any
Subsidiary, or commenced, or overtly threatened to initiate, any action to
enjoin production at any facility of the Company or any Subsidiary.
(ix) All Drug Master Files ('DMFs') submitted to the FDA by the
Company or any Subsidiary for bulk drug ingredients manufactured by the
Company or such Subsidiary are up-to-date and accurately represent the
Company's current manufacturing operations to the extent required by law;
and all persons authorized to reference the DMFs and FDA have been notified
of any changes of information in the DMFs in accordance with 21 C.F.R.
SS314.420(c).
(x) The Company is in substantial compliance with the Medicare
Anti-kickback Statute, 42 U.S.C. SS1320a-7b(b), and implementing
regulations codified at 42 C.F.R. SS1001.
(h) Compliance with Laws. (i) General. Except with respect to
regulatory matters (which are covered exclusively by Section 3.01(g)
hereof) and environmental matters (which are covered exclusively by Section
3.01(h)(ii) below), the Company and the Subsidiaries are in compliance with
all applicable laws, regulations, orders, judgments and decrees, except
where the failure to so comply would not have a material adverse effect on
the Condition of the Company and the Subsidiaries taken as a whole.
(ii) Environmental Matters. Except to the extent that the inaccuracy
of any of the following (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Condition of the Company
and the Subsidiaries taken as a whole (after taking into account any
reserves therefor reflected in the most recent financial statements
included in the Company Commission Filings filed prior to the date hereof)
('Material Adverse Effect') or as set forth on Schedule 3.01(h)(ii), none
of which scheduled items would reasonably, individually or in the
aggregate, be expected to have a Material Adverse Effect:
(A) The Company and the Subsidiaries hold, or have made timely
application to renew, and are in compliance with, all Environmental
Permits, and the Company and the Subsidiaries are in compliance with all
applicable Environmental Laws;
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(B) There currently are no circumstances known to the Company which
would reasonably be expected to prevent or interfere with compliance in
the future with Environmental Permits and applicable Environmental Laws;
(C) None of the Company or the Subsidiaries has received notice of,
nor to the knowledge of the Company is there threatened or pending
against the Company or any of the Subsidiaries, any Environmental Claim,
nor are there currently any circumstances, conditions or events,
including, without limitation, any treatment, storage, disposal or
release of Hazardous Materials, that would reasonably be expected to
give rise to an Environmental Claim against the Company or any of the
Subsidiaries;
(D) None of the Company or the Subsidiaries has entered into or
agreed to any consent decree or order under any applicable Environmental
Law that is currently outstanding, pending or unresolved, and none of
the Company or the Subsidiaries is the subject of any pending or, to the
knowledge of the Company, threatened judgment, decree, or order of any
environmental governmental authority relating to compliance with any
applicable Environmental Law or to investigation, cleanup, remediation
or removal of Hazardous Materials under any applicable Environmental
Law;
(E) There are no (i) underground storage tanks, (ii)
polychlorinated biphenyls, (iii) friable asbestos or friable
asbestos-containing materials or (iv) Hazardous Materials present on,
at, beneath or near any facility currently or formerly owned, leased or
operated by the Company or any of the Subsidiaries, except for any
Hazardous Materials maintained and stored in compliance with applicable
Environmental Laws for use in the ordinary course of the business of the
Company or the Subsidiaries, any of which would reasonably be expected
to give rise to an Environmental Claim against the Company or any of the
Subsidiaries under any Environmental Laws;
(F) There are no past or present conditions or circumstances at any
real property presently or formerly owned, leased or operated by the
Company or any of the Subsidiaries, including without limitation the
release, threatened release, emission, discharge, generation, treatment,
storage or disposal of Hazardous Materials, that would reasonably be
expected to give rise to an Environmental Claim against the Company or
any of the Subsidiaries;
(G) Neither the Company nor any Subsidiary has assumed any
liability relating to Environmental Claims pursuant to any written
contracts or agreements between the Company or any of the Subsidiaries
and any third party;
(H) No liens have been placed upon any assets of the Company or the
Subsidiaries in connection with any actual or alleged liability under
any Environmental Law; and
(I) To the knowledge of the Company, other than the filings
required to secure the ISRA Clearance, neither the Company nor any of
the Subsidiaries is required to give notice of or record or deliver to
any governmental authority an environmental disclosure document or
statement under applicable Environmental Laws by virtue of the
transactions contemplated by this Agreement, or as a condition to the
recording of any mortgage or to ensure the effectiveness of any of the
transactions contemplated hereby.
For purposes of this Agreement, the following terms shall have the
following meanings:
'Environmental Claim' means any written or oral notice, claim, demand,
action, suit, complaint, proceeding or other communication by any Person,
including, without limitation, any federal, state or local governmental
authority, alleging liability or potential liability of the Company or any
of the Subsidiaries (including without limitation liability or potential
liability for emergency actions, investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, relating to, based on
or resulting from (i) the presence, discharge, emission, release or
threatened release of any Hazardous Materials at any location, whether or
not owned, leased or operated by the Company or any of the Subsidiaries, or
(ii) circumstances forming the basis of any violation or alleged violation
of any Environmental Law or Environmental Permit.
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'Environmental Laws' means all applicable federal, state, local and
foreign statutes, rules, regulations, ordinances, orders, decrees and the
common law relating in any manner to the contamination, pollution or
protection of human health and safety or the environment including without
limitation the Comprehensive Environmental Response, Compensation and
Liability Act, the Solid Waste Disposal Act, the Resource Conservation and
Recovery Act, the Clean Air Act, the Clean Water Act, the Toxic Substance
Control Act, the Occupational Safety and Health Act, the Emergency Planning
and Community-Right-to-Know Act, the Safe Drinking Water Act, the New
Jersey Industrial Site Recovery Act, the New Jersey Air Pollution Control
Act, the New Jersey Water Pollution Control Act, the New Jersey Solid Waste
Management Act, the New Jersey Pollution Prevention Act, the Missouri Solid
Waste Law, the Missouri Hazardous Waste Management Law, the Missouri
Underground Storage Tank Law, the Missouri Clean Water Act, the Missouri
Air Conservation Law, all as amended, and similar state laws.
'Environmental Permits' means all permits, consents, approvals,
variances, licenses, registrations and other governmental authorizations
issued by an environmental regulatory agency, authority or entity and
required for the Company and the operations of the Company's and the
Subsidiaries' facilities, and otherwise to conduct their respective
businesses under Environmental Laws.
'Hazardous Materials' means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos-containing
materials, pollutants, contaminants, which are regulated pursuant to any
applicable Environmental Law and such other materials and substances as are
regulated pursuant to any applicable Environmental Laws.
(i) Litigation. Except as disclosed in the Company Commission Filings
or as set forth on Schedule 3.01(i) delivered to Parent by the Company, and
except with respect to environmental matters (which are covered exclusively
in Section 3.01(h)(ii) hereof), there is no action, suit, proceeding at law
or in equity, or any arbitration or any administrative or other proceeding
by or before (or to the knowledge of the Company any investigation by) any
governmental or other instrumentality or agency, pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or
any of the Subsidiaries, or any of their properties or rights which if
adversely determined would be reasonably likely to have a material adverse
effect on the Condition of the Company and the Subsidiaries taken as a
whole. Except as disclosed in the Company Commission Filings and except
with respect to environmental matters (which are covered exclusively in
Section 3.01(h)(ii) hereof), neither the Company nor any of the
Subsidiaries is subject to any judgment, order or decree entered in any
lawsuit or proceeding which is reasonably likely to have a material adverse
effect on the Condition of the Company and the Subsidiaries taken as a
whole or on the ability of the Company or any Subsidiary to conduct its
business as presently conducted.
(j) Employee Benefit Plans. (i) Schedule 3.01(j) delivered by the
Company to Parent sets forth: (x) all 'employee benefit plans,' as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ('ERISA'), and all other employee benefit arrangements, policies or
payroll practices, including, without limitation, severance pay, sick
leave, vacation pay, salary continuation for disability, retirement,
deferred or other executive compensation, bonus, stock purchase,
hospitalization, medical insurance, life insurance and scholarship
programs, maintained by the Company or any of the Subsidiaries or to which
the Company or any such Subsidiary has contributed in the past three years
or is obligated to contribute thereunder for current or former employees of
the Company or any such Subsidiary in each case, excluding plans disclosed
under the immediately following clause (y) (the 'Employee Benefit Plans'),
and (y) all 'employee pension plans,' as defined in Section 3(2) of ERISA,
subject either to Section 412 of the Code or to Title IV of ERISA
maintained by the Company, any of the Subsidiaries or any trade or business
(whether or not incorporated) which are or have at any time within the last
six years been under common control, or which are or have at any time
within the last six years been treated as a single employer with the
Company under Section 414(b), (c), (m) or (o) of the Code ('ERISA
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Affiliate') or to which the Company, any of the Subsidiaries or any ERISA
Affiliate contributed or has at any time within the last six years been
obligated to contribute (the 'Pension Plans').
(ii) None of the Company, any of the Subsidiaries or any ERISA
Affiliate has withdrawn in a complete or partial withdrawal from any
Pension Plan which is a multiemployer plan, as defined in Section 3(37) of
ERISA (each such Pension Plan being defined herein as a 'Multiemployer
Plan'), prior to the Effective Time, nor has any of them received any
notice from a Multiemployer Plan that any of them has incurred any
liability due to the termination or reorganization of a Multiemployer Plan.
Parent will not have (i) except as set forth in Schedule 3.01(j) any
obligation to make any contribution to any Multiemployer Plan or (ii) any
withdrawal liability from any such Multiemployer Plan under Section 4201 of
ERISA which it would not have had had it not consummated the Merger in
accordance with the provisions of this Agreement.
(iii) Each Employee Benefit Plan and Pension Plan intended to qualify
under Section 401 of the Code, other than Multiemployer Plans, has received
a determination letter from the Internal Revenue Service ('IRS') that each
such Employee Benefit Plan or Pension Plan is so qualified and the trust
maintained pursuant thereto is exempt from federal income taxation under
Section 501 of the Code, and, to the best knowledge of the Company, nothing
has occurred with respect to the operation of such Plans which could cause
the loss of such qualification or exemption or the imposition of any
liability, penalty or tax under ERISA or the Code.
(iv) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made by the
Company or the Subsidiaries under any of the Employee Benefit Plans or
Pension Plans or by law (without regard to any waivers granted under
Section 412 of the Code) to any funds or trusts established thereunder or
in connection therewith have been made by the due date thereof (including
any valid extension), and all contributions for any period ending on or
before the Effective Time which are not yet due will have been paid or
accrued on or prior to the Effective Time. No accumulated funding
deficiencies exist in any of the Pension Plans subject to Section 412 of
the Code, other than any Multiemployer Plan.
(v) There is no 'amount of unfunded benefit liabilities' as defined in
Section 4001(a)(18) of ERISA in any of the Pension Plans, other than
Multiemployer Plans, as determined in accordance with the actuarial
assumptions used by the Pension Benefit Guaranty Corporation, or any
successor thereof ('PBGC'), to determine the level of funding required in
the event of the termination of the Pension Plan.
(vi) There has been no 'reportable event,' as that term is defined in
Section 4043 of ERISA and the regulations thereunder, with respect to any
Pension Plan which would require the giving of notice of an event requiring
disclosure under Section 40 41(c)(3)(C) or 4063(a) of ERISA.
(vii) There is no material violation of ERISA with respect to the
filing of applicable reports, documents and notices regarding the Employee
Benefit Plans or Pension Plans; other than Multiemployer Plans, with the
Secretary of Labor or the Secretary of the Treasury or the furnishing of
such documents to the participants or beneficiaries of the Employee Benefit
Plans or Pension Plans.
(viii) True, correct and complete copies of the following documents
(where applicable), with respect to each of the Employee Benefit Plans and
Pension Plans, other than, as to clauses (iii) through (vi) below,
Multiemployer Plans, have been delivered or made available to Parent by the
Company: (i) all plans and related trust documents, and amendments thereto;
(ii) the most recent Forms 5500; (iii) the last IRS determination letter;
(iv) summary plan descriptions; (v) all other material written
communications addressed to employees as a group from the Company or any
Subsidiary to employees relating to the Employee Benefit Plans and Pension
Plans distributed within the last 12 months; and (vi) written descriptions
of all unwritten agreements relating to the Employee Benefit Plans and
Pension Plans.
(ix) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Employee Benefit Plans or Pension Plans
(other than any Multiemployer Plan, unless such action, claim or lawsuit
relates to action or inaction on the part of the Company or any
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Subsidiary), the assets of any of the trusts under such plans or the plan
sponsor or the plan administrator, or against any fiduciary of any such
Employee Benefit Plan or Pension Plan with respect to the operation of such
plans (other than routine benefit claims), nor does the Company, or any
Subsidiary have knowledge of facts which could reasonably be expected to
form the basis for any such claim or lawsuit.
(x) All amendments and actions required to bring the Employee Benefit
Plans and Pension Plans, other than any Multiemployer Plan, into conformity
in all material respects with all of the applicable provisions of ERISA and
other applicable laws have been made or taken except to the extent that
such amendments or actions are not required by law to be made or taken
until a date after the Closing Date.
(xi) Any bonding required with respect to the Employee Benefit Plans
and Pension Plans, other than any Multiemployer Plan, in accordance with
applicable provisions of ERISA has been obtained and is in full force and
effect.
(xii) The Employee Benefit Plans and Pension Plans, other than any
Multiemployer Plan, have been maintained in all material respects in
accordance with their terms and with all applicable provisions of ERISA
(including rules and regulations thereunder) and other applicable federal
and state laws and regulations, and neither the Company nor any of the
Subsidiaries or 'party in interest' or 'disqualified person' with respect
to any such Employee Benefit Plan or Pension Plan has engaged in a
'prohibited transaction' within the meaning of Section 4975 of the Code or
Section 406 of ERISA. No fiduciary who is a Company or Subsidiary employee
has any liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the assets
of any Employee Benefit Plan or Pension Plan.
(xiii) Neither the Company, nor any of the Subsidiaries or any ERISA
Affiliate has within the last six years terminated any Pension Plan subject
to Title IV, or incurred any outstanding liability under Section 4062 of
ERISA to the PBGC, or to a trustee appointed under Section 4042 of ERISA.
All premiums due the PBGC from the Company or any Subsidiary prior to the
date hereof with respect to the Employee Benefit Plans have been paid.
(xiv) Neither the Company nor any of the Subsidiaries maintains
retiree life or retiree health insurance plans which are Employee Benefit
Plans which provide for continuing benefits or coverage for any participant
or any beneficiary of a participant except as may be required under Section
4980B of the Code and Section 601 of ERISA and the regulations thereunder.
The Company, each Subsidiary and each ERISA Affiliate which maintains a
'group health plan' within the meaning of Section 4980B of the Code has
complied in all material respects with the notice and health care
continuation requirements of Section 4980B of the Code and Section 601 of
ERISA and the regulations thereunder.
(xv) Neither the Company, nor any of the Subsidiaries, any ERISA
Affiliate or any organization to which the Company or any such Subsidiary
or ERISA Affiliate is a successor or parent corporation, within the meaning
of Section 4069(b) of ERISA, has engaged in any transaction to evade
liability within the meaning of Section 4069 of ERISA.
(xvi) No liability under any Employee Benefit Plan or Pension Plan
other than a Multiemployer Plan has been funded nor has any such obligation
been satisfied with the purchase of a contract from an insurance company
that is not rated AA by Standard & Poor's Corporation or the equivalent by
at least one nationally recognized rating agency.
(xvii) Except as otherwise contemplated by this Agreement, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming
due to any employee (current, former or retired) of the Company or any of
the Subsidiaries, (ii) increase any benefits otherwise payable under any
Employee Benefit Plan or Pension Plan or (iii) result in the acceleration
of the time of payment or vesting of any such benefits. Any amount that
could be received as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of the Company or any
Subsidiary who is a 'disqualified individual' (as such term is defined in
proposed Treasury Regulation SS1.280G-1)
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under any employment, severance or termination agreement, other
compensation plan or Employee Benefit Plan currently in effect would not be
characterized as an 'excess parachute payment' (as such term is defined in
SS280G(b)(1) of the Code.)
(xviii) None of the Company or any of the Subsidiaries has any
contract, plan or commitment, whether legally binding or not, to create any
additional Employee Benefit Plan or Pension Plan or to modify any existing
Employee Benefit Plan or Pension Plan, except as may be required by law or
under the terms of a collective bargaining agreement.
(xix) Except as set forth on Schedule 3.01(j)(xix) delivered by the
Company to Parent, no stock or other security issued by the Company or any
of the Subsidiaries forms or has formed a part of the assets of any
Employee Benefit Plan or Pension Plan.
(xx) Except as set forth on Schedule 3.01(j)(xx) delivered by the
Company to Parent, neither the Company nor any of the Subsidiaries has any
liability or obligation, accrued or unaccrued, contingent or otherwise, to
any former employee of the Company or any Subsidiary.
(xxi) There has been no 'mass layoff' or 'plant closing' as defined by
the Worker Adjustment and Retraining Notification Act and any similar state
or local 'plant closing' law with respect to the employees of the Company
or any Subsidiary.
(k) Employment Agreements. Except as set forth on Schedule 3.01(k)
delivered to Parent by the Company, there exists (i) no union, guild or
collective bargaining agreement to which the Company or any Subsidiary is a
party, (ii) no employment, consulting or severance agreement between the
Company and any director, officer or employee of the Company which
agreement is not stated to be terminable upon twelve or less months' notice
except for agreements pursuant to which the per annum salary (excluding any
bonuses or performance based compensation) of the employee party to such
agreement does not exceed $100,000 and the remaining term thereof does not
exceed two years or (iii) no employment, consulting, severance or
indemnification agreement to which the Company or any Subsidiary is a party
that would be altered as a result of the Merger or the other transactions
contemplated hereby.
(l) Taxes. Except as set forth in Schedule 3.01(l) delivered to Parent
by the Company: (i) the Company has filed or caused to be filed, within the
times (including authorized extensions) and in the manner prescribed by
law, all federal, state, local and foreign tax returns and tax reports
which are required to be filed by, or with respect to, the Company or any
of the Subsidiaries; (ii) all federal, state, local and foreign income,
profits, franchise, sales, use, occupancy, excise and other taxes and
assessments (including interest and penalties) payable by, or due from, the
Company or any of the Subsidiaries have been, in all material respects,
fully paid or adequately disclosed and fully provided for in the books and
financial statements of the Company and the Subsidiaries; (iii) the federal
income tax liability of the Company and the Subsidiaries has been finally
determined for all fiscal years to and including the fiscal year ended
March 31, 1990; (iv) the Company has received no notice of any examination
of any tax return of the Company or any of the Subsidiaries that is
currently in progress; and (v) there are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any tax
return of the Company or any of the Subsidiaries.
(m) Absence of Undisclosed Liabilities. Except with respect to
environmental matters (which are covered exclusively in Section 3.01(h)(ii)
hereof) and regulatory matters (which are covered exclusively in Section
3.01(g) hereof), neither the Company nor any of the Subsidiaries has any
material indebtedness or material liability, absolute or contingent, direct
or indirect, which is required in accordance with US GAAP to be reflected
on the consolidated balance sheet of the Company and its subsidiaries as of
September 30, 1995 contained in the Company Commission Filings or otherwise
disclosed in the Company Commission Filings other than liabilities so
reflected or disclosed or incurred or accrued in the ordinary course of
business (including liens of current taxes and assessments not in default)
since that date. Except as shown in such balance sheet or in the notes to
the financial statements contained in such Company Commission Filings,
neither the Company nor any of the Subsidiaries is directly or indirectly
liable upon or with respect to (by discount, repurchase agreements or
otherwise), or obligated in any other way to provide funds in
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respect of, or to guarantee or assume, any material debt, obligation or
dividend of any Person, except endorsements in the ordinary course of
business in connection with the deposit of items for collection.
(n) Transactions with Directors, Officers and Affiliates. Except as
disclosed in Schedule 3.01(n) delivered by the Company to Parent or in the
Company Commission Filings, since March 31, 1991, there have been no
transactions between the Company or any of the Subsidiaries and any
director, officer, employee, stockholder or other 'Affiliate' (as defined
in Rule 405 under the Securities Act of 1933, as amended (the 'Securities
Act')) of the Company or any of the Subsidiaries, including, without
limitation, loans, guarantees or pledges to, by or for the Company from,
to, by or for any of such Persons. Except as disclosed in such Schedule
3.01(n) or in the Company Commission Filings, since March 31, 1991, none of
the officers or directors of the Company or any of the Subsidiaries, or any
spouse or relative of any of such Persons, has been a director or officer
of, or has had any material direct or indirect interest in, any firm,
corporation, association or business enterprise which during such period
has been a supplier, customer or sales agent of the Company or any of its
subsidiaries or has competed with or been engaged in any business of the
kind being conducted by the Company or any of the Subsidiaries.
(o) Broker's or Finder's Fee. Except for Goldman Sachs & Co. (whose
fees and expenses as financial advisors to the Company will be paid by the
Company in accordance with the Company's agreement with such firm, a true
and correct copy of which has been previously delivered to Parent by the
Company), no agent, broker, Person or firm acting on behalf of the Company
or Harold Snyder, Beatrice Snyder, Beryl L. Snyder, Brian S. Snyder or Jay
T. Snyder is, or will be, entitled to any fee, commission or broker's or
finder's fees from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the transactions
contemplated hereby.
(p) Opinion of Financial Advisor. The Company has received the opinion
of Goldman Sachs & Co., dated the date hereof, to the effect that, as of
such date, the Exchange Ratio is fair to the Company's stockholders.
(q) Vote Required. The approval of the Merger by the affirmative vote
of two-thirds of the votes that holders of the outstanding shares of
Company Common Stock are entitled to cast is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve
the transactions contemplated hereby.
(r) Material Contracts. Schedule 3.01(r) lists all material contracts
and agreements to which, as of the date hereof, the Company or any
Subsidiary is a party which were not filed as exhibits to the Company
Commission Filings, which are not cancelable by the Company or its
Subsidiary on less than 60 days' notice and which involve or relate to (i)
obligations of the Company or any Subsidiary for borrowed money where the
amount of such obligations exceeds $50,000 individually, (ii) the lease by
the Company or any Subsidiary, as lessee or lessor, of real property for
rent of more than $10,000 per annum, (iii) the purchase or sale of goods
(other than raw material to be purchased by the Company in amounts and at
prices substantially consistent with past practices of the Company) or
services with an aggregate minimum purchase price of more than $100,000 per
annum, (iv) rights to manufacture and/or distribute any Pharmaceutical
Product which accounted for more than $50,000 of the consolidated revenues
of the Company and the Subsidiaries during the fiscal year ended March 31,
1995 or under which the Company or any Subsidiary received or paid license
or other fees in excess of $50,000 during the said fiscal year, (v) the
purchase or sale of assets or properties not in the ordinary course of
business having a purchase price in excess of $100,000 or (vi) individual
capital expenditures or commitments in excess of $100,000. All such
contracts and agreements are duly and validly executed by the Company or
such Subsidiary, and are in full force and effect. No event has occurred
which, after notice or the passage of time or both, would constitute a
material default under any such contract or agreement. Except as disclosed
on Schedule 3.01(r), all such contracts and agreements will continue, after
the Effective Time, to be binding in accordance with their respective terms
until their respective expiration dates.
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(s) Accounting Matters. The Company knows of no reasons, within its
control, why the Merger will not be capable of being treated as a pooling
of interest transaction under APB 16. The Company has not taken any action
that will prevent the Merger from being recorded as a pooling of interest
transaction under APB 16.
(t) Tax Matters. The Company knows of no fact or circumstance which is
reasonably likely to cause the Merger to be treated other than as a
tax-free reorganization under Section 368(a)(1)(A) of the Code by virtue of
Section 368(a)(2)(E) of the Code.
3.02 Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company as follows:
(a) Due Organization, Good Standing and Power. Each of Parent and its
subsidiaries is a corporation duly organized and validly existing and in
good standing (where applicable) under the laws of its jurisdiction of
organization and each such corporation has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of Parent and its subsidiaries is
duly qualified or licensed to do business and is in good standing (where
applicable) in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it make such
qualification necessary, except in such jurisdictions where the failure to
be so qualified or licensed and in good standing (where applicable) would
not have a material adverse effect on the Condition of Parent and its
subsidiaries taken as a whole.
(b) Authorization and Validity of Agreement. Each of Parent and Sub
has full power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by each of Parent and Sub, and the consummation by it of the
transactions contemplated hereby, have been duly authorized by the Board of
Directors of each of Parent and Sub and no other corporate action on the
part of either of Parent or Sub is necessary to authorize the execution,
delivery and performance of this Agreement by each of Parent and Sub and
the consummation of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Parent and Sub and is a
valid and binding obligation of each of Parent and Sub, enforceable against
each of Parent and Sub in accordance with its terms, except that such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally, and general equitable principles.
(c) Capitalization. (i) The authorized share capital of Parent
consists of 992,930,000 Ordinary Shares. As of December 31, 1995, (i) there
were 554,228,366 Ordinary Shares issued and outstanding and (ii) employee
share options to subscribe for an aggregate of 6,219,966 Ordinary Shares
were outstanding. All such issued Ordinary Shares and all Ordinary Shares
issued in connection with the Merger have been, or will be, as the case may
be, duly authorized and validly issued as fully paid or credited as fully
paid and were not and, in the case of Ordinary Shares issued in connection
with the Merger, will not have been, issued in violation of any preemptive
right. Except as set forth in this Section 3.02(c) or on Schedule 3.02(c)
delivered to the Company by Parent and except for changes since December
31, 1994 resulting from the exercise of employee share options outstanding
on such date, (i) there is no share capital of Parent authorized, issued or
outstanding and (ii) there are not as of the date hereof, and at the
Effective Time there will not be, any outstanding options, warrants,
rights, subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments, contingent or
otherwise, relating to Ordinary Shares or any other share capital of
Parent, pursuant to which Parent is or may become obligated to issue or
purchase or otherwise acquire Ordinary Shares or any other share capital or
securities convertible into, exchangeable for, or evidencing the right to
subscribe for, any share capital of Parent.
(ii) All of the outstanding shares of capital stock of each of
Parent's subsidiaries (other than directors' qualifying shares) except for
subsidiaries with no material assets or liabilities have been validly
issued as fully paid or credited as fully paid, were not issued in
violation of any preemptive
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rights and are beneficially owned, directly or indirectly, by Parent, free
and clear of all liens, encumbrances, options or claims whatsoever.
(d) Consents and Approvals; No Violations. Assuming that (i) the
filings required under the HSR Act are made and the waiting period
thereunder has been terminated or has expired; (ii) the filing of the Proxy
Statement is made and the Registration Statement and the F-6 Registration
Statement are declared effective; (iii) the filing of the Certificate of
Merger and other appropriate merger documents, if any, as required by the
laws of the State of Delaware is made; (iv) any applicable state securities
or Blue Sky laws are complied with; and (v) the Controller of Foreign
Currency of the Bank of Israel has approved the Merger, the issuance of the
Ordinary Shares in connection therewith and the other transactions
contemplated by this Agreement, the Israeli Securities Authority has issued
the required permit to publish the Proxy Statement or granted an exemption
from such requirement, and the Tel Aviv Stock Exchange ('TASE') has
delivered an agreement in principle to list the Ordinary Shares to be
issued in connection with the transactions contemplated hereby, the
execution and delivery of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated hereby will
not: (1) violate any provision of the Memorandum of Association or Articles
of Association of Parent or the Certificate of Incorporation or By-Laws of
Sub; (2) violate any statute, ordinance, rule, regulation, order or decree
of any court or of any governmental or regulatory body, agency or authority
applicable to Parent or any of its subsidiaries or by which their
respective properties or assets may be bound, including, without
limitation, any consent decrees, court orders or judgments; (3) require any
filing with, or permit, consent or approval of, or the giving of any notice
to any Governmental Entity; or (4) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
Parent or any of its subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise,
permit, agreement, lease or other instrument or obligation to which Parent
or any of its subsidiaries is a party, or by which it or any of their
respective properties or assets may be bound, excluding from the foregoing
clauses (3) and (4) filings, permits, consents, approvals and notices, the
absence of which, and violations, breaches, defaults, conflicts and liens
which, in the aggregate, would not have a material adverse effect on the
Condition of Parent and its subsidiaries taken as a whole.
(e) Parent Reports and Financial Statements; Accounting Records. (i)
Since December 31, 1991, Parent has filed all forms, reports and documents
with the Commission required to be filed by it pursuant to the U.S. federal
securities laws and the rules and regulations promulgated thereunder, and
all forms, reports and documents filed with the Commission have complied in
all material respects with all applicable requirements of the U.S. federal
securities laws and the Commission rules and regulations promulgated
thereunder. Parent has heretofore delivered to the Company true and
complete copies of all forms, reports, registration statements and other
filings filed by the Company with the Commission since December 31, 1991
(such forms, reports, registration statements and other filings, together
with any amendments thereto, are sometimes collectively referred to as the
'Parent Commission Filings'). As of their respective dates, the Parent
Commission Filings did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(ii) The audited consolidated financial statements included in the
Parent Commission Filings comply as to form in all material respects with
applicable accounting requirements and with the rules and regulations of
the Commission with respect thereto, were prepared in accordance with
accounting principles generally accepted in Israel ('Israel GAAP') (as in
effect from time to time), which as applicable to Parent are substantially
the same as US GAAP, applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto) and fairly present
in all material respects the consolidated financial position of Parent and
its consolidated subsidiaries as of the dates thereof and the results of
their operations and changes in cash flows, as the case may be, for the
periods then ended. The unaudited interim financial statements included in
the Parent
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Commission Filings were prepared in accordance with Israel GAAP (as in
effect from time to time) applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto) and fairly present
the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and the results of their operations
and changes in cash flows, as the case may be, for the periods then ended
subject to normal and recurring year-end audit adjustments and any other
adjustments described therein.
(iii) Parent and its subsidiaries keep proper accounting records in
which all material assets and liabilities, and all material transactions,
of Parent and its subsidiaries are recorded in conformity with applicable
accounting principles. No part of Parent's or any subsidiary's accounting
system or records, or access thereto, is under the control of a Person who
is not an employee of Parent or such subsidiary.
(f) Absence of Certain Changes. Except as disclosed in Parent
Commission Filings distributed to stockholders prior to the date hereof and
except as set forth on Schedule 3.02(f) delivered to the Company by Parent,
since December 31, 1994, (i) there has not been any material adverse change
in the Condition of Parent and its subsidiaries taken as a whole; (ii) the
businesses of Parent and its subsidiaries have been conducted only in the
ordinary course; and (iii) Parent and its subsidiaries have not increased
the compensation of any officer or granted any general salary or benefits
increase to their employees other than in the ordinary course of business.
(g) Compliance with Laws. (i) General. Except with respect to
regulatory matters (which are covered exclusively by Section 3.02(o)
hereof) and environmental matters (which are covered exclusively by Section
3.02(g)(ii) below), Parent and its subsidiaries are in compliance with all
applicable laws, regulations, orders, judgments and decrees, except where
the failure to so comply would not have a material adverse effect on the
Condition of Parent and its subsidiaries taken as a whole.
(ii) Environmental Matters. Except to the extent that the inaccuracy
of any of the following (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Condition of Parent
(after taking into account any reserves therefor included in the Parent
Commission Filings filed prior to the date hereof) or as set forth on
Schedule 3.02(g)(ii) (none of which scheduled items are expected to have a
material adverse effect):
(A) Parent is in compliance with all applicable Environmental Laws
and any permits, authorizations, licenses and certificates issued by any
governmental regulatory authority or entity pursuant to Environmental
Laws;
(B) Parent has obtained, or made timely application for, all
permits required for its operations under Environmental Laws;
(C) there are no uncontrolled Hazardous Materials present in the
environment or, to Parent's knowledge, imminent threatened releases of
Hazardous Substances into the environment at any of Parent's facilities;
and
(D) Parent has received no written notice that it is or may be
liable for cleanup or other costs relating to environmental matters as a
result of (1) any Hazardous Materials in the environment at any facility
owned or operated by Parent or (2) the off-site disposal of Hazardous
Materials generated by Parent at any of its facilities.
(h) Litigation. Except as disclosed in Parent Commission Filings or as
set forth on Schedule 3.02(h) delivered to the Company by Parent, there is
no action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the knowledge of
Parent any investigation by) any governmental or other instrumentality or
agency, pending, or, to the knowledge of Parent, threatened, against or
affecting Parent or any of its subsidiaries, or any of their properties or
rights which if adversely determined would be reasonably likely to have a
material adverse effect on the Condition of Parent and its subsidiaries
taken as a whole. Except as disclosed in Parent Commission Filings, neither
Parent nor any of its subsidiaries is subject to any judgment, order or
decree entered in any lawsuit or proceeding which is reasonably likely to
have a
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material adverse effect on the Condition of Parent and its subsidiaries
taken as a whole or on the ability of Parent or any subsidiary to conduct
its business as presently conducted.
(i) Taxes. Parent has filed or caused to be filed, within the times
and in the manner prescribed by law, all tax returns (including authorized
extensions) and tax reports which are required by Israel, the United States
and any other country, state and locality to be filed by, or with respect
to, Parent or any of its subsidiaries. All income, profits, franchise,
sales, use, occupancy, excise and other taxes and assessments (including
interest and penalties) payable by, or due from, Parent or any of its
subsidiaries under the laws of Israel, the United States and any other
country, state and locality have been fully paid or adequately disclosed
and fully provided for in the books and financial statements of Parent and
its subsidiaries.
(j) Broker's or Finder's Fee. Except for Lehman Brothers (whose fees
and expenses as financial advisor to Parent and Sub will be paid by Parent
in accordance with Parent's agreement with such firm, a true and correct
copy of which has been previously delivered to the Company by Parent), no
agent, broker, Person or firm acting on behalf of Parent or Sub is, or will
be, entitled to any fee, commission or broker's or finder's fees from any
of the parties hereto, or from any Person controlling, controlled by, or
under common control with any of the parties hereto, in connection with
this Agreement or any of the transactions contemplated hereby.
(k) Accounting Matters. Parent knows of no reason, within its control,
why the Merger will not be capable of being treated as a pooling of
interest transaction under APB 16. Parent has not taken any action that
will prevent the Merger from being recorded as a pooling of interest
transaction under APB 16.
(l) Tax Matters. Parent knows of no fact or circumstance which is
reasonably likely to cause the Merger to be treated other than as a
tax-free reorganization under Section 368(a)(1)(A) of the Code by virtue of
Section 368(a)(2)(E) of the Code.
(m) Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(n) Absence of Undisclosed Liabilities. Parent does not have any
material indebtedness or material liability which is required in accordance
with Israel GAAP to be reflected on the consolidated balance sheet of
Parent as of December 31, 1994 contained in the Parent Commission Filings
or otherwise disclosed in the Parent Commission Filings other than
liabilities so reflected or disclosed or incurred or accrued in the
ordinary course of business (including liens of current taxes and
assessments not in the default) since that date. Except as shown in such
balance sheet or in the notes to the financial statements contained in such
Parent Commission Filings, neither Parent nor Sub is directly or indirectly
liable upon or with respect to (by discount, repurchase agreements or
otherwise), or obligated in any other way to provide funds in respect of,
or to guarantee or assume, any material debt, obligation or dividend of any
Person, except endorsements in the ordinary course of business in
connection with the deposit of items for collection.
(o) Regulatory Compliance. (i) As to each drug manufactured, marketed,
sold or licensed by Parent in the United States for which an NDA or ANDA
has been approved or an IND has been submitted to the FDA and become
effective, Parent and its subsidiaries are in substantial compliance with
21 U.S.C. SSSS355 or 357 or 21 C.F.R. Parts 312, 314 or 430 et. seq.,
respectively, and all terms and conditions of such applications. As to each
such drug, Parent and any relevant subsidiary, and the officers, employees
or agents of Parent or such subsidiary have included in the application for
such drug, where required, the certification described in 21 U.S.C.
SS335a(k)(1) and the list described in 21 U.S.C. 335a(k)(2), and such
certification and such list was in each case true and accurate when made
and remained true and accurate thereafter. In addition, Parent is in
substantial compliance with all applicable registration and listing
requirements set forth in 21 U.S.C. SS360 and 21 C.F.R. Part 207.
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(ii) Each article of drug manufactured and/or distributed by Parent or
any of its subsidiaries in the United States is not adulterated within the
meaning of 21 U.S.C. SS351 or misbranded within the meaning of 21 U.S.C.
SS352, and is not a product that is in violation of 21 U.S.C. SS355.
(iii) Except as disclosed in the Parent Commission Filings or
otherwise set forth in Schedule 3.02(o), all manufacturing operations of
Parent and its subsidiaries in the United States have been and are being
conducted in substantial compliance with the good manufacturing practice
regulations set forth in 21 C.F.R. Parts 210 and 211.
(iv) Except as disclosed in the Parent Commission Filings, neither
Parent nor any of its subsidiaries has received any written notice that the
FDA has commenced, or threatened to initiate, any action to withdraw its
approval or request the recall of any product of Parent or any of its
subsidiaries, or commenced, or overtly threatened to initiate, any action
to enjoin production at any facility of Parent or any of its subsidiaries.
(v) Each drug manufactured outside the United States by Parent or any
of its subsidiaries is manufactured in accordance with applicable rules and
regulations of the jurisdiction in which such drug is manufactured. Each
drug manufactured by Parent or any of its subsidiaries and exported into
another jurisdiction for distribution is imported into such jurisdiction in
accordance with applicable rules and regulations of the jurisdiction into
which such drug is imported.
(vi) Neither Parent, nor any of its subsidiaries, nor any officer,
employee or agent of either Parent or any of its subsidiaries has made an
untrue statement of a material fact or fraudulent statement to the FDA,
failed to disclose a material fact required to be disclosed to the FDA, or
committed an act, made a statement, or failed to make a statement that, at
the time such disclosure was made, could reasonably be expected to provide
a basis for the FDA to invoke its policy respecting 'Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities', set forth
in 56 Fed. Reg. 46191 (September 10, 1991). Neither Parent nor any of its
subsidiaries, nor any officer, employee or agent of either Parent or any of
its subsidiaries has been convicted of any crime or engaged in any conduct
for which debarment is mandated by 21 U.S.C. SS335a(a) or authorized by 21
U.S.C. SS335a(b).
ARTICLE IV
CONDUCT OF BUSINESS; TRANSACTIONS PRIOR
TO CLOSING DATE; ADDITIONAL AGREEMENTS
4.01 Conduct of Business of the Company. The Company agrees that, except as
expressly permitted, required or contemplated by, or otherwise described in,
this Agreement, or required by law or governmental agency or otherwise consented
to or approved in writing by Parent, during the period commencing on the date
hereof and ending on the Closing Date:
(a) The Company and each of its subsidiaries will conduct their
respective operations in all material respects only according to their
ordinary and usual course of business and will use their reasonable efforts
to preserve intact their respective business organizations, keep available
the services of their directors, officers and employees, preserve in full
force and effect all material licenses and approvals held by them and
maintain satisfactory relationships with, suppliers, distributors, clients
and others having material business relationships with them;
(b) Neither the Company nor any of its subsidiaries will (i) make any
change in or amendment to its Certificate of Incorporation or By-Laws; (ii)
issue or sell any shares of its capital stock or share capital (other than
in connection with (A) the Company's Stockholder Dividend Reinvestment and
Stock Purchase Plan or (B) the exercise of options granted under employee
and directors' stock option plans outstanding on the date hereof) or any of
its other securities, or issue any securities convertible into, or options,
warrants or rights to purchase or subscribe to, or enter into any
arrangement or contract with respect to the issuance or sale of, any shares
of its capital stock or any of its other securities, or make any other
changes in its capital structure; (iii) declare, pay or make any dividend
or other distribution or payment with respect to, or split, combine, redeem
or reclassify, any shares of its capital stock or share capital other than
in accordance with
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the Company's Restricted Stock Purchase Plan or Shareholder Dividend
Reinvestment and Stock Purchase Plan; (iv) enter into any contract or
commitment with respect to capital expenditures in excess of those set
forth in Schedule 4.01(b) delivered to Parent by the Company or in excess
of $100,000, individually, or $200,000, in the aggregate, or enter into any
other material contracts or commitments except contracts in the ordinary
course of business; (v) acquire assets (other than as contemplated by
clause (iv) above), other than in the ordinary course of business, in an
amount in excess of $100,000, individually, or $200,000, in the aggregate,
or dispose of (including by way of sale, lease or encumbrance), other than
in the ordinary course of business, a material amount of assets or release
or relinquish any material rights under any material contract; (vi) except
as contemplated by this Agreement, amend any employee or non-employee
benefit plan or program, employment agreement, license agreement or
retirement agreement, or pay any bonus or contingent compensation, except
in each case in the ordinary course of business consistent with past
practice prior to the date of this Agreement; (vii) incur any indebtedness
for borrowed money (other than by drawing under current revolving credit
agreements (as such agreements are in effect on the date hereof and without
giving effect to any waivers of any of the provisions of such agreements))
or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or any of
its subsidiaries or guarantee any debt securities of others; (viii) agree,
in writing or otherwise, to take any of the foregoing actions; (ix) make
any material change in its method of accounting or record keeping not
otherwise required by US GAAP; or (x) agree to the settlement of any
material litigation for any amounts in excess of those reserved on the
Company's books and records;
(c) The Company will not, nor will the Company permit any of its
subsidiaries to, purchase or acquire, or offer to purchase or acquire, any
shares of its capital stock, other than in connection with the Company's
Restricted Stock Purchase Plan and Stockholder Dividend Reinvestment and
Stock Purchase Plan; and
(d) The Company will deliver to Parent all of Company's monthly and
quarterly, if any, financial statements for periods and dates subsequent to
March 31, 1995, as soon as practicable after the same are available to the
Company.
Any action consented to under this Section 4.01 shall not be deemed to
constitute a breach of any representation or warranty contained in this
Agreement.
4.02 Access to Information Concerning Business and Records. (a) During the
period commencing on the date hereof and ending on the Closing Date, the Company
shall, upon reasonable notice, afford to Parent and Parent's counsel,
accountants and other authorized representatives, reasonable access during
normal business hours to the properties, books and records of the Company and
its subsidiaries in order that they may have the opportunity to make such
investigations as they shall desire of the affairs of the Company and its
subsidiaries; such investigation shall not, however, affect the representations
and warranties made in this Agreement. The Company agrees to cause its officers
and employees to furnish such additional financial and operating data and other
information and respond to such inquiries as Parent shall from time to time
request.
(b) During the period commencing on the date hereof and ending on the
Closing Date, Parent shall, upon reasonable notice, afford to the Company and
the Company's counsel, accountants and other authorized representatives,
reasonable access during normal business hours to the properties, books and
records of Parent and its subsidiaries in order that they may have the
opportunity to make such investigations as they shall desire of the affairs of
Parent and its subsidiaries; such investigation shall not, however, affect the
representations and warranties made in this Agreement. Parent agrees to cause
its officers and employees to furnish such additional financial and operating
data and other information and respond to such inquiries as the Company shall
from time to time request.
4.03 Confidentiality. Information obtained by Parent and the Company
pursuant to this Agreement shall be subject to the provisions of the
Confidentiality Agreement between the Company and Parent.
4.04 Registration Statement/Proxy Statement; Listing on Tel Aviv Stock
Exchange. (a) As promptly as practicable after the execution of this Agreement,
the Company and Parent shall prepare and file with the Commission preliminary
proxy materials which shall constitute the preliminary Proxy
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Statement and a preliminary prospectus with respect to the Ordinary Shares and
ADSs to be issued in connection with the Merger. As promptly as practicable
after comments are received from the Commission with respect to the preliminary
proxy materials and after the furnishing by the Company and Parent of all
information required to be contained therein (including, without limitation,
financial statements and supporting schedules and certificates and reports of
independent public accountants), the Company shall file with the Commission the
definitive Proxy Statement and Parent shall file with the Commission the
definitive Proxy Statement and the Registration Statement, which Proxy Statement
and Registration Statement shall each comply in all material respects with the
applicable requirements of the Exchange Act and Securities Act, respectively,
and the applicable rules and regulations of the Commission thereunder. Parent
and the Company shall use their best efforts to cause the Registration Statement
to become effective as soon thereafter as practicable. The definitive Proxy
Statement shall contain the opinion of Goldman Sachs & Co. referred to in
Section 3.01(p) of this Agreement, provided that such opinion shall be brought
down to and dated, a date not more than two business days prior to the date of
the Proxy Statement.
(b) The Company shall cause the Proxy Statement to be mailed to the
stockholders of the Company and, if necessary, after the Proxy Statement shall
have been so mailed, promptly circulate amended, supplemental or supplemented
proxy material and, if required in connection therewith, resolicit proxies.
(c) Each of Parent and Sub, on the one hand, and the Company, on the other
hand, warrants to the other that the information provided and to be provided by
Parent and Sub and the Company, respectively, for use in each of the
Registration Statement, on the date the Registration Statement becomes
effective, and the Proxy Statement, on the date the Proxy Statement is filed
with the Commission, on the date it is first mailed to the Company's
stockholders and on the date of the Special Meeting (as defined in Section 4.06
below) shall not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
Parent and Sub, on the one hand, and the Company, on the other, shall notify the
other parties promptly of the receipt of any comments by the Commission and of
any request by the Commission for amendments or supplements to the preliminary
Proxy Statement, the Proxy Statement or the Registration Statement or for
additional information, and shall supply one another with copies of all
correspondence with the Commission with respect to any of the foregoing. If at
any time prior to the Special Meeting, any event should occur relating to Parent
or Sub (or any of their respective affiliates, directors or officers) which
should be described in an amendment or supplement to the Proxy Statement or the
Registration Statement, Parent shall promptly inform the Company. If at any time
prior to the Special Meeting, any event should occur relating to the Company,
its subsidiaries or any of their respective affiliates, directors or officers
which should be described in an amendment or supplement to the Proxy Statement
or the Registration Statement, the Company shall promptly inform Parent.
Whenever any event occurs which should be described in an amendment or
supplement to the Proxy Statement or the Registration Statement, Parent and the
Company shall, upon learning of such event, cooperate with each other promptly
to file and clear with the Commission and, if applicable, mail such amendment or
supplement to the stockholders of the Company.
(d) Each of Parent and Sub, on the one hand, and the Company, on the other
hand, warrants to the other that all information concerning the Parent, Sub and
Parent's other subsidiaries, and the Company and its subsidiaries, respectively,
to be supplied expressly for inclusion in the listing application to be prepared
for and filed with the TASE with respect to Ordinary Shares to be issued in
connection with the transactions contemplated hereby and any supplements thereto
and any other materials or documents issued to stockholders or employees of
Parent on or after the date hereof will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(e) Parent and the Company shall make all necessary filings with respect to
the Merger under the Securities Act and the Exchange Act and the rules and
regulations thereunder and under applicable
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blue sky or similar laws and shall use their best efforts to obtain required
approvals and clearances with respect thereto.
4.05 Employee Benefits. (a) Parent shall cause the Surviving Corporation to
adopt a severance plan providing for payment to each employee of the Company,
whose tenure and conditions of employment are not covered by a collective
bargaining agreement, and whose employment is terminated within one year after
the Effective Time a severance benefit in cash in an amount equal to: (i) in the
case of Vice Presidents and Assistant Vice Presidents of the Company, twelve
(12) months base salary, payable in equal monthly installments, and (ii) in the
case of other non-union employees, such employee's regular weekly base pay
multiplied by the number of years of employment such employee has had with the
Company up to ten (10) years of employment, plus two times such weekly salary
multiplied by the number of years of such employment beyond the tenth year (such
payment to be paid on a weekly basis in an amount not exceeding such regular
weekly base pay, and reduced by any applicable withholding and payroll taxes);
provided, however, that the Surviving Corporation shall be free to include
customary provisions in such severance plan including, without limitation,
provisions which preclude payment in the event of a termination for cause and
payment as a result of inter-plant transfers among the Company's New Jersey
facilities. Any such employee whose employment is terminated after the first
anniversary of the Effective Time shall be entitled to the same severance
benefits as are payable to other non-union employees of Parent's U.S. generic
drug subsidiary.
(b) At the Effective Time, subject to applicable law, all of the Employee
Benefit Plans as of the Closing Date, other than those involving stock of the
Company ('Current Benefits') and all employment agreements between the Company
and any of its employees in effect as of the Closing Date shall continue, and
for not less than one year from and after the Closing Date, Parent shall provide
for the employees of the Surviving Corporation to continue to participate in the
Current Benefits and to be provided aggregate benefits thereunder that are not
less than those provided thereunder during the Company's fiscal year ended March
31, 1995. Nothing herein shall preclude any change effected after such one-year
period on a prospective basis in any Employee Benefit Plan or Pension Plan or
prohibit Parent or the Surviving Corporation from terminating any particular
Employee Benefit Plan following such one-year period, provided that to the
extent Parent or the Surviving Corporation terminates any Employee Benefit Plan
after the Effective Time, and any U.S. generic drug subsidiary of Parent has in
place a benefit plan providing benefits of the same general type as the
terminated Employee Benefit Plan to its similarly situated subsidiaries'
employees, Parent shall thereafter permit the employees of the Surviving
Corporation to participate in such employee benefit plan of its U.S. subsidiary
or a similar plan.
4.06 Company Stockholder Approval; Recommendation. Subject to Section 4.17,
the Company, acting through its Board of Directors, shall (i) call a special
meeting of the holders of Company Common Stock for the purpose of voting upon
this Agreement and the Merger (the 'Special Meeting') and (ii) include in the
Proxy Statement the recommendation of its Board of Directors that holders of
Company Common Stock approve and adopt this Agreement and approve the Merger.
4.07 Stock Options. The Company shall take such action as may be permitted
under the Stock Option Plans to effect the actions described in Section 2.05 and
shall comply with all requirements regarding income tax withholding in
connection therewith. In addition to the foregoing, the Company will take all
steps necessary to obtain and deliver to Parent, at or prior to the Effective
Time, the written consent of each optionee under the Stock Option Plans to the
actions described in Section 2.05 hereof and shall take whatever action is
reasonably required to satisfy Parent that no holder of options or rights under
the Stock Option Plans will have any right to acquire any interest in the
Company or Parent as a result of the exercise of options on or after the
Effective Time. The Company shall not make any further grants of options or
rights of any nature under the Stock Option Plans after the date of this
Agreement, nor shall the Company's Board of Directors, Compensation Committee or
Stock Option Committee take any action that is inconsistent with Section 2.05 or
this Section 4.07 of this Agreement.
4.08 Letters of the Company's Accountants. The Company shall use its best
efforts to cause to be delivered to Parent a letter of Ernst & Young, the
Company's independent auditors, dated a date within
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two business days before the date of the Proxy Statement and a second bring-down
letter, dated a date within two business days before the Effective Time, in each
case addressed to Parent, in form and substance reasonably satisfactory to
Parent and customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
Registration Statement. The accountants' letters shall not consider any changes
arising from the announcement or consummation of the Merger or the other
transactions contemplated by this Agreement.
4.09 Letters of Parent's Accountants. Parent shall use its best efforts to
cause to be delivered to the Company a letter of Kesselman & Kesselman, Parent's
independent auditors, dated a day within two business days before the date on
which the Registration Statement shall become effective and a second bring-down
letter, dated a date within two business days before the Effective Time, in each
case addressed to the Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement. The accountants' letters shall not
consider any changes arising from the announcement or consummation of the Merger
or the other transactions contemplated by this Agreement.
4.10 Notices of Certain Events. Each party hereto shall promptly notify the
other parties of:
(a) any 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;
(b) any notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting any of Parent, Sub or the Company, as
the case may be, or any of their respective subsidiaries which relate to
the consummation of the transactions contemplated by this Agreement; and
(d) such party's obtaining knowledge of the occurrence, or failure to
occur, of any event which occurrence or failure to occur will be likely to
cause (A) any representation or warranty contained in this Agreement to be
untrue and inaccurate in any material respect, or (B) any material failure
of any party to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement; provided,
however, that no such notification shall affect the representations,
warranties or obligations of the parties or the conditions to the
obligations of the parties hereunder.
4.11 Tel Aviv Stock Exchange Listing. Parent shall make application to the
TASE for, and use its best efforts to obtain, the listing of the additional
Ordinary Shares to be issued pursuant to this Agreement on the TASE.
4.12 NASDAQ/NMS Admission. Parent shall use its best efforts to cause the
ADSs issued pursuant to the Merger to be admitted for trading on the NASDAQ/NMS,
subject to official notice of issuance.
4.13 HSR Act. The Company and Parent shall, as soon as practicable after
the date of this Agreement, file Notification and Report Forms under the HSR Act
with the Federal Trade Commission (the 'FTC') and the Antitrust Division of the
Department of Justice (the 'Antitrust Division') and shall use their best
efforts to respond as promptly as practicable to all inquiries received from the
FTC or the Antitrust Division for additional information or documentation.
4.14 Indemnification; Officers' and Directors' Insurance. (a) From and
after the Effective Time, Parent and the Surviving Corporation shall indemnify,
defend and hold harmless each person who was, is now, or who becomes prior to
the Effective Time, an officer, director or employee of the Company (the
'Indemnified Parties') against all losses, expenses, claims, damages,
liabilities, costs, expenses, judgments or amounts that are paid in settlement
with the approval of the indemnifying party (which approval will not be
unreasonably withheld) arising out of the transactions contemplated by this
Agreement to the fullest extent provided for under the Company's Certificate of
Incorporation and By Laws as in effect as of the date hereof or permitted or
required by applicable law, including without limitation the advancement of
expenses. Parent agrees that all rights to indemnification existing in favor
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of the directors, officers or employees of the Company as provided in the
Company's Certificate of Incorporation or By-Laws, as in effect as of the date
hereof, with respect to matters occurring through the Effective Time, shall
survive the Merger and shall continue in full force and effect for a period of
not less than six years from the Effective Time, and Parent hereby guarantees
the due and prompt performance in full of such indemnification obligations of
the Surviving Corporation. Parent agrees to use its best efforts to cause the
Surviving Corporation to maintain in effect for not less than three years after
the Effective Time the current policies of directors' and officers' liability
insurance maintained by the Company with respect to matters occurring prior to
the Effective Time; provided, however, that (i) the Surviving Corporation may
substitute therefor policies of at least the same coverage (with carriers
comparable to the Company's existing carriers) containing terms and conditions
which are no less advantageous to the Indemnified Parties and (ii) the Surviving
Corporation shall not be required to pay a premium at a rate for such insurance
in excess of 150% of the annual premium rate represented by the last premium
paid prior to the date hereof, but in such case shall purchase as much coverage
as possible for such amount and (iii) any or all of the Indemnified Parties
shall have the right to provide funds to the Surviving Corporation to fund
premiums to the extent they exceed such 150% level.
(b) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated by this Agreement is
commenced, whether before or after the Effective Time, the parties hereto agree
to cooperate and use their respective best efforts to vigorously defend against
and respond thereto.
(c) The provisions of this Section 4.14 are intended for the benefit of,
and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
4.15 Best Efforts. Each of the Company, Parent and Sub shall, and shall
cause each of their respective subsidiaries to, cooperate and use their
respective best efforts to take, or cause to be taken, all appropriate action,
and to make, or cause to be made, all filings necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
their respective best efforts to obtain, prior to the Closing Date, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities (including, without limitation, ISRA
Clearance) and parties to contracts with the Company and its subsidiaries and
Parent and its subsidiaries as are necessary for consummation of the
transactions contemplated by this Agreement and to fulfill the conditions to the
Merger.
4.16 Rule 145. Schedule 4.16 delivered by the Company to Parent identifies
'Affiliates' of the Company for purposes of Rule 145 under the Securities Act.
The Company shall cause each such Person to deliver to Parent prior to the
Closing Date a written agreement substantially in the form of Exhibit A hereto,
or in the case of Harold Snyder and Beatrice Snyder and certain trusts which
they have established a written agreement substantially in the form of Exhibit
A-1 hereto (each an 'Affiliate Agreement').
4.17 No Solicitation. (a) The Company shall not, nor shall it permit any of
its subsidiaries to, nor shall it authorize or permit any officer or director
of, or any investment banker, attorney or other advisor or representative of,
the Company or any of its subsidiaries to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Takeover Proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal; provided, however, that, to the
extent required by the fiduciary obligations of the Board of Directors of the
Company, as determined in good faith by the Board of Directors after reviewing
the advice of outside counsel, the Company may, (A) in response to an
unsolicited request therefor, furnish information with respect to the Company to
any Person pursuant to a customary confidentiality agreement (as determined by
the Company's outside counsel) and discuss (1) such information (but not the
terms of any possible Takeover Proposal) and (2) the terms of this Section 4.17
with such Person and (B) upon receipt by the Company of a Takeover Proposal,
following delivery to Parent of the notice required pursuant to Section 4.17(c),
participate in discussions or negotiations regarding such Takeover Proposal.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any officer or
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director of the Company or any of its subsidiaries or any investment banker,
attorney or other advisor or representative of the Company or any of its
subsidiaries, whether or not such Person is purporting to act on behalf of the
Company or any of its subsidiaries or otherwise, shall be deemed to be a breach
of this Section 4.17(a) by the Company. For purposes of this Agreement,
'Takeover Proposal' means any proposal for a merger or other business
combination involving the Company or any proposal or offer to acquire in any
manner, directly or indirectly, an equity interest in, not less than 20% of the
outstanding voting securities of, or assets representing not less than 20% of
the annual revenues of the Company, other than the transactions contemplated by
this Agreement.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or Sub, the approval or recommendation by such Board of
Directors or any such committee of this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (iii)
enter into any agreement with respect to any Takeover Proposal. Notwithstanding
the foregoing, in the event the Board of Directors of the Company receives a
Takeover Proposal that, in the exercise of its fiduciary obligations (as
determined in good faith by the Board of Directors after reviewing the advice of
outside counsel), it determines to be a Superior Proposal, the Board of
Directors may (subject to the following sentences) withdraw or modify its
approval or recommendation of this Agreement or the Merger, approve or recommend
any such Superior Proposal, enter into an agreement with respect to such
Superior Proposal or terminate this Agreement, in each case at any time after
the second business day following Parent's receipt of written notice (a 'Notice
of Superior Proposal') advising Parent that the Board of Directors has received
a Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the Person making such Superior Proposal. In
addition, if the Company proposes to enter into an agreement with respect to any
Takeover Proposal, it shall concurrently with taking any of the foregoing
actions pay, or cause to be paid, to Parent the Termination Fee (as defined in
Section 7.01(c)). For purposes of this Agreement, a 'Superior Proposal' means
any bona fide Takeover Proposal on terms which the Board of Directors of the
Company determines in its good faith reasonable judgment (after reviewing the
advice of a financial advisor of nationally recognized reputation) to be more
favorable to the Company's stockholders than the Merger.
(c) In addition to the obligations of the Company set forth in paragraph
(b) above, the Company shall promptly advise Parent orally and in writing of any
request for information or of any Takeover Proposal, or any inquiry with respect
to or which could reasonably be expected to lead to any Takeover Proposal, the
material terms and conditions of such request, Takeover Proposal or inquiry, and
the identity of the Person making any such Takeover Proposal or inquiry. The
Company shall use its best efforts to keep Parent fully informed of the status
and details of any such request, Takeover Proposal or inquiry.
4.18 Post Merger Restructurings. Parent shall indemnify the former
shareholders of the Company who held Company Common Stock immediately prior to
the Effective Time from, and hold them harmless against, any federal, state,
local and foreign tax liability that they may incur if Parent or any of its
affiliates effects any merger, consolidation, reorganization, issuance,
transfer, assignment, conveyance, disposition or other transaction with respect
to the Surviving Corporation, its capital stock or its assets after the
Effective Time, which, without regard to Section 367 of the Code, results in the
Merger being treated other than as a tax-free reorganization under the Code.
4.19 Voting of Shares Subject to Proxy. Parent shall exercise its rights
under the Irrevocable Proxy and Termination Rights Agreement dated the date
hereof (the 'Proxy') to vote the Shares (as defined in the Proxy) at any meeting
or in connection with any written consent of the Company's stockholders (i) in
favor of the Merger, and (ii) in favor of this Agreement.
4.20 Parent Shareholder Meeting. Parent shall hold the annual meeting of
its shareholders as soon as practicable after the Effective Time, but in no
event no later than October 30, 1996, at which meeting the Snyder family shall
be entitled under the terms of Parent's Articles of Association to appoint
Beatrice Snyder as a director of Parent by virtue of their holding in excess of
4% of Parent's outstanding share capital as of the record date of such meeting.
The Board of Directors of Parent has adopted a resolution (a) nominating Harold
Snyder for election at such annual meeting as an
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Additional Director of Parent for a term of three years, (b) recommending that
upon his election to the Board, Harold Snyder shall be designated as a member of
the Executive Committee of Parent's Board of Directors and (c) recommending to
the Board of Directors as reconstituted after each of the following two annual
meetings of shareholders to continue to designate Mr. Snyder as a member of the
Executive Committee while he continues to serve on the Board.
4.21 Dispositions Contrary to Pooling. Parent shall not (A) after the
Effective Time make any disposition of the assets of the Surviving Corporation
or any equity interest in the Surviving Corporation which would prevent the
Merger from being recorded as a pooling of interest transaction under APB 16 or
(B) prior to the third anniversary of the Effective Time, make any disposition
of the assets of the Surviving Corporation or any equity interests in the
Surviving Corporation that would cause any recognition of gain under a gain
recognition agreement entered into with the Internal Revenue Service under
Section 367(a) of the Code and Section 1.367(a)-3T of the U.S. Temporary
Treasury Income Tax Regulations by any former shareholder of the Company who is
a 'five percent transferee shareholder' (as defined in Section
1.367(a)-3T(c)(6)(ii)), except a disposition described in Section
1.367(a)-3T(g)(7) as to which Parent provides the five percent transferee
shareholders, on a timely basis, with notice of the disposition and all
information they require in order to comply with the requirements of subdivision
(i) of that section. Parent shall (i) cause the Company to comply with the
reporting requirements of Section 1.367(a)-3T(c)(4) and (ii) provide the
five-percent transferee shareholders with all information they require in order
to comply with the provisions of paragraphs (5), (6) and (7)(ii) and (iii) of
Section 1.367(a)-3T(g).
If prior to the third anniversary of the Effective Time, the U.S. Treasury
or the Internal Revenue Service has not officially (in a published statement
upon which taxpayers may rely) eliminated the retroactive imposition of interest
charges on tax recognized with respect to shares which were covered by a gain
recognition agreement to the extent sold prior to the date of a disposition of
the type described in clause (B) above or otherwise caused the gain recognition
agreement in respect of shares so sold to become null and void as to such sold
shares, and if prior to such third anniversary, all such five percent transferee
shareholders shall together have diligently sought to obtain a private letter
ruling from the Internal Revenue Service providing relief from such
retroactively imposed interest charges, permitting Parent's counsel to
participate fully in the preparation and prosecution of such letter ruling, and
they shall have failed to obtain such a ruling, then the three year period
described in clause (B) above shall be extended to the earlier to occur of (x)
the fifth anniversary of the Effective Time or (y) the date on which relief of
the type described in this sentence shall have been obtained.
4.22 Dividend Reinvestment Plan. As soon as practicable after the date
hereof (but in no event later than March 1, 1996), the Company shall amend the
Stockholder Dividend Reinvestment and Stock Purchase Plan to terminate the
supplemental payment investment option offered thereunder.
ARTICLE V
CONDITIONS PRECEDENT TO MERGER
5.01 Conditions Precedent to Obligations of Parent, Sub and the Company.
The respective obligations of Parent and Sub, on the one hand, and the Company,
on the other hand, to effect the Merger are subject to the satisfaction or
waiver (subject to applicable law) at or prior to the Effective Time of each of
the following conditions:
(a) Approval of Stockholders. This Agreement, the Merger and related
transactions shall have been approved and adopted by the requisite vote or
consent of the stockholders of the Company in accordance with applicable
law and the Company's Certificate of Incorporation and By-Laws.
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or been terminated.
(c) Litigation. No preliminary or permanent injunction or other order
shall have been issued by any court or by any governmental or regulatory
agency, body or authority which enjoins, restrains or prohibits the
transactions contemplated hereby, including the consummation of the
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Merger or has the effect of making the Merger illegal and which is in
effect at the Effective Time (each party agreeing to use its best efforts
to have any such injunction or order lifted).
(d) Statutes. No statute, rule, regulation, executive order, decree or
order of any kind shall have been enacted, entered, promulgated or enforced
by any court or governmental authority which prohibits the consummation of
the Merger or has the effect of making the Merger illegal.
(e) Tel Aviv Stock Exchange Listing. The TASE shall have granted
Parent's application for the listing of the additional Ordinary Shares to
be issued in connection with the Merger.
(f) NASDAQ/NMS Listing. The ADSs issuable to Company stockholders
pursuant to this Agreement shall have been admitted for trading on the
NASDAQ/NMS upon official notice of issuance.
(g) Effectiveness of Registration Statement. The Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(h) Consent of Controller of Foreign Currency. The Controller of
Foreign Currency of the Bank of Israel shall have consented to the Merger,
the issuance of the Ordinary Shares in connection therewith and the other
transactions contemplated by this Agreement.
(i) Consents. Consents from government bodies and authorities which
are required in order to consummate the Merger and the other transactions
contemplated hereby and the failure to obtain which would have a material
adverse effect on the Condition of Parent and its subsidiaries taken as a
whole after giving effect to the Merger (including, without limitation,
consent under the Insurance Holding Company Systems law of the State of
Hawaii) shall have been obtained.
(j) Tax Opinion. The Company shall have received the opinion of
Proskauer Rose Goetz & Mendelsohn LLP, counsel to the Company, and each of
Parent and the Company shall have received the opinion of Willkie Farr &
Gallagher, counsel to Parent, each to the effect that the Merger will be
treated for United States federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that the Company,
Parent and Sub will each be a party to that reorganization within the
meaning of Section 368(b) of the Code, dated on or about the date that is
two business days prior to the date the Proxy Statement is first mailed to
stockholders of the Company, which opinion shall have not have been
withdrawn or modified in any material respect.
(k) Market Events. There shall not have occurred and be continuing any
general suspension or limitation of trading in the Ordinary Shares or the
ADSs (exclusive, however, of any temporary suspension pending and ensuing
public announcement) or in securities generally on the NASDAQ/NMS.
(l) Employment Agreements. Each of the Persons named on Exhibit B-1
shall have signed an Employment Agreement substantially in the form of
Exhibit B-2 hereto.
5.02 Conditions Precedent to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are also subject to the satisfaction or
waiver, at or prior to the Effective Time, of each of the following conditions.
(a) Accuracy of Representations and Warranties. All representations
and warranties of the Company contained herein shall be true and correct in
all material respects as of the date hereof and at and as of the Closing,
with the same force and effect as though made on and as of the Closing Date
unless the failure of such representations and warranties to be true and
correct in all material respects does not, individually or in the
aggregate, materially and adversely affect the value of the Company and the
Subsidiaries taken as a whole, and Parent and Sub shall have received a
certificate to this effect from the chief executive officer and a senior
financial officer of the Company.
(b) Performance by Company. Except as otherwise agreed in writing, the
Company shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or
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complied with by it on or prior to the Closing Date, and Parent and Sub
shall have received a certificate to this effect from the chief executive
officer and a senior financial officer of the Company.
(c) Affiliate Agreements. Each Person named in Schedule 4.16 shall
have executed and delivered to the Company an Affiliate Agreement.
(d) Legal Opinion. Parent shall have received an opinion, dated the
Closing Date, of Proskauer Rose Goetz & Mendelsohn LLP, substantially to
the effect set forth in Exhibit C hereto.
(e) Accountants' Letters. Parent shall have received from Ernst &
Young the letters referred to in Section 4.08.
(f) Accounting Treatment. Parent shall have received an opinion in
form and substance satisfactory to it from Kesselman & Kesselman dated the
Closing Date, stating that, in its opinion, there is no fact or
circumstance concerning Parent or Sub which would cause the Merger not to
be recorded for accounting purposes as a pooling of interests under both
Israel GAAP and US GAAP.
(g) ISRA. The Company shall have obtained ISRA Clearance.
(h) Israeli Securities Compliance. Parent shall have received the
required permit from the Israeli Securities Authority to publish the Proxy
Statement or shall have obtained an exemption from the requirement to
obtain such a permit.
5.03 Conditions Precedent to Obligation of the Company. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver,
at or prior to the Effective Time, of each of the following conditions.
(a) Accuracy of Representations and Warranties. All representations
and warranties of Parent and Sub contained herein shall be true and correct
in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the
Closing Date unless the failure of such representations and warranties to
be true and correct in all material respects does not, individually or in
the aggregate, materially and adversely affect the value of Parent and its
subsidiaries taken as a whole, and the Company shall have received a
certificate to this effect from the chief executive officer and chief
financial officer of Parent.
(b) Performance by Parent and Sub. Except as otherwise agreed in
writing, each of Parent and Sub shall have performed in all material
respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, contained in this Agreement to
be performed or complied with by it on or prior to the Closing Date, and
the Company shall have received a certificate to this effect from the chief
executive officer and chief financial officer of Parent.
(c) Legal Opinion. The Company shall have received opinions, dated the
Closing Date, of Willkie Farr & Gallagher and S. Horowitz & Co.,
substantially to the effect set forth in Exhibit D-1 and Exhibit D-2,
respectively, hereto.
(d) Accountants' Letters. The Company shall have received from
Kesselman & Kesselman the letters referred to in Section 4.09.
(e) Accounting Treatment. The Company shall have received an opinion
in form and substance satisfactory to it from Ernst & Young dated the
Closing Date, stating that, in its opinion, there is no fact or
circumstance concerning the Company or its subsidiaries which would cause
the Merger not to be recorded for accounting purposes as a pooling of
interests under US GAAP.
(f) Affiliate Agreement. Parent shall have executed and delivered to
each Person named in Schedule 4.16 an Affiliate Agreement.
(g) Undertakings. Parent shall have delivered undertakings executed by
each of its officers and directors to refrain from effecting sales of
Ordinary Shares or ADSs after the publication of financial statements
reflecting the combined operating results of the Company and Parent for a
period of not less than 30 days from and after the Effective Time.
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ARTICLE VI
TERMINATION AND ABANDONMENT
6.01 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether before or after approval of the Merger by the stockholders of the
Company:
(a) by mutual consent of the Company, on the one hand, and of Parent
and Sub, on the other hand;
(b) by either Parent or the Company, if the Effective Time shall not
have occurred by August 31, 1996;
(c) by Parent, if the required approval of the Company's stockholders
shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or at any adjournment
thereof;
(d) by either Parent or the Company, if there shall be any law or
regulation of any competent authority that makes consummation of the Merger
illegal or otherwise prohibited or if any judgment, injunction, order or
decree of any competent authority prohibiting such transaction is entered
and such judgment, injunction, order or decree shall have become final and
nonappealable;
(e) by either Parent or the Company, if there has been a material
breach of any covenant or a breach of any representation or warranty on the
part of the other, which breach of representation or warranty individually
or, together with all other such breaches, materially and adversely affects
the value of the breaching party, provided that any such breach of a
covenant or representation or warranty has not been cured within 15
business days following receipt by the breaching party of notice hereunder
of such breach;
(f) by the Company in accordance with Section 4.17; provided, however,
that such termination under this clause (f) shall not be effective until
the Company has made payment of the full fee required by Section 7.01(c)
hereof;
(g) by Parent, if the Special Meeting is canceled or is otherwise not
held prior to August 15, 1996 except as a result of a judgment, injunction,
order or decree of any competent authority or events or circumstances
beyond the reasonable control of the Company; or
(h) by Parent, if (i) the Board of Directors of the Company shall have
withdrawn or modified in a manner adverse to Parent its approval or
recommendation to the Company's stockholders of this Agreement or the
Merger or shall have approved or recommended to the Company's stockholders
that they accept the terms of any Takeover Proposal or shall have resolved
to take any of the foregoing actions or (ii) a Third Party Acquisition
shall have occurred; provided, however, that such termination under this
clause (h) shall not relieve the Company of its fee obligations under
Section 7.01(c) hereof. 'Third Party Acquisition' means the occurrence of
any of the following events: (x) the acquisition of the Company by merger,
tender offer or otherwise by any Person other than Parent, Sub or any
affiliate thereof (a 'Third Party'); (y) the acquisition by a Third Party
of 20% or more of the total assets of the Company and its subsidiaries,
taken as a whole; or (z) the acquisition by a Third Party of 20% or more of
the outstanding Company Common Stock.
6.02 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 6.01 hereof by Parent or Sub, on the one hand, or
the Company, on the other hand, written notice thereof shall forthwith be given
to the other party or parties specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall become void and have no
effect, and there shall be no liability hereunder on the part of Parent, Sub or
the Company, except that Sections 3.01(o), 3.02(j), 4.03, this Section 6.02 and
Article VII hereof shall survive any termination of this Agreement. Nothing in
this Section 6.02 shall relieve any party to this Agreement of liability for
breach of this Agreement or for representations which were incorrect when made.
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<PAGE>
ARTICLE VII
MISCELLANEOUS
7.01 Fees and Expenses. (a) Except as provided below in this Section 7.01,
all fees and expenses incurred in connection with the Merger, this Agreement and
the transactions contemplated by this Agreement shall be paid by the party (the
Company, on the one hand, or Parent and Sub, on the other hand) incurring such
fees or expenses, whether or not the Merger is consummated.
(b) If this Agreement is terminated by Parent pursuant to Sections 6.01(c),
6.01(e), 6.01(g) or 6.01(h) or by the Company pursuant to Section 6.01(f), the
Company shall pay, or cause to be paid, in same day funds to Parent upon demand,
all actual out-of-pocket costs and expenses of Parent and Sub incurred in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, legal, professional and service fees and
expenses. If this Agreement is terminated by the Company pursuant to Section
6.01(e), Parent shall pay, or cause to be paid, in same day funds to the Company
upon demand, all actual out-of-pocket costs and expenses of the Company incurred
in connection with this Agreement and the transactions contemplated hereby,
including, without limitation, legal, professional and service fees and
expenses.
(c) The Company shall pay, or cause to be paid, in same day funds to Parent
upon demand a fee of $6,000,000 (the 'Termination Fee') if:
(i) this Agreement is terminated by the Company pursuant to Section
6.01(f);
(ii) this Agreement is terminated by Parent pursuant to Section
6.01(h)(i) or (ii); or
(iii) this Agreement is terminated by Parent pursuant to Sections
6.01(e) and (g) and within 12 months thereafter, the Company enters into an
agreement with respect to a Third Party Acquisition, or a Third Party
Acquisition occurs, involving any Person (or any affiliate or associate
thereof) (x) with whom the Company (or its agents) had any discussions with
respect to a Third Party Acquisition, (y) to whom the Company (or its
agents) furnished information with respect to or with a view to a Third
Party Acquisition or (z) who had submitted a Takeover Proposal or expressed
any interest publicly or to the Company in a Third Party Acquisition, in
the case of each of clauses (x), (y) and (z) prior to such termination.
(d) Parent shall pay, or cause to be paid, in same day funds to the Company
upon demand a fee of $6,000,000 if this Agreement is terminated by the Company
pursuant to Section 6.01(e) and within 12 months thereafter, (i) Parent is
acquired by merger, tender offer or otherwise by any Person, (ii) a Person
acquires 20% or more of the total assets of Parent and its subsidiaries, taken
as a whole, (iii) a Person acquires 20% or more of the outstanding Parent
Ordinary Shares, or (iv) Parent enters into an agreement with respect to a
transaction described in (i), (ii) or (iii) hereof.
7.02 Representations, Warranties and Agreements. The respective
representations and warranties of the Company, on the one hand, and Parent and
Sub, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party. Each and every such
representation and warranty and all agreements contained herein shall expire
with, and be terminated and extinguished by, the Closing and thereafter none of
the Company, Parent or Sub shall be under any liability whatsoever with respect
to any such representation or warranty or agreement except those contained in
Sections 2.02, 2.03, 2.05, 3.01(o), 3.02(c), 3.02(j), 4.03, 4.05, 4.14, 4.15,
4.18, 4.20, 4.21 and Article VII. This Section 7.02 shall have no effect upon
any other obligation of the parties hereto, whether to be performed before or
after the Effective Time.
7.03 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, Parent or Sub, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on
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<PAGE>
the part of any party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
7.04 Public Announcements. The Company, on the one hand, and Parent and
Sub, on the other hand, agree to consult promptly with each other prior to
issuing any press release or otherwise making any public statement with respect
to the transactions contemplated hereby and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement (the comments of such
party to be given reasonable consideration), unless advised by counsel that such
disclosure is required by applicable law or the rules or regulations of any
applicable securities exchange.
7.05 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in Person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
if to the Company, to it at:
Biocraft Laboratories, Inc.
18-01 River Road
Fair Lawn, New Jersey 07410
Attention: President
Telecopier #: (201) 797-5270
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Robert A. Cantone, Esq.
Telecopier #: (212) 969-2900
if to either Parent or Sub, to it at:
Teva Pharmaceutical Industries Limited
5 Basel Street
Petach Tikva, 49131, Israel
Attention: President
Telecopier #: (972) 3-924-6026
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Peter H. Jakes, Esq.
Telecopier #: (212) 821-8111
and a copy to:
S. Horowitz & Co.
31 Ahad Haam Street
Tel Aviv 65543, Israel
Attention: Asgad Stern, Esq.
Telecopier #: (972) 3-560-1143
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day (fifth
business day, if mailed outside the country of the recipient) after the mailing
thereof except for a notice of a change of address, which shall be effective
only upon receipt thereof.
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<PAGE>
7.06 Entire Agreement. This Agreement, the schedules and the exhibits and
other documents referred to herein or delivered pursuant thereto collectively
contain the entire understanding of the parties hereto with respect to the
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
7.07 Binding Effect; Benefit; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interest or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Except as
otherwise expressly provided in Section 4.14 hereof, nothing in this Agreement,
expressed or implied, is intended to confer on any Persons other than the
parties hereto or their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
7.08 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified and supplemented, or provisions hereof waived, in
writing by the parties hereto in any and all respects before the Effective Time
(notwithstanding any stockholder approval), by action taken by the respective
Boards of Directors of Parent, Sub and the Company or by the respective officers
authorized by such Boards of Directors, provided, however, that after any such
stockholder approval, no amendment, modification, supplement or waiver shall be
made which by law requires further approval by such stockholders without such
further approval.
7.09 Further Actions. Each of the parties hereto agrees that, subject to
its legal obligations, it will use its best efforts to fulfill all conditions
precedent specified herein, to the extent that such conditions are within its
control, and to do all things reasonably necessary to consummate the
transactions contemplated hereby.
7.10 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement.
7.11 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, and all of which together shall
be deemed to be one and the same instrument.
7.12 Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the conflict of laws rules thereof,
except to the extent the matters provided for herein are required to be governed
by the laws of Israel or the General Corporation Law of the State of Delaware.
7.13 Severability. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
7.14 'Person' Defined. 'Person' shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
7.15 Submission to Jurisdiction. With respect to any suit, action or
proceeding initiated by a party to this Agreement arising out of, under or in
connection with this Agreement, the Company, Parent and Sub each hereby submit
to the non-exclusive jurisdiction of any state or federal court sitting in the
State of New York and irrevocably waive, to the fullest extent permitted by law,
any objection that they may now have or hereafter obtain to the laying of venue
in any such court in any such suit, action or proceeding. Parent agrees that,
within 14 days of the date of this Agreement, it will appoint and designate CT
Corporation System in the City of New York, New York located at 1633 Broadway,
New York, New York, or such other Person as may be satisfactory to the Company,
as its agent to receive process in any such suit, action or proceeding and
agrees that service of process on such agent shall be deemed to be in every
respect effective service of process on it in any such suit, action or
proceeding and waives all claim of error by reason of such service.
A-33
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<PAGE>
IN WITNESS WHEREOF, each of Parent, Sub and the Company has caused this
Agreement to be executed by their respective officers or directors thereunto
duly authorized, all as of the date first above written.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
By: /s/ ELI HURVITZ
...................................
Name: Eli Hurvitz
Title:President and Chief
Executive Officer
Attest:
By: /s/ UZI KARNIEL
.................................
Name: Uzi Karniel
Title:Secretary and
In-House Counsel
GENCO MERGER CORPORATION
By: /s/ WILLIAM A.
FLETCHER
...................................
Name: William A. Fletcher
Title:President
Attest:
By: /s/ PETER H. JAKES
.................................
Name: Peter H. Jakes
Title:Assistant Secretary
BIOCRAFT LABORATORIES, INC.
By: /s/ HAROLD SNYDER
...................................
Name: Harold Snyder
Title:Chairman of the Board,
President and Chief
Executive Officer
Attest:
By: /s/ BEATRICE SNYDER
.................................
Name: Beatrice Snyder
Title:Senior Vice President
and Secretary
A-34
<PAGE>
<PAGE>
SCHEDULE I
DESIGNATED DIRECTORS
Harold Snyder
Beatrice Snyder
Eli Hurvitz
William Fletcher
Peter Jakes
One Additional Teva Designee
<PAGE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
DESIGNATED OFFICERS
- ------------------------------------------
<S> <C>
William Fletcher.......................... President and Chief Executive Officer
Harold Snyder............................. Senior Vice President
Peter Terreri............................. Vice President and Chief Financial Officer, Treasurer
Beatrice Snyder........................... Vice President -- Cost Accounting and Inventory, Secretary
Beryl L. Snyder........................... Vice President, General Counsel
Brian S. Snyder........................... Vice President, Controller
Jay T. Snyder............................. Vice President -- Research & Product Development
Harmon Aronson............................ Vice President -- Quality Management
Melvin Kaufman............................ Vice President -- Operations
Gerald Moskowitz.......................... Vice President -- Sales
Steven J. Sklar........................... Vice President -- Finance
Joy Bloodsaw.............................. Associate Vice President -- Purchasing
McKee Moore............................... Associate Vice President -- Sales
Harvey Richards........................... Associate Vice President -- Regulatory Affairs
George Svokos............................. Associate Vice President -- Missouri Operations
</TABLE>
<PAGE>
<PAGE>
ANNEX II
April 29, 1996
Board of Directors
BIOCRAFT LABORATORIES, INC.
18-01 River Road
Fairlawn, NJ 07410
Gentlemen and Mesdames:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.01 per share (the 'Shares'), of
Biocraft Laboratories, Inc. (the 'Company') of the exchange ratio of 0.461
American Depositary Shares ('Teva American Depositary Shares'), of Teva
Pharmaceutical Industries Ltd. ('Teva') to be received for each Share, each Teva
American Depositary Share representing ten Teva ordinary shares, par value NIS
0.01 each, (the 'Exchange Ratio') pursuant to the Agreement and Plan of Merger
dated as of January 29, 1996 by and among Teva, Genco Merger Corporation, a
wholly-owned subsidiary of Teva and the Company (the 'Agreement').
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.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Teva's Registration Statement on Form F-4, including the Proxy
Statement/Prospectus relating to the Special Meeting of stockholders of Biocraft
to be held in connection with the Merger Agreement; Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company for the five fiscal
years ended March 31, 1995; Annual Reports to Stockholders and Annual Reports on
Form 20-F of Teva for the six years ended December 31, 1995; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q and 6-K of the
Company and Teva, respectively; certain other communications from the Company
and Teva to their respective stockholders; and certain internal financial
analyses and forecasts for the Company and Teva prepared by their respective
managements. We also have held discussions with members of the senior management
of Biocraft and Teva regarding the past and current business operations,
financial condition and future prospects of their respective companies as well
as the future outlook of the combined entity. In addition, we have reviewed the
reported price and trading activity for the Shares and Teva American Depositary
Shares, compared certain financial and stock market information for Biocraft and
Teva with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations and performed such other studies and analyses as we
considered appropriate.
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 Teva or
any of their respective subsidiaries and we have not been furnished with any
such evaluation or appraisal. We have assumed, with your consent, that the
consummation of the transaction contemplated pursuant to the Agreement will be
recorded as a pooling of interests under generally accepted accounting
principles.
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
Exchange Ratio pursuant to the Agreement is fair to the holders of Shares.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE>
<PAGE>
APPENDIX 1
PROXY
BIOCRAFT LABORATORIES, INC.
SPECIAL MEETING OF STOCKHOLDERS
MAY 31, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The UNDERSIGNED, having received notice of the meeting and management's proxy
statement therefor, and revoking all prior proxies, hereby appoint(s) HAROLD
SNYDER and BEATRICE SNYDER, and each of them, attorneys or attorney of the
undersigned, with full power of substitution, for and in the name of the
undersigned, to represent and to vote the stock of the undersigned in BIOCRAFT
LABORATORIES, INC. (the 'Company') at the Special Meeting of Stockholders held
on May 31, 1996 and at any adjournment thereof as set forth below with all
powers the undersigned would possess if personally present:
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY WILL BE VOTED AS SPECIFIED AND, UNLESS OTHERWISE SPECIFIED, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1.
Attendance of the undersigned at the meeting or at any adjourned session thereof
will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of Common Stock
of the Company in a fiduciary, custodial or joint capacity or capacities, this
proxy is signed by the undersigned in every such capacity as well as
individually.
<PAGE>
<PAGE>
[X] Please mark your
votes as in this
example
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
1. PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER dated as of
January 29, 1996 among Teva Pharmaceutical Industries Limited, a company
organized under the laws of the State of Israel ('Teva'), Genco Merger
Corporation,a wholly-owned subsidiary of Teva ('Merger Sub'), and the
Company, providing for the merger of Merger Sub with and into the Company
(the 'Merger'). Pursuant to the Merger, the Company will become a wholly-owned
subsidiary of Teva, and each outstanding share of Common Stock, par value $.01
per share, of the Company will be converted into the right to receive 0.461
American Depositary Shares of Teva ('ADSs'), each ADS representing 10 Ordinary
Shares, par value NIS 0.01 each, of Teva.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
SIGNATURE(S)------------------DATE ------------------------
- ------------------------------DATE ------------------------
Signature if jointly held
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as .................... SS
The registered trademark symbol shall be expressed as ...... 'r'
<PAGE>
