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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
MARSAM PHARMACEUTICALS INC.
(Name of Subject Company)
SCHEIN PHARMACEUTICAL, INC.
(Bidder)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
571 728 104
(CUSIP Number)
MARTIN SPERBER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
100 CAMPUS DRIVE
FLORHAM PARK, NEW JERSEY 07932
(201) 593-5500
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
Copy to:
Edward W. Kerson, Esq.
Proskauer Rose Goetz & Mendelsohn
1585 Broadway
New York, New York 10036
JULY 29, 1995
(Date of Event which Requires Filing of this Statement)
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of Pages
Exhibit Index is located on Page
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CALCULATION OF FILING FEE
<TABLE>
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TRANSACTION VALUATION** AMOUNT OF FILING FEE
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$257,266,506 $51,454
</TABLE>
/ / Check the following box if any part of this fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration number, or the
form or schedule and the date of its filing.
AMOUNT PREVIOUSLY PAID: NONE FILING PARTY: NOT
APPLICABLE
FORM OR REGISTRATION NO: NOT APPLICABLE DATE FILED: NOT
APPLICABLE
** Estimated for purposes of calculating the amount of the filing fee only. The
amount assumes the purchase of 11,084,137 shares of common stock, $.01 par value
(the "Shares"), and options to purchase 1,166,649 Shares, at a price per Share
of $21 in cash. Such number of Shares represents all the Shares outstanding as
of July 26, 1995, and assumes the exercise of all existing options to acquire
Shares from the Company.
<PAGE>
SCHEDULE 14D-1
<TABLE>
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CUSIP No. 571 728 104 Page 3 of [ ] Pages
</TABLE>
<TABLE>
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NAME OF REPORTING PERSONS
SCHEIN PHARMACEUTICAL, INC.
1 S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
11-2726505
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
2 (b) / /
3 SEC USE ONLY
SOURCE OF FUNDS
4 BK
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(D) OR 2(E) N/A / /
CITIZENSHIP OR PLACE OF ORGANIZATION
6 STATE OF DELAWARE
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7 2,989,882*
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES*
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9 24%
TYPE OF REPORTING PERSON
10 CO
</TABLE>
* On July 28, 1995, Schein Pharmaceutical, Inc., a Delaware corporation
("Purchaser"), and SM Acquiring Corp., a Delaware corporation and a wholly-owned
subsidiary of Purchaser ("Sub"), entered into a Stockholders Agreement (the
"Stockholders Agreement") with a group of stockholders (collectively, the
"Selling Stockholders") of Marsam Pharmaceuticals Inc. (the "Company"), pursuant
to which the Selling Stockholders agreed to sell to Purchaser an aggregate of
2,989,882 shares of common stock, $.01 par value per share (the "Shares"),
including 2,871,132 Shares beneficially owned by the Selling Stockholders and
118,750 Shares, assuming the exercise of all existing options to acquire Shares
held by the Selling Stockholders, (representing approximately 24% of the Shares
outstanding calculated on a fully-diluted basis). Pursuant to the Stockholders
Agreement, the Selling Stockholders have agreed to validly tender pursuant to
Purchaser's offer to purchase all of the outstanding Shares which are owned
beneficially by them. The Stockholders Agreement is described more fully in
Section 12 of the Offer to Purchase, dated July 28, 1995.
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 is filed by Schein
Pharmaceutical, Inc. ("Purchaser"), a Delaware corporation relating to the offer
by Purchaser to purchase all outstanding shares of common stock, $.01 par value
(the "Shares") of Marsam Pharmaceuticals Inc. (the "Company"), at $21 per Share,
net to the seller in cash, on the terms and subject to the conditions set forth
in the Offer to Purchase, dated August 4, 1995 (the "Offer to Purchase"), and in
the related Letter of Transmittal, copies of which are attached hereto as
Exhibits (a)(1) and (a)(2), respectively (which collectively constitute the
"Offer").
This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement
on Schedule 13D with respect to the acquisition by Purchaser of beneficial
ownership of the Selling Stockholders' Shares. The item numbers and responses
thereto below are in accordance with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is Marsam Pharmaceuticals Inc., a
Delaware corporation (the "Company"). The address of the Company's principal
executive offices is Building 31, Olney Avenue, Cherry Hill, New Jersey 08003.
(b) The information set forth on the cover page and under "Introduction" in
the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d), (g) This Statement is filed by Purchaser. The information set forth
on the cover page, under "Introduction," in Section 9 and in Schedule I of the
Offer to Purchase is incorporated herein by reference.
(e)-(f) During the last five years, neither Purchaser nor, to its knowledge,
any of the persons listed in Schedule I (Directors and Executive Officers) to
the Offer to Purchase, (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) has been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTRACTS, TRANSACTIONS, OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a) The information set forth in Section 11 of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth under "Introduction" and in Sections 9, 11 and
12 of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(b) The information set forth under "Introduction" and in Section 10 of
the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(e) The information set forth under "Introduction," and in Sections 9,
11 and 12 of the Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 7 of the Offer to Purchase is
incorporated herein by reference.
1
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) The information set forth under "Introduction" and in Section 12 of the
Offer to Purchase is incorporated herein by reference.
(b) The information set forth under "Introduction" and in Sections 9, 11 and
12 of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES
The information set forth under "Introduction" and in Sections 9, 11, 12 and
13 of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAIN, EMPLOYED OR TO BE COMPENSATED
The information set forth under "Introduction" and in Sections 10 and 16 of
the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS TO CERTAIN BIDDERS
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION
(a) The information set forth in Sections 11 and 12 of the Offer to Purchase
is incorporated herein by reference.
(b)-(e) The information set forth in Sections 10 and 15 of the Offer to
Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
2
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
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(a)(1) Offer to Purchase, dated July 28, 1995
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9
(a)(7) Form of Summary Advertisement, dated August 4, 1995
(a)(8) Text of Press Release, dated July 29, 1995
(b) Commitment Letter, dated June 6, 1995, from Chemical Bank and Chemical Securities
Inc. to Purchaser
(c)(1) Agreement and Plan of Merger, dated July 28, 1995, among Purchaser, SM Acquiring
Corp., a wholly-owned subsidiary of Purchaser ("SM Acquiring"), and the Company.
(c)(2) Stockholders Agreement, dated July 28, 1995, among Purchaser, SM Acquiring, Agvar
Chemicals Inc., Agnes Varis and Karl Leichtman, jointly, Agnes Varis, individually,
and Marvin Samson.
(c)(3) Waiver of Circa Pharmaceuticals, Inc. relating to the Stockholders' Agreement, dated
as of December 31, 1985, by and among the Company, Marvin S. Samson, Agvar Chemicals
Inc. and Bolar Pharmaceutical Co., Inc. (now known as Circa Pharmaceuticals, Inc.)
(c)(4) Employment Agreement, dated July 28, 1995, among the Company and Marvin Samson......
(c)(5) Compensation Continuation Agreement, dated October 19, 1991, by and between the
Company and Marvin Samson...........................................................
(c)(6) Split Dollar Insurance Agreement, dated March 25, 1995, by and between Michael A.
Samson and Andrew Samson, Trustees under Indenture of Trust of Marvin Samson, dated
October 3, 1989 and the Company.....................................................
(d) Complaint filed July 31, 1995 in the Delaware Chancery Court on behalf of all
shareholders against the Company ET. AL.............................................
(e) Not applicable
(f) None
</TABLE>
3
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
SCHEIN PHARMACEUTICAL, INC.
Dated: August 4, 1995
By: /s/ Martin Sperber__________________
Name: Martin Sperber
Title: Chairman & Chief Executive
Officer
4
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EXHIBIT INDEX
<TABLE>
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EXHIBIT DESCRIPTION PAGE
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(a)(1) Offer to Purchase, dated July 28, 1995........................................................
(a)(2) Letter of Transmittal.........................................................................
(a)(3) Notice of Guaranteed Delivery.................................................................
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees..............
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees......................................................................................
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.........
(a)(7) Form of Summary Advertisement, dated August 4, 1995...........................................
(a)(8) Text of Press Release, dated July 29, 1995....................................................
(b) Commitment Letter, dated June 6, 1995, from Chemical Bank and Chemical Securities Inc. to
Purchaser.....................................................................................
(c)(1) Agreement and Plan of Merger, dated July 28, 1995, among Purchaser, SM Acquiring Corp., a
wholly-owned subsidiary of Purchaser ("SM Acquiring"), and the Company........................
(c)(2) Stockholders Agreement, dated July 28, 1995, among Purchaser, SM Acquiring, Agvar Chemicals
Inc., Agnes Varis and Karl Leichtman, jointly, Agnes Varis, individually, and Marvin
Samson........................................................................................
(c)(3) Waiver of Circa Pharmaceuticals, Inc. relating to the Stockholders' Agreement, dated as of
December 31, 1985, by and among the Company, Marvin S. Samson, Agvar Chemicals Inc. and Bolar
Pharmaceutical Co., Inc. (now known as Circa Pharmaceuticals, Inc.)...........................
(c)(4) Employment Agreement, dated July 28, 1995, among the Company and Marvin Samson................
(c)(5) Compensation Continuation Agreement, dated October 19, 1991, by and between the Company and
Marvin Samson.................................................................................
(c)(6) Split Dollar Insurance Agreement, dated March 25, 1995, by and between Michael A. Samson and
Andrew Samson, Trustees under Indenture of Trust of Marvin Samson, dated October 3, 1989 and
the Company...................................................................................
(d) Complaint filed July 31, 1995 in the Delaware Chancery Court on behalf of all shareholders
against the Company ET. AL....................................................................
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MARSAM PHARMACEUTICALS INC.
AT
$21.00 NET PER SHARE
BY
SCHEIN PHARMACEUTICAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 1, 1995, UNLESS EXTENDED
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH
OF THE OFFER AND MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S
STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE OFFER AND MERGER, AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER ALL THEIR
SHARES PURSUANT TO THE OFFER.
THE PURCHASER HAS ENTERED INTO A STOCKHOLDERS AGREEMENT WITH CERTAIN SELLING
STOCKHOLDERS, PURSUANT TO WHICH, AMONG OTHER THINGS, THOSE STOCKHOLDERS HAVE
AGREED TO TENDER IN THE OFFER, AND THE PURCHASER HAS THE RIGHT TO ACQUIRE, UPON
THE TERMS AND SUBJECT TO THE CONDITIONS OF THE STOCKHOLDERS AGREEMENT,
APPROXIMATELY 24% OF THE COMPANY'S OUTSTANDING SHARES (CALCULATED ON A FULLY
DILUTED BASIS) AT THE OFFER PRICE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF
SHARES THAT WOULD REPRESENT, ON A FULLY DILUTED BASIS, A MAJORITY OF THE
OUTSTANDING SHARES. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
CONTAINED IN THIS OFFER TO PURCHASE. SEE INTRODUCTION AND SECTIONS 1 AND 14 OF
THIS OFFER TO PURCHASE.
------------------------
IMPORTANT
Any stockholder wishing to tender all or a portion of that stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
manually signed facsimile of it) in accordance with the instructions in the
Letter of Transmittal, mail or deliver it and any other required documents to
the Depositary and either deliver the certificates for those Shares to the
Depositary along with the Letter of Transmittal or tender those Shares pursuant
to the procedures for book-entry transfer set forth in Section 3, or (2) request
his broker, dealer, commercial bank, trust company or other nominee effect the
transaction for the stockholder. Any stockholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact that broker, dealer, commercial bank, trust company or other
nominee, if the stockholder wishes to tender such Shares.
Any stockholder who wishes to tender Shares and whose certificates
representing those Shares are not immediately available or who cannot comply
with the procedure for book-entry transfer on a timely basis should tender those
Shares by following the procedures for guaranteed delivery set forth in Section
3.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Requests for additional copies of this Offer to Purchase, the
Letter of Transmittal, the Notice of Guaranteed Delivery and other related
materials may be directed to the Information Agent or to brokers, dealers,
commercial banks and trust companies.
------------------------
August 4, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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INTRODUCTION.............................................................................................. 1
1. Terms of the Offer.......................................................................... 2
2. Acceptance for Payment and Payment for Shares............................................... 4
3. Procedure for Tendering Shares.............................................................. 5
4. Withdrawal Rights........................................................................... 7
5. Certain Federal Income Tax Consequences of the Offer and the Merger......................... 8
6. Price Range of the Shares; Dividends on the Shares.......................................... 9
7. Effect of the Offer on the Market for the Shares, NASDAQ/NMS Listing, Exchange Act
Registration and Margin Securities......................................................... 9
8. Certain Information Concerning the Company.................................................. 10
9. Certain Information Concerning the Purchaser and the Sub.................................... 12
10. Source and Amount of Funds.................................................................. 13
11. Background of the Offer..................................................................... 14
12. Purpose of the Offer and the Merger; Plans for the Company; the Merger Agreement; the
Stockholders Agreement; Other Agreements................................................... 15
13. Dividends and Distributions................................................................. 26
14. Certain Conditions of the Offer............................................................. 26
15. Certain Legal Matters....................................................................... 28
16. Fees and Expenses........................................................................... 30
17. Miscellaneous............................................................................... 30
</TABLE>
(i)
<PAGE>
To the Holders of Common Stock of
Marsam Pharmaceuticals Inc.:
INTRODUCTION
Schein Pharmaceutical, Inc., a Delaware corporation (the "Purchaser"),
hereby offers to purchase all the outstanding shares of common stock, $.01 par
value (the "Shares"), of Marsam Pharmaceuticals Inc., a Delaware corporation
(the "Company"), at a purchase price of $21.00 per Share (the "Offer Price"),
net to the seller in cash, upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal (which,
together with any amendments or supplements, collectively constitute the
"Offer").
The Offer is being made pursuant to an agreement and plan of merger dated
July 28, 1995 (the "Merger Agreement") among the Purchaser, SM Acquiring Co.,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Purchaser (the
"Sub"), and the Company. The Merger Agreement provides, among other things, for
the commencement of the Offer by the Purchaser and further provides that,
subject to the satisfaction or waiver of certain conditions, the Purchaser will
transfer to the Sub all the Shares held by it, and the Sub will be merged with
and into the Company (the "Merger"), with the Company surviving the Merger as a
direct, wholly-owned subsidiary of the Purchaser (the "Surviving Corporation").
In the Merger, each outstanding Share (other than Shares owned by the Company or
any subsidiary of the Company, the Purchaser, the Sub or any other subsidiary of
the Purchaser, and Shares owned by stockholders who shall have properly
exercised their appraisal rights under Delaware law) will be converted at the
effective time of the Merger (the "Effective Time") into the right to receive
the Offer Price in cash, without interest and less any required withholding
taxes (the "Merger Consideration").
The board of directors of the Company (the "Board") has unanimously
determined that each of the Offer and Merger is fair to, and in the best
interests of, the Company's stockholders (the "Stockholders"), has approved the
Merger Agreement and the transactions contemplated by the Merger Agreement,
including the Offer and Merger, and recommends that the Stockholders accept the
Offer and tender all their Shares pursuant to the Offer.
Bear, Stearns & Co. Inc., the Company's financial advisor ("Bear Stearns"),
has delivered to the Company its written opinion dated the date of the Merger
Agreement that the consideration to be received by holders of the Shares
pursuant to the Offer and Merger is fair to the Company's public Stockholders
from a financial point of view. A copy of the opinion of Bear Stearns is
contained in the Company's Solicitation/ Recommendation Statement on Schedule
14D-9 (the "Schedule 14D-9") filed with the Securities and Exchange Commission
(the "Commission") in connection with the Offer, a copy of which is being
furnished to Stockholders concurrently with this Offer to Purchase.
The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the Expiration Date (as defined in
Section 1 below) that number of Shares (the "Minimum Number of Shares") that
would represent, on a fully diluted basis, a majority of the outstanding Shares
(the "Minimum Tender Condition"). The Offer also is subject to certain other
conditions. See Sections 1 and 14.
The Company has informed the Purchaser that, as of July 26, 1995, there were
(i) 11,084,137 Shares outstanding and (ii) outstanding stock options (the
"Marsam Options") granted by the Company to purchase an aggregate of 1,166,649
Shares.
Concurrently with the execution of the Merger Agreement, the Purchaser and
the Sub entered into a stockholders agreement dated July 28, 1995 (the
"Stockholders Agreement") with certain Stockholders (the "Selling Stockholders")
owning, in the aggregate, 3,071,132 Shares (or approximately 25% of the
outstanding Shares calculated on a fully diluted basis). Pursuant to the
Stockholders Agreement, the Selling Stockholders have agreed to tender pursuant
to the Offer and not withdraw an aggregate of 2,871,132 Shares (or approximately
24% of the outstanding Shares calculated on a fully diluted basis) that are
owned beneficially by them plus any Shares issued to them upon the exercise of
Marsam Options (collectively, the "Founders Shares"). The tender of the Founders
Shares by the Selling Stockholders will not be sufficient to satisfy the Minimum
Tender Condition.
<PAGE>
Pursuant to the Stockholders Agreement, the Purchaser has the right to acquire
from the Selling Stockholders at the Offer Price all the Founders Shares, if (i)
the Offer is terminated, abandoned or withdrawn by the Purchaser or the Sub due
to the failure of certain conditions to the Offer, (ii) the Merger Agreement is
terminated by the Purchaser or the Company by reason of a court of competent
jurisdiction having issued, in connection with a suit, action or proceeding by a
party that has made an Acquisition Proposal (as defined under "The Merger
Agreement -- No Solicitation" below), an order (other than a temporary
restraining order), a decree or ruling or having taken any other action
restraining, enjoining or otherwise prohibiting the purchase of Shares pursuant
to the Offer or the Merger, provided that the party terminating the Merger
Agreement used its reasonable best efforts to remove or lift the order, decree
or ruling, or (iii) the Offer is consummated, but the Purchaser has not accepted
for payment and paid for the Founders Shares and such non-acceptance or
non-payment is not in contravention of the Purchaser's or the Sub's obligations
under the Merger Agreement or the Offer. Subject to certain conditions specified
in the Stockholders Agreement, that right is exercisable in whole but not in
part for the 30-day period following the first to occur of the foregoing events.
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including, if required, the approval of the Merger by the
requisite vote or consent of the Stockholders. Under the Delaware General
Corporation Law (the "DGCL"), the stockholder vote necessary to approve the
Merger will be the affirmative vote of at least a majority of the outstanding
Shares, including Shares held by the Purchaser and its affiliates. Accordingly,
even if, upon the terms and subject to the conditions of the Offer, the
Purchaser purchases all the Shares owned by the Selling Stockholders, the
Purchaser will not have the votes required to approve the Merger without the
affirmative vote of other Stockholders. If the Purchaser acquires at least 90%
of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser
would be able to effect the Merger pursuant to the "short-form" merger
provisions of Section 253 of the DGCL, without prior notice to, or any action
by, any other Stockholder. In that event, the Purchaser intends to effect the
Merger as promptly as practicable following the purchase of Shares in the Offer.
See Section 12.
The Merger Agreement and Stockholders Agreement are more fully described in
Section 12. Certain federal income tax consequences of the sale of Shares
pursuant to the Offer and the exchange of Shares for the Merger Consideration
pursuant to the Merger are described in Section 5.
Tendering Stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer or
Merger. The Purchaser will pay all charges and expenses of Chemical Bank
("Chemical"), the depositary (the "Depositary"), and Georgeson & Company Inc.,
as the information agent (the "Information Agent"), in connection with the
Offer. See Section 16.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment (and thereby purchase) all
Shares that are validly tendered and not withdrawn in accordance with Section 4
below prior to the Expiration Date. As used in the Offer, the term "Expiration
Date" means 12:00 midnight, New York City time, on Friday, September 1, 1995,
unless and until the Purchaser, in accordance with the terms of the Offer and
the Merger Agreement, shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" means the latest time
and date at which the Offer, as so extended, expires. As used in this Offer to
Purchase, "business day" has the meaning set forth in Rule 14d-1(c)(6) under the
Securities Exchange Act of 1934 (the "Exchange Act").
In the event that the Offer is not consummated, the Purchaser may seek to
acquire additional Shares through open market purchases, privately negotiated
transactions or otherwise, upon such terms and conditions and at such prices as
it shall determine, which may be more or less than the Offer Price and could be
for cash or other consideration.
2
<PAGE>
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Tender Condition and the expiration or termination of all waiting
periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
the regulations under it (the "HSR Act"). The Offer also is subject to certain
other conditions set forth in Section 14 below. Subject to the terms of the
Merger Agreement, the Purchaser expressly reserves the right (but will not be
obligated) to waive any or all of the conditions of the Offer. Subject to the
terms of the Merger Agreement, if by the Expiration Date any or all of the
conditions of the Offer are not satisfied or waived, the Purchaser will extend
the period during which the Offer is open until the earliest of the consummation
of the Offer, November 30, 1995 (provided, that the Purchaser will not be
obligated to make any such extension if, in the reasonable belief of the
Purchaser, all of the conditions of the Offer are not capable of being satisfied
by that date) or the termination of the Merger Agreement.
Subject to the terms of the Merger Agreement, the Purchaser expressly
reserves the right, subject to applicable law, to extend the period of time
during which the Offer is open, provided that the extension of the Offer will be
for a period of no more than 10 business days. There can be no assurance that
the Purchaser will exercise its right to extend the Offer. The Purchaser also
expressly reserves the right, subject to applicable laws (including applicable
regulations of the Commission promulgated under the Exchange Act) and the terms
of the Merger Agreement, at any time or from time to time, (i) to delay
acceptance for payment of or payment for any Shares, regardless of whether the
Shares were theretofore accepted for payment, or to terminate the Offer and not
accept for payment or pay for any Shares not theretofore accepted for payment or
paid for, upon the occurrence of any of the conditions specified in Section 14
below, by giving oral or written notice of such delay in payment or termination
to the Depositary, and (ii) to amend the Offer in any respect, by giving oral or
written notice to the Depositary. Any extension, delay in payment, termination
or amendment will be followed as promptly as practicable by public announcement,
the announcement in the case of an extension to be issued no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Purchaser
may choose to make any public announcement, the Purchaser will have no
obligation to publish, advertise or otherwise communicate any such announcement,
other than by issuing a release to the Dow Jones News Service or as otherwise
required by law. The reservation by the Purchaser of the right to delay
acceptance for payment of or payment for Shares is subject to the provisions of
Rule 14e-1(c) under the Exchange Act, which requires that the Purchaser pay the
consideration offered or return the Shares deposited by or on behalf of
Stockholders promptly after the termination or withdrawal of the Offer. Any
delay in acceptance for payment or payment beyond the time permitted by
applicable law will be effectuated by an extension of the period during which
the Offer is open.
Pursuant to the terms of the Merger Agreement, without the prior written
consent of the Company, the Purchaser will not (i) decrease or change the form
of consideration payable in the Offer, (ii) decrease the number of Shares sought
pursuant to the Offer, (iii) impose additional conditions to the Offer, (iv)
change the conditions to the Offer, (v) waive the condition that there be
validly tendered and not properly withdrawn prior to the time the Offer expires
a number of Shares that constitutes a majority of the Shares outstanding
calculated on a fully diluted basis on the date of purchase or (vi) make any
other change in the terms or conditions of the Offer adverse to holders of
Shares; provided that, except as set forth above, the Purchaser may waive any
other condition to the Offer in its sole discretion; and provided, further, that
the Offer may be extended in connection with an increase in the consideration to
be paid pursuant to the Offer so as to comply with applicable rules and
regulations of the Commission. Assuming the prior satisfaction or waiver of the
conditions to the Offer, the Purchaser will accept for payment, and pay for, in
accordance with the terms of the Offer, all Shares validly tendered and not
properly withdrawn pursuant to the Offer promptly after the Expiration Date.
The Commission has announced that, under its interpretation of Rules
14d-4(c) and 14d-6(d) under the Exchange Act, material changes in the terms of a
tender offer or information concerning a tender offer may require that the
tender offer be extended so that it remains open a
3
<PAGE>
sufficient period of time to allow security holders to consider such material
changes or information in deciding whether or not to tender or withdraw their
securities. The minimum period during which an offer must remain open following
material changes in the terms of the Offer or information concerning the Offer,
other than a change in price or a change in percentage of securities sought,
will depend upon the facts and circumstances, including the relative materiality
of the terms or information. If the Purchaser decides to increase or, subject to
the consent of the Company, to decrease the consideration in the Offer, to make
a change in the percentage of Shares sought or to change or waive the Minimum
Tender Condition and, if, at the time that notice of any such change is first
published, sent or given to Stockholders, the Offer is scheduled to expire at
any time earlier than the tenth business day after (and including) the date of
that notice, the Offer will be extended at least until the expiration of that
period of ten business days.
The Company has provided the Purchaser with its stockholder list and
security position listings for the purpose of disseminating the Offer to
Stockholders. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company'
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment (and thereby purchase) and,
under the terms of the Offer, pay for Shares that are validly tendered and not
properly withdrawn on or prior to the Expiration Date, promptly after the later
of the following dates: (i) the Expiration Date and (ii) the date of
satisfaction or waiver of all the conditions to the Offer set forth in this
Offer to Purchase. The Purchaser expressly reserves the right, in its
discretion, subject to applicable laws and regulations, to delay acceptance for
payment of or payment for Shares in order to comply, in whole or in part, with
any applicable law, government regulation or condition contained in this Offer
to Purchase. See Section 14 below.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates for the
Shares (or a timely Book-Entry Confirmation (as defined in Section 3) with
respect to the Shares) and (ii) the Letter of Transmittal (or a manually signed
facsimile), properly completed and duly executed with all required signature
guarantees, and all other documents required by the Letter of Transmittal. See
Section 3 below.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) tendered Shares as, if and when the Purchaser
gives oral or written notice to the Depositary of the Purchaser's acceptance of
the Shares for payment. In all cases, payment for Shares purchased pursuant to
the Offer will be made by deposit of the purchase price with the Depositary,
which will act as agent for tendering Stockholders for the purpose of receiving
payment from the Purchaser and transmitting payment to tendering Stockholders
whose Shares shall have been accepted for payment. If, for any reason,
acceptance for payment of any Shares tendered pursuant to the Offer is delayed,
or the Purchaser is unable to accept for payment Shares tendered pursuant to the
Offer, then, without prejudice to the Purchaser's rights under Section 14, the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn, except to the extent that the
tendering Stockholders are entitled to withdrawal rights as described in Section
4 below and as otherwise required by Rule 14e-1(c) under the Exchange Act. Under
no circumstances will interest on the Offer Price be paid by the Purchaser,
regardless of any delay in making such payment.
If any tendered Shares are not purchased for any reason or if certificates
are submitted for more Shares than are tendered, certificates for the Shares not
purchased or tendered will be returned
4
<PAGE>
pursuant to the instructions of the tendering Stockholder without expense to the
tendering Stockholder (or, in the case of Shares delivered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility (as
defined in Section 3) pursuant to the procedures set forth in Section 3, the
Shares will be credited to an account maintained at the appropriate Book-Entry
Transfer Facility) as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid per Share pursuant to the Offer, the Purchaser will pay the increased
consideration for all the Shares purchased pursuant to the Offer, whether or not
the Shares were tendered prior to the increases in consideration.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates the right to purchase
Shares tendered pursuant to the Offer; however no such transfer or assignment
will release the Purchaser from its obligations under the Offer or prejudice the
rights of tendering Stockholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES
VALID TENDERS. For Shares to be validly tendered pursuant to the Offer,
either (i) a Letter of Transmittal (or a manually signed facsimile), properly
completed and duly executed, with any required signature guarantees and any
other documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date and either (a) certificates representing
Shares must be received by the Depositary at any such address prior to the
Expiration Date or (b) the Shares must be delivered pursuant to the procedures
for book-entry transfer set forth below and a Book-Entry Confirmation (as
defined below) must be received by the Depositary prior to the Expiration Date
or (ii) the tendering Stockholder must comply with the guaranteed delivery
procedures set forth below. No alternative, conditional or contingent tenders
will be accepted.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company, Midwest Securities Trust Company
and Philadelphia Depository Trust Company (each, a "Book-Entry Transfer
Facility" and, collectively, the "Book-Entry Transfer Facilities") for purposes
of the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in any of the Book-Entry
Transfer Facilities' systems may make book-Entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer the Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with that Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
the Shares may be effected through book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility, the Letter of Transmittal (or a
manually signed facsimile), properly completed and duly executed, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to, and received by, the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date, or the tendering Stockholder must comply with the guaranteed delivery
procedures described below. The confirmation of a book-entry transfer of Shares
into the Depositary's account at a Book-Entry Transfer Facility as described
above is referred to as a "Book-Entry Confirmation". DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Signatures on Letters of Transmittals must be
guaranteed by a member firm of a registered national securities exchange
(registered under Section 6 of the Exchange Act) or of the National Association
of Securities Dealers, Inc. (the "NASD"), or by a commercial bank or trust
company having an office or correspondent in the United States or by any other
"Eligible Guarantor Institution" (as defined in Rule 17Ad-15 under the Exchange
Act) (each of the foregoing constituting an "Eligible Institution"), unless the
Shares are tendered (i) by a registered holder of Shares who has not completed
either the box entitled "Special Delivery Instructions" or the box entitled
"Special Payment Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal. If the certificates representing Shares are registered in
5
<PAGE>
the name of a person other than the signer of the Letter of Transmittal or if
payment is to be made or certificates for Shares not accepted for payment or not
tendered are to be issued to a person other than the registered holder, then the
certificates representing Shares must be endorsed or accompanied by appropriate
stock powers, in each case signed exactly as the name or names of the registered
holder or holders appear on the certificates, with the signatures on the
certificates or stock powers guaranteed as described above and as provided in
the Letter of Transmittal. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a Stockholder wishes to tender Shares pursuant to
the Offer and the Stockholder's certificates are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary prior to the
Expiration Date, the Shares may nevertheless be tendered, if all the following
guaranteed delivery procedures are complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser with this
Offer to Purchase, is received by the Depositary as provided below prior to
the Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer or a Book-Entry Confirmation with respect to all tendered Shares,
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile) and any other documents required by the
Letter of Transmittal, are received by the Depositary within three NASDAQ/
National Market System ("NASDAQ/NMS") trading days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mailed to the Depositary and must include an
endorsement by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
In all cases, Shares shall not be deemed validly tendered, unless a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile) is received by the Depositary.
The method of delivery of certificates for Shares, the Letter of Transmittal
and any other required documents is at the option and risk of the tendering
Stockholder. If delivery is made by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
Notwithstanding any other provision of this Offer to Purchase, payment for
Shares accepted for payment pursuant to the Offer in all cases will be made only
after timely receipt by the Depositary of certificates for (or Book-Entry
Confirmation with respect to) the Shares, a Letter of Transmittal (or a manually
signed facsimile), properly completed and duly executed, with any required
signature guarantees and all other documents required by the Letter of
Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent backup federal income tax
withholding of 31% of the payments made to Stockholders with respect to the
purchase price of Shares purchased pursuant to the Offer or the Merger, a
Stockholder must provide the Depositary with his correct taxpayer identification
number and certify that he is not subject to backup federal income tax
withholding by completing the substitute Form W-9 included in the Letter of
Transmittal. See Instruction 10 of the Letter of Transmittal. See Section 5
below.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares pursuant to any of the procedures described above will
be determined by the Purchaser in its sole discretion, which determination shall
be final and binding on all parties. The Purchaser reserves the absolute right
to reject any or all tenders of Shares determined not to be in proper form or
the acceptance of or payment for which may, in the opinion of counsel, be
unlawful and reserves the absolute right to waive any defect or
6
<PAGE>
irregularity in any tender of Shares. Subject to the terms of the Merger
Agreement, the Purchaser also reserves the absolute right to waive or amend any
or all of the conditions of the Offer. The Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and its
instructions) will be final and binding on all parties. No tender of Shares will
be deemed to have been validly made, until all defects and irregularities have
been cured or waived. None of the Purchaser, the Sub, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
OTHER REQUIREMENTS. By executing a Letter of Transmittal, a tendering
Stockholder irrevocably appoints designees of the Purchaser as his
attorneys-in-fact and proxies, with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of the Stockholder's
rights with respect to the Shares tendered by the Stockholder and purchased by
the Purchaser and with respect to any and all other Shares or other securities
issued or issuable in respect of those Shares, on or after the date of the
Offer. All such powers of attorney and proxies will be considered coupled with
an interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts the Shares for payment. Upon
acceptance for payment, all prior powers of attorney and proxies given by the
Stockholder with respect to the Shares (and any other Shares or other securities
so issued in respect of such purchased Shares) will be revoked, without further
action, and no subsequent powers of attorney and proxies may be given (and, if
given, will not be deemed effective) by the Stockholder. The designees of the
Purchaser will be empowered to exercise all voting and other rights of the
Stockholder with respect to such Shares (and any other Shares or securities so
issued in respect of such purchased Shares) as they in their sole discretion may
deem proper, including, without limitation, in respect of any annual or special
meeting of the Stockholders, or any adjournment or postponement of any such
meeting, or in connection with any action by written consent in lieu of any such
meeting or otherwise (including any such meeting or action by written consent to
approve the Merger). The Purchaser reserves the absolute right to require that,
in order for Shares to be validly tendered, immediately upon Purchaser's
acceptance for payment of the Shares, the Purchaser must be able to exercise
full voting and other rights with respect to the Shares, including voting at any
meeting of Stockholders then scheduled.
A tender of Shares pursuant to any of the procedures described above will
constitute the tendering Stockholder's acceptance of the terms and conditions of
the Offer, as well as the tendering Stockholder's representation and warranty to
the Purchaser that (i) the Stockholder has a net long position in the Shares
being tendered, within the meaning of Rule 14e-4 under the Exchange Act, and
(ii) the tender of the Shares complies with Rule 14e-4. It is a violation of
Rule 14e-4 for a person, directly or indirectly, to tender Shares for his own
account, unless, at the time of tender, the person so tendering (i) has a net
long position equal to or greater than the amount of (a) Shares tendered or (b)
other securities immediately convertible into or exchangeable or exercisable for
the Shares tendered and that person will acquire the Shares for tender by
conversion, exchange or exercise and (ii) will cause the Shares to be delivered
in accordance with the terms of the Offer. Rule 14c-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person. The Purchaser's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
Stockholder and the Purchaser upon the terms and conditions of the Offer.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except as
otherwise provided in this Section 4. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Purchaser as provided in this Offer to Purchase, may
also be withdrawn at any time after October 2, 1995. If the Purchaser extends
the Offer, is delayed in its purchase of or payment for Shares or is unable to
purchase or pay for Shares
7
<PAGE>
for any reason, then, without prejudice to the rights of the Purchaser, tendered
Shares may be retained by the Depositary on behalf of the Purchaser and may not
be withdrawn, except to the extent that tendering Stockholders are entitled to
withdrawal rights as set forth in this Section 4.
The reservation by the Purchaser of the right to delay the acceptance or
purchase of or payment for Shares is subject to the provisions of Rule 14e-1(c)
under the Exchange Act, which requires the Purchaser to pay the consideration
offered or return Shares deposited by or on behalf of Stockholders promptly
after the termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the persons who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered the Shares.
If certificates evidencing Shares have been delivered or otherwise identified to
the Depositary, then, prior to the release of the certificates, the tendering
Stockholder must also submit the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn, and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution (except in
the case of Shares tendered for the account of an Eligible Institution). If
Shares have been tendered pursuant to the procedure for book-entry transfer set
forth in Section 3, the notice of withdrawal must specify the name and number of
the account at the applicable Book-Entry Transfer Facility to be credited with
the withdrawn Shares. All questions as to the form and validity (including time
of receipt) of notices of withdrawal will be determined by the Purchaser, in its
sole discretion, whose determination will be final and binding on all parties.
No withdrawal of Shares will be deemed to have been properly made until all
defects and irregularities have been cured or waived. None of the Purchaser, the
Sub, the Depositary, the Information Agent or any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failing to give such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be tendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3 above.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted into the right to receive the Merger
Consideration in the Merger (including any cash amounts received by dissenting
Stockholders pursuant to the exercise of appraisal rights). The discussion
applies only to holders of Shares in whose hands Shares are capital assets, and
may not apply to Shares received pursuant to the exercise of employee stock
options or otherwise as compensation, or to holders of Shares who are not
citizens or residents of the United States.
The federal income tax consequences set forth below are included for general
informational purposes only and are based upon present law. Because individual
circumstances may differ, each holder of Shares should consult his own tax
advisor to determine the applicability of the rules discussed below to that
Stockholder and the particular tax effects of the Offer and the Merger,
including the application and effect of state, local and other tax laws.
The receipt of the Offer Price and the Merger Consideration (including any
cash amounts received by dissenting Stockholders pursuant to the exercise of
appraisal rights) will be a taxable transaction for federal income tax purposes
(and also may be a taxable transaction under applicable state, local and other
income tax laws). In general, for federal income tax purposes, a holder of
Shares will recognize gain or loss equal to the difference between his adjusted
tax basis in the Shares sold pursuant to the Offer or converted to cash in the
Merger and the amount of cash received therefor. Gain or loss must be determined
separately for each block of Shares (I.E., Shares acquired at the same
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<PAGE>
cost in a single transaction) sold pursuant to the Offer or converted to cash in
the Merger. Such gain or loss will be capital gain or loss and will be long-term
gain or loss, if, on the date of sale (or, if applicable, the date of the
Merger), the Shares were held for more than one year.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a 31% rate. Backup withholding generally applies if the
Stockholder (i) fails to furnish his social security number or other taxpayer
identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) fails
properly to report interest or dividends or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN provided is his correct number and that he is not subject to backup
withholding. Backup withholding is not an additional tax but merely an advance
payment, which may be refunded to the extent it results in an overpayment of
tax. Certain persons generally are exempt from backup withholding, including
corporations and financial institutions. Certain penalties apply for failure to
furnish correct information and for failure to include the reportable payments
in income. Each Stockholder should consult with his own tax advisor as to his
qualifications for exemption from withholding and the procedure for obtaining
such exemption.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
According to the Company, the Shares commenced trading on the NASDAQ/NMS
under the symbol "MSAM" on March 26, 1987. The Company has never paid cash
dividends on the Shares. The following table sets forth, for the periods
indicated, the high and low sale prices per Share on the NASDAQ/NMS.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C> <C>
1993:
First Quarter................................................................... 12 3/4 8 1/2
Second Quarter.................................................................. 14 1/2 9
Third Quarter................................................................... 24 1/2 14
Fourth Quarter.................................................................. 25 1/2 18 1/4
1994:
First Quarter................................................................... 21 1/2 11 1/4
Second Quarter.................................................................. 13 1/4 8
Third Quarter................................................................... 15 9 3/4
Fourth Quarter.................................................................. 16 9 1/2
1995:
First Quarter................................................................... 15 10
Second Quarter.................................................................. 19 3/4 13 1/4
Third Quarter (through August 3)................................................ 21 1/4 18 1/2
</TABLE>
On July 28, 1995, the last full day before the public announcement of the
Purchaser's intention to acquire the Shares, the closing bid price per Share on
the NASDAQ/NMS was $19 5/16. On August 3, 1995, the last full trading day before
the commencement of the Offer, the closing bid price per Share on the NASDAQ/NMS
was $20 3/4 per Share. Stockholders are urged to obtain current market
quotations for the Shares.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NASDAQ/NMS LISTING,
EXCHANGE ACT REGISTRATION AND MARGIN SECURITIES
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
The extent of the public market for the Shares and, according to the
published guidelines of the NASD, the continued trading of the Shares on the
NASDAQ/NMS, after commencement of the Offer,
9
<PAGE>
will depend upon the number of holders of Shares remaining at that time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration of the Shares under the Exchange Act,
as described below, and other factors.
The Company has informed the Purchaser that, as of July 26, 1995, 11,084,137
Shares were outstanding. If, as a result of the purchase of Shares pursuant to
the Offer or otherwise, trading of the Shares on the NASDAQ/NMS is discontinued,
the liquidity of and market for the Shares could be adversely affected. The
Purchaser cannot predict whether or to what extent the reduction in the number
of Shares that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for or marketability of the Shares or
whether it would cause future prices to be greater or less than the Offer Price.
The Shares are currently registered under Section 12(g) of the Exchange Act.
Registration of the Shares under the Exchange Act may be terminated upon
application by the Company to the Commission, if the Shares are neither listed
on a national securities exchange nor held by more than 300 holders of record.
Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
its Stockholders and to the Commission and could make certain provisions of the
Exchange Act no longer applicable to the Company, such as the short-swing profit
recovery provisions of Section 16(b) of the Exchange Act, the requirement of
furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in
connection with Stockholders' meetings and the related requirement of furnishing
an annual report to Stockholders and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of securities pursuant to Rule 144 or 144A
under the Securities Act of 1933 may be impaired or eliminated.
The Purchaser intends to seek to cause the Company to terminate the
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for termination are met. If registration of the
Shares is not terminated prior to the Merger, the registration of the Shares
under the Exchange Act will be terminated following consummation of the Merger.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the loan value of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purpose of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares would
no longer be "margin securities" or be eligible for listing on the NASDAQ/NMS.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices
located at Building 31, Olney Avenue, Cherry Hill, New Jersey 08003. According
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 (the "Company 10-K"), the Company's principal business is developing,
manufacturing, marketing and distributing generic injectable prescription drugs.
According to the Company 10-K, the Company was founded in 1985. The Company
originally sold its products through joint venture agreements and under
manufacturing agreements with other pharmaceutical companies. During the last
two and one-half years, the Company has developed its own sales force and sells
its products under the Marsam label and private labels.
Set forth below is certain selected consolidated financial information, with
respect to the Company and its subsidiaries excerpted from the Company 10-K and
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1995. More comprehensive financial information is included in such reports
and other documents filed by the Company with the Commission, and the
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<PAGE>
following summary is qualified in its entirety by reference to such reports and
other documents and all the financial information (including any related notes)
contained therein. Such reports and other documents should be available for
inspection and copies should be obtainable in the manner set forth below under
"Available Information".
MARSAM PHARMACEUTICALS INC.
SELECTED CONSOLIDATED FINANCIAL DATA
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE 30, --------------------------
1995 1994 1993
-------------- ------------ ------------
<S> <C> <C> <C>
Net sales........................................................ $ 21,310,900 $ 35,012,800 $ 23,500,900
Income before income taxes....................................... 2,701,700 3,509,800 2,012,900
Provision for (benefit from) income taxes........................ 810,400 (132,800) 40,000
Net income....................................................... 1,891,300 3,642,600 1,972,900
</TABLE>
CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ------------------------------
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Total current assets............................................. $ 38,499,500 $ 34,796,500 $ 32,089,400
Total assets..................................................... 61,313,600 56,861,900 49,382,100
Total current liabilities........................................ 6,821,900 4,876,800 1,824,300
Total liabilities................................................ 7,837,900 5,705,100 2,513,800
Stockholders' equity............................................. 53,475,700 51,156,800 49,382,100
</TABLE>
CERTAIN COMPANY PROJECTIONS. During the course of discussions between the
Purchaser and the Company that led to the execution of the Merger Agreement (see
Section 11 below), in May 1995 the Company provided the Purchaser with certain
non-public business and financial information about the Company. Included among
the information the Company provided the Purchaser were projections that
indicated 1995, 1996, 1997 and 1998 net revenue of $48.3 million, $71.3
milllion, $94.1 million and $120.1 million, respectively, and 1995, 1996, 1997
and 1998 net income of $4.7 million, $9.6 million, $16.2 million and $25.2
million, respectively. The Company does not as a matter of course make public
any projections as to future performance or earnings, and the projections set
forth above are included in this Offer to Purchase only because the information
was provided to the Purchaser.
AVAILABLE INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act. In accordance with the Exchange Act, the
Company files periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters. The
Company is required to disclose in such proxy statements certain information, as
of particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of those persons in transactions
with the Company. Such reports, proxy statements and other information may be
inspected at the Commission's office at 450 Fifth Street, N.W., Washington, D.C.
20549, and also should be available for inspection and copying at the regional
offices of the Commission located at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies may be obtained upon
payment of the Commission's prescribed fees by writing to its principal office
at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material can also be
obtained at the office of The National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006-1506.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained in this Offer to Purchase has been taken from
or based upon publicly available documents on file with the Commission and other
publicly available information. Although the Purchaser and the
11
<PAGE>
Sub do not have any knowledge that any such information is untrue, neither the
Purchaser nor the Sub takes any responsibility for the accuracy or completeness
of such information or for any failure by the Company to disclose events that
may have occurred and may affect the significance or accuracy of any such
information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE SUB
The Purchaser, a Delaware corporation, is principally engaged in developing,
manufacturing and marketing multisource pharmaceutical products (also known as
generic drugs). The principal executive offices of the Purchaser are located at
100 Campus Drive, Florham Park, New Jersey 07932.
The Sub, a Delaware corporation, was formed solely for the purpose of
engaging in the transactions contemplated by the Merger Agreement, including the
merger of the Sub with and into the Company, and has not conducted any unrelated
activities since its formation. The principal executive offices of the Sub are
located at 100 Campus Drive, Florham Park, New Jersey 07932. All the outstanding
capital stock of the Sub is owned by the Purchaser.
During the last five years, none of the Purchaser, the Sub or, to the best
knowledge of the Purchaser and the Sub, any of the persons listed in Schedule I,
(i) has been convicted in a criminal proceeding (excluding traffic violations
and similar misdemeanors) or (ii) was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violations of such laws. The name, business
address, present principal occupation or employment, five-year employment
history and citizenship of each director and executive officer of the Purchaser
are set forth in Schedule I.
Set forth below is certain selected consolidated financial information with
respect to the Purchaser and its subsidiaries.
SCHEIN PHARMACEUTICAL, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
CONSOLIDATED STATEMENT OF INCOME DATA:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JULY --------------------------
1, DECEMBER 31, DECEMBER 25,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................................. $ 182,858 $ 385,428 $ 393,926
Special compensation, restructuring and relocation expenses........... -- 2,014 40,006
Income before income taxes, minority interest, cumulative effect of
accounting change and extraordinary item............................. 20,585 53,376 43,041
Taxes on income....................................................... 8,337 21,617 23,773
Minority interest in subsidiaries..................................... -- -- 343
Cumulative effect of accounting change................................ -- -- 1,129
Net income............................................................ 12,248 31,759 20,740
</TABLE>
CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT
---------------------------------------
JULY 1, DECEMBER 31, DECEMBER 25,
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
Total current assets.................................................... $ 178,009 $ 176,496 $ 148,163
Total assets............................................................ 274,273 269,729 227,861
Total current liabilities............................................... 61,421 77,886 61,128
Long-term debt, less current maturities................................. 52,295 42,462 25,725
Total shareholders' equity.............................................. 152,606 140,164 108,239
</TABLE>
12
<PAGE>
Martin Sperber, the Purchaser's chairman and chief executive officer, has
owned 3,125 Shares for a number of years, and has advised the Purchaser he
intends to tender all such Shares pursuant to the Offer. Except as described in
this Offer to Purchase, (i) none of the Purchaser, the Sub or, to the best
knowledge of the Purchaser and the Sub, any of the persons listed in Schedule I
or any associate or majority-owned subsidiary of any such person, beneficially
owns or has a right to acquire any equity security of the Company and (ii) none
of the Purchaser, the Sub or, to the best knowledge of the Purchaser and the
Sub, any of the other persons referred to above, or any of the respective
directors, executive officers or subsidiaries of any of the foregoing, has
effected any transaction in any equity security of the Company during the past
60 days.
Except as described in this Offer to Purchase, (i) none of the Purchaser,
the Sub or, to the best knowledge of the Purchaser and the Sub, any of the
persons listed in Schedule I has any contract, arrangement, understanding or
relationship (whether or not legally enforceable) with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies and (ii) there have been no contacts, negotiations or
transactions between the Purchaser, the Sub or any of their respective
subsidiaries or, to the best knowledge of the Purchaser and the Sub, any of the
persons listed in Schedule I, on the one hand, and the Company or any of its
directors, officers or affiliates, on the other hand, that are required to be
disclosed pursuant to the rules and regulations of the Commission.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser and the Sub to
consummate the Offer and the Merger and to pay related fees and expenses is
estimated to be approximately $258 million. The Sub intends to obtain the funds
required by it from capital contributions and/or loans from the Purchaser.
The Purchaser will obtain all of those funds from credit facilities. The
Purchaser has received a commitment letter dated June 6, 1995 (the "Bank
Commitment Letter") from Chemical to provide senior secured term loan facilities
and senior secured revolving credit facilities for up to $350 million (i) to
finance the purchase of the Shares pursuant to the Offer and Merger and to pay
certain related fees and expenses related to the Offer and Merger, (ii) to
refinance certain existing debt of the Purchaser and (iii) for working capital
purposes. Consummation of that financing is subject to, among other things, the
receipt of required consents, the absence of material adverse conditions and the
negotiation, execution and delivery of definitive documentation consistent with
the Bank Commitment Letter and the related term sheet. There can be no assurance
that the terms described in the Bank Commitment Letter will be contained in the
definitive agreements or that the definitive agreements will not contain
additional provisions.
The Bank Commitment Letter and the related term sheet attached provide for
credit facilities relating to the Offer consisting of a $250 million term loan
facility (the "Facility A") and a $100 million revolving credit facility (the
"Facility B"), which mature on the earlier of the Effective Date and the date
270 days after the first date on which Shares are accepted for purchase pursuant
to the Offer. In addition, facilities relating to the Merger will consist of a
$250 million term loan facility ("Facility C") and a $100 million revolving
credit facility (the "Facility D"), which mature on December 31, 2001. The
Purchaser has agreed to assist Chemical in syndicating Facility A, Facility B,
Facility C and Facility D (collectively, the "Facilities").
13
<PAGE>
The Facilities will be guaranteed by each of the Purchaser's domestic
subsidiaries and, subject to standards to be agreed upon by the Purchaser and
Chemical, certain of the Purchaser's foreign subsidiaries. The loans under the
Facilities and the guarantees will be secured by (i) all the Shares owned
directly or indirectly by the Purchaser and all the common stock of each
subsidiary of the Purchaser that is a guarantor and approximately 65% of the
common stock of foreign, non-guarantor subsidiaries and (ii) substantially all
assets of the Purchaser and its domestic subsidiaries.
The Facilities will bear interest, depending on the interest rate pricing
option selected by the Purchaser, at LIBOR, Prime Rate, Base CD plus one percent
per annum or Federal Funds Effective Rate plus one-half of 1 percent per annum
(the Prime Rate, Base CD plus one percent per annum and Federal Funds Effective
Rate plus one-half of 1 percent per annum being collectively referred to as the
"Alternate Base Rate"). A margin of one and one-quarter of 1 percent per annum
and one-quarter of 1 percent per annum will be added to LIBOR and Alternate Base
Rate loans, respectively, effected pursuant to Facilities A and B. A sliding
scale margin for loans effected pursuant to Facilities C and D will be added to
the selected rate option based on leverage and interest expense coverage ratios,
which, for LIBOR-based loans, will be up to one and one-half percent per annum
and, for Alternate Base Rate loans, will be up to one-half of 1 percent per
annum. A commitment fee on the undrawn amount of Facilities A and B will be
payable at a per annum rate of three-eighths of 1 percent and at a sliding rate
of one-quarter to one-half of 1 percent in the case of Facilities C and D.
It presently is anticipated that funds borrowed under the Facilities would
be repaid from internally generated funds of the Purchaser or the Company, or
with the proceeds of a subsequent or other financing transaction.
The margin regulations promulgated by the Federal Reserve Board place
restrictions on the amount of credit that may be extended for the purposes of
purchasing margin stock (including the Shares), if the credit is secured
directly or indirectly by margin stock. The Purchaser believes the financing of
the acquisition of the Shares will be in full compliance with margin
regulations, as applicable.
11. BACKGROUND OF THE OFFER
In recent years, the Purchaser and the Company have engaged in business with
each other. In that connection, in 1992, 1993 and 1994, the Company made sales
to the Purchaser of $1,139,454, $1,952,688 and $183,237, respectively.
From time to time over the past few years, Martin Sperber, the chairman and
chief executive officer of the Purchaser, and Marvin Samson, the Company's
president, also briefly discussed the possibility of the two companies working
together in other ways. These discussions included a meeting on May 8, 1995 and
a telephone conversation on May 12, 1995, in which Mr. Sperber and Mr. Samson
discussed the possibility of the two companies combining. Subsequently, in May
1995, representatives of Tanner & Co., Inc. ("Tanner"), the Purchaser's
financial advisor, and Bear Stearns, the Company's financial advisor, discussed
the Purchaser's possible acquisition of the Company. In that connection, in
mid-May, the Purchaser executed a confidentiality agreement with the Company in
anticipation of receiving information concerning the Company.
At a meeting on May 17, 1995 among representatives of the Purchaser, the
Company, Tanner and Bear Stearns, the Purchaser's representatives indicated the
Purchaser was interested in pursuing an acquisiton of the Company at a price of
$19.50 a Share. In a letter dated May 31, 1995 to Mr. Samson, Mr. Sperber
reaffirmed the Purchaser's interest, subject to due diligence, in acquiring the
Company for $19.50 a Share and, if appropriate, going beyond $19.50. In a letter
dated June 1, 1995, as a follow-up to his previous letter, Mr. Sperber advised
Mr. Samson that, in anticipation of receiving due diligence material that would
justify a higher price, the Purchaser was prepared to increase its number to
$21.00 a Share, and might consider going higher.
14
<PAGE>
In early June, the Company began to furnish the Purchaser and its
representatives with information about the Company, including financial
information and information relating to manufacturing, sales and distribution of
the Company's products and other relevant data (in addition to the publicly
available information the Purchaser already had). Throughout June and July, the
Purchaser and its representatives conducted their due diligence investigation of
the Company, and representatives of the Purchaser and Tanner engaged in
continuing discussions with representatives of the Company and Bear Stearns
regarding that process.
During early June, the Purchaser negotiated the terms of its financing for
the possible acquisition. On June 7, representatives of the Purchaser, Tanner
and the Purchaser's counsel met with representatives of the Company, Bear
Stearns and the Company's counsel. At that meeting, the parties discussed the
Purchaser's financing for a possible acquisition, and the Purchaser reaffirmed
its interest in proceeding with due diligence with a view to effecting a
possible acquisition transaction.
During early June, Mr. Sperber, Mr. Samson and Agnes Varis, the beneficial
owner of approximately 14% of the outstanding Shares and a director of the
Company, discussed the Company, the possible transaction and matters relating to
management arrangements, including the Purchaser's interest in the Company
having a substantial degree of autonomy after the acquisition. On June 11, at
Mr. Sperber's request, Mr. Samson furnished the Purchaser a proposal relating to
the Company's governance after the acquisition, which Mr. Sperber, Mr. Samson
and Ms. Varis continued to discuss thereafter. On June 19, Mr. Sperber, Dariush
Ashrafi, the Purchaser's senior vice president and chief financial officer, Mr.
Samson and Ms. Varis met to review those discussions.
On June 8, drafts of the agreement and plan of merger and the stockholders
agreement were delivered to the Company's counsel. In late June, the Company's
counsel provided the Purchaser's counsel with its comments on the June 8 draft
of the agreement and plan of merger.
In the course of discussions among the parties, the Purchaser had indicated
that its proposed acquisition was conditioned upon Mr. Samson and Ms. Varis (and
her affiliates) entering into the proposed stockholders agreement and Mr. Samson
entering into a five-year employment agreement. On July 18, counsel for the
Company and the Purchaser met and discussed various issues relating to the
proposed transaction. On July 19, a draft of an employment agreement with Mr.
Samson was furnished by the Purchaser. From July 25 through July 28, the parties
negotiated the agreement and plan of merger and the stockholders agreement as
well as the employment agreement with Mr. Samson.
After confirming that the representatives of the Company and its advisors
were prepared to recommend the transaction to the Board of Directors of the
Company on the terms described in this Offer to Purchase, the Boards of
Directors of the Purchaser and of the Company independently met and approved the
transaction on July 26 and July 28, respectively.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER
AGREEMENT; THE STOCKHOLDERS AGREEMENT; OTHER AGREEMENTS
PURPOSE OF THE OFFER AND THE MERGER
The purpose of the Offer and the Merger is to enable the Purchaser to
acquire, in one or more transactions, substantial control of the Company and the
entire equity interest in the Company.
The Offer is intended to increase the likelihood that the Merger will be
completed promptly. The Purchaser regards the acquisition of the Company as an
attractive opportunity to acquire a significant and well-established business.
The Purchaser believes the increased scale of the combined businesses will
enable the Purchaser to compete more effectively in the pharmaceutical business
both domestically and internationally.
15
<PAGE>
PLANS FOR THE COMPANY
The Purchaser has identified several areas where it believes the Company and
the Purchaser may enhance each other's performance. The two business units, in
the aggregate, would create a multisource pharmaceutical company with a
materially broader product line than that of either business unit individually,
and the two business units would have complementary strengths.
The Purchaser intends, from time to time after completion of the Offer, to
evaluate and review the Company's operations and consider what, if any, changes
would be desirable in light of circumstances that then exist.
Except as noted in this Offer to Purchase, the Purchaser and the Sub have no
present plans or proposals that would result in an extraordinary corporate
transaction, such as a merger, reorganization, liquidation or sale or transfer
of a material amount of assets, involving the Company or any subsidiary or any
other material changes in the Company's capitalization, dividend policy,
corporate structure, business or composition of its management or Board.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement, which is incorporated by reference and a copy of which
has been filed with the Commission as an exhibit to the Schedule 14D-1. The
Merger Agreement may be examined, and copies obtained, as set forth in Section 8
above.
THE OFFER. The Merger Agreement provides for the commencement of the Offer,
in connection with which the Purchaser has expressly reserved the right to waive
certain conditions of the Offer; however, without the prior written consent of
the Company, the Purchaser has agreed not to (i) decrease or change the form of
consideration payable in the Offer, (ii) decrease the number of Shares sought
pursuant to the Offer, (iii) impose additional conditions to the Offer, (iv)
change the conditions to the Offer, (v) waive the condition that there be
validly tendered and not properly withdrawn prior to the time the Offer expires
a number of Shares that constitutes a majority of the Shares outstanding
calculated on a fully diluted basis on the date of purchase, or (vi) make any
other change in the terms or conditions of the Offer adverse to holders of
Shares; provided that the Offer may be extended in connection with an increase
in the consideration to be paid pursuant to the Offer to comply with applicable
rules and regulations of the Commission.
BOARD REPRESENTATION. The Merger Agreement provides that, promptly upon the
purchase by the Purchaser or any of its subsidiaries of a number of Shares that
represents at least a majority of the outstanding Shares (on a fully diluted
basis), and from time to time thereafter, the Company, the Purchaser and the Sub
will, subject to the provisions of section 14(f) of the Exchange Act and Rule
14f-1 under the Exchange Act, use all reasonable efforts to cause the Board to
be comprised of Marvin Samson, Agnes Varis, Allen Misher, three individuals to
be designated by the Purchaser and one employee of Bayer Corporation or any of
its affiliates (other than the Purchaser and its subsidiaries) to be designated
by the Purchaser (subject to the approval of Marvin Samson, which approval may
not be unreasonably withheld). Following the date on which those persons first
comprise the Board (the "Control Date") and prior to the Effective Time and as
long as there is at least one Continuing Director (defined in the Merger
Agreement as certain specified directors then in office who were directors as of
the date of the Merger Agreement), if requested by a majority of the Continuing
Directors, all other directors will abstain from acting upon, and the approval
of a majority of the Continuing Directors will be required to authorize, any
termination of the Merger Agreement by the Company, any amendment of the Merger
Agreement requiring action by the Board, any extension of time for the
performance of any obligation or other act of the Purchaser or the Sub under the
Merger Agreement and any waiver of compliance with any provision of the Merger
Agreement for the benefit
of the Company.
16
<PAGE>
CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that,
upon the terms (but subject to the conditions) set forth in the Merger
Agreement, the Sub will be merged with and into the Company. In the Merger, each
Share issued and outstanding immediately prior to the Effective Time (excluding
shares owned directly or indirectly by the Company or any of its subsidiaries or
by the Purchaser, the Sub or any other subsidiary of the Purchaser and
Dissenting Shares (as defined in the Merger Agreement)) will be converted into
the right to receive in cash an amount per Share equal to the highest price per
Share payable in the Offer, without any interest thereon, less any withholding
taxes required under Section 3406 of the Internal Revenue Code of 1986. Each
share of the capital stock of the Sub issued and outstanding immediately prior
to the Effective Time will be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the Surviving
Corporation (as defined in the Merger Agreement), which will thereupon become a
direct, wholly-owned subsidiary of the Purchaser. The Merger Agreement provides
that the Merger will occur as soon as practicable following the satisfaction or
waiver of conditions set forth in the Merger Agreement. The Merger will become
effective upon the filing of a certificate of merger in the State of Delaware or
at such time thereafter as is provided in the certificate of merger.
STOCKHOLDER MEETING. The Merger Agreement provides that, if required by
applicable law, the Company will, as soon as practicable following payment for
the Shares in the Offer, duly call a meeting (the "Special Meeting") of its
Stockholders for the purpose of considering and taking action upon the Merger
Agreement and the transactions contemplated by the Merger Agreement. At the
Special Meeting, the Purchaser will cause all the Shares then owned by the
Purchaser or the Sub or and any of their subsidiaries or affiliates to be voted
in favor of the Merger.
If the Purchaser acquires at least 90% of the outstanding Shares in the
Offer, the Merger may be effected without a meeting of the Stockholders in
accordance with the provisions of Delaware law.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties. These include representations and
warranties by the Company with respect to corporate existence and power, capital
structure, corporate authorization, non-contravention of other agreements,
documents and laws, consents and approvals, subsidiaries, Commission filings,
compliance with applicable laws, litigation, taxes, regulatory compliance,
employee benefits, material liabilities, environmental matters, absence of
changes and other matters.
The Purchaser and the Sub also have made certain representations and
warranties with respect to corporate existence and power, corporate
authorization and consents and approvals, non-contravention of other agreements,
documents and laws, regulatory matters, financing and other matters.
CONDUCT OF BUSINESS PENDING THE MERGER. The Company has agreed that, from
the date of the Merger Agreement to the Effective Time, except as otherwise
provided in the Merger Agreement or consented to by the Purchaser, the Company
and its subsidiaries will conduct their business only in the ordinary course
consistent with past practice and will use all reasonable efforts to preserve
intact their business organizations and to maintain their existing relationships
with third parties with whom they have significant business relationships.
Except as contemplated by the Merger Agreement, the Company has further agreed
that it will not, nor will it permit any of its subsidiaries to: (i) issue, sell
or pledge, or authorize or propose the issuance, sale or pledge of, additional
shares of capital stock of any class (including the Shares) or any other
ownership interest in any of its subsidiaries, or securities convertible into or
exchangeable for any such shares or ownership interest or any rights, warrants
or options to acquire or with respect to any such shares of capital stock,
ownership interest or other convertible or exchangeable securities, or grant or
accelerate any right to convert or exchange any securities for any such shares
(including the Shares) or ownership interest or any other securities in respect
of, in lieu of or in substitution for Shares outstanding, other than (a) Shares
issuable upon exercise of the Options (as defined in the Merger Agreement) and
(b) issuances of capital stock of the Company's subsidiaries to the Company or
to a wholly-owned subsidiary of the Company; (ii) redeem or otherwise acquire,
directly or indirectly, any of its outstanding securities (including the
Shares); (iii) split, combine or reclassify its capital stock or declare, set
aside, make or pay any dividend or
17
<PAGE>
distribution on any shares of capital stock of the Company or any of its
subsidiaries (other than cash dividends paid to the Company by its wholly-owned
subsidiaries); (iv) make any acquisition, by means of a merger or otherwise, of
assets or securities, or any sale, lease, encumbrance or other disposition of
assets or securities, in each case other than in the ordinary course of business
and in circumstances not requiring approval of its board of directors; (v) incur
or assume any debt for borrowed money (other than short-term debt pursuant to
existing credit facilities); (vi) assume, guarantee, endorse or otherwise become
liable or responsible for the obligations of any other person (except
wholly-owned subsidiaries of the Company), except in the ordinary course of
business; (vii) make any loans, advances or capital contributions to, or
investments in, any other person (except wholly-owned subsidiaries of the
Company), in each case other than in the ordinary course of business; (viii)
change any of the accounting principles or practices used by the Company or any
of its subsidiaries, except as required by the Commission or by United States
generally accepted accounting principles; (ix) make any tax election not
required by law or settle or compromise any federal, state or local income tax
liability, in each case that is material to the Company and its subsidiaries
taken as a whole; (x) adopt any amendments to the Company's certificate of
incorporation or by-laws; (xi) grant any stock-related or performance awards;
(xii) forgive any loans to employees, officers or directors of more than $10,000
with respect to any particular individual; (xiii) enter into any new employment,
severance, consulting or salary continuation agreements with any officers,
directors or employees other than as contemplated by the Merger Agreement; (xiv)
adopt, amend or terminate any material employee benefit plan, except in the
ordinary course of business or as required by law or as necessary to maintain
tax qualified status; or (xv) agree in writing or otherwise to take any of the
foregoing actions or any action that would make any representation or warranty
in the Merger Agreement untrue or incorrect in any material respect as of the
date when made or as of a future date or otherwise would result in any of the
conditions to the Offer not being satisfied.
OTHER AGREEMENTS. The Company, the Purchaser and the Sub have agreed to
take all reasonable actions necessary to comply promptly with all legal
requirements that may have been imposed on it with respect to the Offer, the
Merger and the transactions contemplated by the Stockholders Agreement
(including furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other governmental entity) and
promptly to cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their subsidiaries
in connection with the Offer, the Merger and the transactions contemplated by
the Stockholders Agreement; provided that the Purchaser need not so comply, if
required by the Department of Justice or any other governmental entity to hold
separate, sell or otherwise dispose of any subsidiary of the Purchaser or the
Company or assets or properties of any of the foregoing, the effect of which
would be materially to impair the value of the Merger to the Purchaser. Each of
the Company, the Purchaser and the Sub will, and will cause its subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any governmental entity or other public or private third party
required to be obtained or made by the Company, the Purchaser or any of their
subsidiaries in connection with the Offer, the Merger, the Stockholders
Agreement or the taking of any action contemplated by any of the foregoing. The
Purchaser and the Company also have made certain agreements regarding access to
information and holding in confidence information so furnished.
NO SOLICITATION. From the date of the Merger Agreement until the
termination of the Merger Agreement, neither the Company nor any of its
subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates, will directly or indirectly initiate,
solicit or knowingly encourage, or take any other action knowingly to
facilitate, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries to obtain an Acquisition Proposal or
agree to or endorse an Acquisition Proposal, or authorize or permit any of its
or their officers, directors or employees or any
18
<PAGE>
of its subsidiaries, or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its subsidiaries, to
take any such action; provided that, the Board is not prohibited from furnishing
information to, or entering into, maintaining or continuing discussions or
negotiations with, any person or entity that (i) made inquiries or proposals
prior to the date of the Merger Agreement regarding an Acquisition Proposal or
(ii) makes an unsolicited Acquisition Proposal, if the Board, after consultation
with and based upon the advice of independent legal counsel (who may be the
Company's regularly engaged, independent legal counsel), determines in good
faith that such action is necessary for the Board to comply with its fiduciary
duties to Stockholders under applicable law, and, prior to taking such action,
the Company (a) provides reasonable notice to the Purchaser to the effect that
it is taking such action (unless the Board determines in good faith after
consultation with and based upon the advice of independent legal counsel that
giving such notice would breach the fiduciary duties of the Board in connection
with an Acquisition Proposal that is more favorable to the Company's
stockholders than the Offer and the Merger (a "Superior Proposal")) and (b)
receives from such person or entity an executed confidentiality agreement in
reasonably customary form. The term "Acquisition Proposal" means any inquiry,
offer or proposal regarding any of the following (other than transactions with
the Purchaser or the Sub contemplated by the Merger Agreement) involving the
Company or any of its subsidiaries: (i) any merger, consolidation, share
exchange, recapitalization, business combination or other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of all or substantially all of the assets of the Company and its subsidiaries
taken as a whole, in a single transaction or a series of related transactions;
(iii) any tender offer or exchange offer for 20% or more of the outstanding
shares of capital stock of the Company or the filing of a registration statement
under the Securities Act of 1933 in connection with that tender or exchange
offer; or (iv) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
Pursuant to the Merger Agreement, the Board will not (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to the Purchaser or the
Sub, its approval or recommendation of the Offer, the Merger Agreement or the
Merger, (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal or (iii) cause the Company to enter into any agreement with
respect to any Acquisition Proposal, unless, prior to the time of acceptance for
payment of Shares in the Offer, the Board determines in good faith, after
consultation with and based upon the advice of independent legal counsel, that
it is necessary to do so in order to comply with its fiduciary duties to the
Stockholders under applicable law, in which event the Board may withdraw or
modify its approval or recommendation of the Offer, the Merger Agreement and the
Merger, approve or recommend a Superior Proposal or cause the Company to enter
into an agreement with respect to a Superior Proposal. The Company will provide
reasonable notice to the Purchaser or the Sub to the effect that it is taking
such action.
FEES AND EXPENSES. The Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement will be paid by the party incurring the
expenses. In addition, in the event that an Acquisition Proposal has been made
to or recommended or accepted by the Company, and either (i) the Purchaser shall
have terminated the Merger Agreement as a result of the Board having withdrawn,
modified or changed its recommendation or approval of the Merger Agreement or
the Offer in a manner adverse to the Purchaser or the Board having approved or
recommended any Acquisition Proposal or (ii) the Company shall have terminated
the Merger Agreement in order to enter into an agreement in respect of an
Acquisition Proposal, the Company has agreed to pay the Purchaser a fee in
immediately available funds equal to $6,000,000.
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the obligation
of each party to effect the Merger is subject to the satisfaction, prior to the
proposed Effective Time, of the following conditions: (i) the Merger Agreement
and the Merger shall have been approved and adopted by the affirmative vote of
the holders of a majority of the Shares entitled to vote, if a vote is required
by applicable law, (ii) all necessary waiting periods applicable to the Merger
under the HSR Act shall have
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been terminated or shall have expired, (iii) no temporary restraining order,
preliminary or permanent injunction or other order issued by any court or
governmental authority or other legal restraint or prohibition preventing or
restricting the consummation of the Merger shall be in effect and (iv) the
Purchaser shall have accepted for payment and paid for the Shares tendered and
not withdrawn pursuant to the Offer, provided that this condition will be deemed
satisfied with respect to the Purchaser and the Sub, if the Purchaser shall have
failed to purchase Shares in violation of the Merger Agreement or the terms of
the Offer.
TERMINATION. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval by the Stockholders of the matters presented in connection with the
Merger (i) by mutual written consent of the Board and the board of directors of
the Purchaser; (ii) by either the Company or the Purchaser, if, without any
material breach by the terminating party of its obligations under the Merger
Agreement, the purchase of Shares pursuant to the Offer shall not have occurred
on or before November 30, 1995; (iii) by the Company or the Purchaser, if the
Offer expires or is terminated or withdrawn pursuant to its terms without any
Shares being purchased in accordance with the Merger Agreement, provided that
the Purchaser may not so terminate the Merger Agreement if the Purchaser's
termination of, or the failure to accept for payment or pay for any Shares
tendered pursuant to, the Offer does not follow the failure to occur, of any of
the conditions to the Offer or is otherwise in violation of the terms of the
Offer or the Merger Agreement; (iv) by the Company or the Purchaser, if any
court of competent jurisdiction shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the purchase of Shares pursuant
to the Offer or the Merger, provided that such right to terminate the Merger
Agreement under this clause is not available to any party who shall not have
used its reasonable best efforts, subject to the terms of the Merger Agreement,
to remove or lift such order, decree or ruling; (v) by the Company, if the Offer
has not been timely commenced in accordance with the terms of the Merger
Agreement; (vi) by the Purchaser, if the Board shall (a) withdraw, modify or
change its recommendation or approval in respect of the Merger Agreement or the
Offer in a manner adverse to the Purchaser or (b) have approved or recommended
any proposal other than by the Purchaser or the Sub in respect of an Acquisition
Proposal; (vii) subject to the terms of the Merger Agreement, by the Company, to
allow the Company to enter into an agreement in respect of an Acquisition
Proposal; and (viii) prior to the consummation of the Offer, by the Company, if
any of the representations or warranties of the Purchaser or the Sub in the
Merger Agreement were untrue or incorrect in any material respect when made or
have since become, and at the time of termination remain, untrue or incorrect in
any material respect, or the Purchaser or the Sub shall have breached or failed
to comply in any material respect with any of its obligations under the Merger
Agreement, or any other events or circumstances have occurred that render the
conditions to the Company's obligation to effect the Merger not able to be
satisfied on or before November 30, 1995. In the event of termination of the
Merger Agreement by either the Company or the Purchaser as provided in the
Merger Agreement, the Merger Agreement will become void and there will be no
liability or obligation on the part of the Purchaser, the Sub or the Company, or
their respective officers, directors or shareholders, except as provided in the
Merger Agreement. In addition, following the Control Date if the Purchaser
acquires in the Offer at least a majority of the outstanding Shares (calculated
on a fully diluted basis), and prior to the Effective Time, and as long as there
is at least one Continuing Director, if requested by a majority of the
Continuing Directors, all other directors will abstain from acting upon, and the
approval of a majority of the Continuing Directors will be required to
authorize, any amendment or termination of the Merger Agreement by the Company,
any extension for the performance or waiver of the obligations or other acts of
the Purchaser or the Sub and any waiver of the Company's rights under the Merger
Agreement.
INDEMNIFICATION. The Purchaser and the Sub have agreed that all rights to
indemnification and exculpation now existing in favor of the directors,
officers, employees and agents of the Company as provided in its charter or
by-laws or otherwise in effect as of the date of the Merger Agreement with
respect to matters occurring prior to the Effective Time will survive the Merger
and continue in full
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force and effect. The Merger Agreement provides that the Purchaser will
indemnify, defend and hold harmless, to the full extent permitted by law, each
present or former officer, director, employee or agent of the Company or any of
its subsidiaries (the "Indemnified Parties") against all losses, claims,
damages, costs, liabilities or judgements or amounts that are paid in
settlement, including advancement of expenses (including attorneys' fees) as
incurred in respect of any threatened, pending or contemplated claim, action,
suit or proceeding, whether criminal, civil, administrative or investigative,
including, without limitation, any action by or on behalf of any or all security
holders of the Company or by or in the right of the Company or the Surviving
Corporation, or investigation relating to any action or omission by such
Indemnified Party in its capacity as such (including service to any other
entity, plan, trust or the like at the Company's request) occurring on or prior
to the Effective Time ("Indemnified Liabilities"), including, without
limitation, any Indemnified Liabilities that arise out of or relate to the
transactions contemplated by the Merger Agreement).
For a period of no fewer than six years after the Effective Time, the
Purchaser will cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company and its
subsidiaries (provided that the Surviving Corporation may substitute policies
with reputable and financially sound carriers of at least the same coverage and
containing terms and conditions no less advantageous, as long as substitution
does not result in gaps or lapses in coverage) with respect to matters arising
before the Effective Time, provided that the Purchaser will not be required to
pay an annual premium for such insurance in excess of 200% of the last annual
premium paid by the Company prior to the date of the Merger Agreement, but in
that case will purchase as much coverage as possible for such amount. The
Purchaser will cause the Surviving Corporation to pay all expenses (including
reasonable attorneys' fees) reasonably incurred by an Indemnified Party in
successfully enforcing the rights to which the Indemnified Party is entitled
under the Merger Agreement, the Surviving Corporation's by-laws or otherwise.
Should the Surviving Corporation fail to comply with the foregoing obligations,
the Purchaser will be responsible for those obligations.
AMENDMENT. To the extent permitted by applicable law, the Merger Agreement
may be amended, by action by or on behalf of the Boards of Directors of the
Company, the Purchaser and the Sub; provided that, after the Merger Agreement is
approved by the Stockholders, no amendment will be made that decreases the
amount of consideration to be delivered to the Stockholders or adversely affects
the rights of the Stockholders under the Merger Agreement, without the approval
of the Stockholders. In addition, following the Control Date (if the Purchaser
acquires in the Offer at least a majority of the outstanding Shares (calculated
on a fully diluted basis)) and prior to the Effective Time, any amendment or
termination of the Merger Agreement, extension for the performance or waiver of
the obligations or other acts of the Purchaser or the Sub or waiver of the
Company's rights under the Merger Agreement, will require the concurrence of a
majority of the Continuing Directors.
TIMING. The exact timing and details for the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by the Purchaser pursuant to the Offer. Although the Purchaser has
agreed to cause the Merger to be consummated on the terms set forth above, there
can be no assurance as to the timing of the Merger.
DELAWARE LAW. The Board has approved the Merger Agreement and the
transactions contemplated by it, including the Offer, the Merger and the
Stockholders Agreement, and the entry by the Purchaser into the Stockholders
Agreement for purposes of Section 203 of the DGCL. Accordingly, the restrictions
of Section 203 do not apply to the transactions contemplated by the Offer, the
Merger Agreement or the Stockholders Agreement. Section 203 of the DGCL prevents
an "interested stockholder" (generally, a stockholder owning 15% or more of a
corporation's outstanding voting stock or an affiliate or associate of that
stockholder) from engaging in a "business combination" (defined to include a
merger and certain other transactions) with a Delaware corporation for a period
of three years following the date on which the stockholder became an interested
stockholder, unless (i) prior to that date, the corporation's board of directors
approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder, (ii) upon consummation of the
transaction that resulted in the stockholder becoming an interested stockholder,
the
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interested stockholder owned at least 85% of the corporation's voting stock
outstanding at the time the transaction commenced (excluding shares owned by
certain employee stock plans and persons who are directors and also officers of
the corporation) or (iii) on or subsequent to that date, the business
combination is approved by the corporation's board of directors and authorized
at an annual or special meeting of stockholders, and not by written consent, by
the affirmative vote of at least 66 2/3% of the outstanding voting stock not
owned by the interested stockholder. As described above, Section 203 of the DGCL
does not apply to the Offer, the Merger or the Stockholders Agreement.
THE STOCKHOLDERS AGREEMENT
The following is a summary of the material terms of the Stockholders
Agreement. This summary is not a complete description of the terms and
conditions of the Stockholders Agreement and is qualified in its entirety by
reference to the full text of the Stockholders Agreement, which is incorporated
by reference and a copy of which has been filed with the Commission as an
exhibit to the Schedule 14D-1. The Stockholders Agreement may be examined, and
copies may be obtained, as set forth in Section 8 above.
TENDER OF SHARES. Simultaneously with the execution of the Merger
Agreement, the Purchaser, the Sub and each of the Selling Stockholders entered
into the Stockholders Agreement. Upon the terms and subject to the conditions of
that agreement, the Selling Stockholders have severally agreed validly to tender
and not to withdraw pursuant to and in accordance with the terms of the Offer,
not later than the tenth business day after commencement of the Offer, an
aggregate of 2,871,132 Shares owned beneficially by them. The Selling
Stockholders will have no obligation to tender the Founders Shares after the
earliest of (i) the termination, expiration, abandonment or withdrawal or the
Offer, (ii) December 30, 1995 and (iii) the termination of the Merger Agreement
under any of the circumstances described in clause (i), (ii), (iii), (iv), (v)
or (viii) under "The Merger Agreement -- Termination" above.
STOCK OPTION. Each of the Selling Stockholders has granted the Purchaser an
irrevocable option (collectively, the "Stock Options") to purchase all their
Shares (less 100,000 Shares beneficially owned by each of Mr. Samson and Ms.
Varis) at a purchase price per Share equal to the Offer Price. Pursuant to the
Stockholders Agreement, if (i) the Offer is terminated, abandoned or withdrawn
by the Purchaser due to any of the following: (a) the failure to achieve the
Minimum Tender Condition, (b) the representations and warranties of the Company
in the Merger Agreement were untrue or incorrect in any material respect when
made or (except for those that address matters as of a specific date and except
for changes specifically permitted under the Merger Agreement) thereafter become
and remain untrue or incorrect in any material respect, (c) the Company breaches
or fails to comply in any material respect with any of its obligations under the
Merger Agreement and, with respect to any breach or failure that can be
remedied, the breach or failure is not remedied within 10 business days after
the Purchaser has furnished the Company written notice of the breach or failure,
(d) the Board withdraws or materially modifies or changes its recommendation of
the Offer, the Merger Agreement or the Merger, or the Board approves or
recommends an Acquisition Proposal or (e) a court of competent jurisdiction
issues an order, decree or ruling or takes any other action restraining,
enjoining or otherwise prohibiting the Purchase of Shares pursuant to the Offer
or the Merger as a result of a suit, action or proceeding by a party that has
made an Acquisition Proposal; or (ii) the Offer is consummated but the Purchaser
has not accepted for payment and paid for the Founders Shares, and the
non-acceptance or non-payment is not in contravention of the Purchaser's or the
Sub's obligations under the Merger Agreement or the Offer, the Stock Options
will become exercisable, in whole but not in part, upon the first to occur of
any such event and continuing until 30 days after the date of the occurrence of
that event, as long as: (i) all waiting periods under the HSR Act required for
the purchase of the Option Shares upon such exercise shall have expired or been
waived, and (ii) there shall not be in effect any injunction or other order
issued by any court or governmental, administrative or regulatory agency or
authority prohibiting the exercise of the Stock Options pursuant to the
Stockholders Agreement. In the event that the Purchaser elects to exercise the
Stock Options, the
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Purchaser must send a written notice to the Selling Stockholders identifying the
place and date (not fewer than two or more than 10 business days from the date
of that notice) for the closing of the purchase.
Under the Stockholders Agreement, if the Purchaser purchases Shares pursuant
to the Stock Options, it is required, subject to certain conditions, to offer to
purchase all the other outstanding Shares within 30 days on the same terms. In
addition, if, at any time within 183 days after the consummation of the
purchase, the Purchaser or any of its affiliates sells, exchanges or otherwise
disposes of any of those Shares, voluntarily or otherwise (including, without
limitation, pursuant to a merger), and if the cash or fair value of the
consideration per Share received in exchange exceeds the purchase price of those
Shares, then the Purchaser is required promptly to pay or deliver an aggregate
of 60% of that excess to the respective Selling Stockholders pro rata in
relation to the number of Shares sold by them pursuant to the Stock Options.
VOTING. Each Selling Stockholder has agreed that, until the first to occur
of December 30, 1995 or termination of the Merger Agreement in accordance with
its terms, at any meeting of the Stockholders or in connection with any written
consent of the Stockholders, that Selling Stockholder will vote (or cause to be
voted) the Shares held of record or beneficially by that Selling Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms of the Merger Agreement; (ii)
against any action or agreement that would result in a breach in any respect of
any agreement of the Company under the Merger Agreement; and (iii) against any
other action that could reasonably be expected to interfere with, delay or
otherwise adversely affect the Merger and the transactions contemplated by the
Merger Agreement. Each Selling Stockholder's obligations regarding voting, as
well as that Selling Stockholder's obligation to waive any rights of appraisal
or rights to dissent from the Merger, terminate following any decrease in, or
change in the form of, the consideration payable to Stockholders in the Merger,
unless that Selling Stockholder gives its consent to the decrease or change.
NO SOLICITATION. The Selling Stockholders have further agreed not to,
directly or indirectly, initiate, solicit or knowingly encourage (including by
way of furnishing non-public information or assistance), or take any other
action knowingly to facilitate, any inquiries or the making of any proposal that
constitutes, or reasonably may be expected to lead to, an Acquisition Proposal,
enter into or maintain or continue discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain an Acquisition Proposal,
agree to or endorse an Acquisition Proposal or authorize or permit any person or
entity acting on behalf of that Selling Stockholder to do any of the foregoing.
Under the Stockholders Agreement, if any Selling Stockholder receives any
inquiry or proposal regarding any Acquisition Proposal, that Selling Stockholder
is required promptly to inform the Purchaser of that inquiry or proposal. The
Purchaser's exclusive remedy for a breach of these provisions is an injunction
or decree of specific performance, and not monetary damages.
REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER AGREEMENTS. In connection
with the Stockholders Agreement, the Selling Stockholders have made certain
customary representations, warranties and covenants, including with respect to
(i) their ownership of the Founders Shares, (ii) their authority to enter into
and perform their obligations under the Stockholders Agreement, (iii) the
receipt of requisite governmental consents and approvals, (iv) the absence of
liens and encumbrances on and in respect of the Founders Shares, (v)
restrictions on the transfer of the Founders Shares, (vi) the solicitation of
Acquisition Proposals and (vii) the waiver of their appraisal rights.
THE EMPLOYMENT AGREEMENT
Simultaneously with the execution of the Merger Agreement, the Company and
Marvin S. Samson entered into an employment agreement (the "Employment
Agreement"). Beginning on the Control Date, the Company has agreed to continue
to employ Mr. Samson as president, chief executive officer and chief operating
officer of the Company, and the Purchaser has agreed to employ Mr. Samson as an
executive vice president of the Purchaser. The Employment Agreement provides for
an annual salary of not less than $400,000 per year plus any other compensation
as may, from time to
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time, be determined by the Company. In addition, Mr. Samson will participate in
certain benefit Plans (as defined in the Employment Agreement) of the Company
or, at the option of Mr. Samson and on a basis reasonably acceptable to the
Company and the Purchaser, of the Purchaser.
The Employment Agreement expires on the fifth anniversary of the Control
Date, but will be automatically renewed for one-year periods, unless notice of
termination is given by either party. In addition, the Company may retain Mr.
Samson as a consultant for a one-year period following the termination of his
employment. During that period, the Company will pay Mr. Samson an amount equal
to his base salary immediately prior to the termination of employment. The
Employment Agreement provides for a severance payment of not less than $400,000
per year plus certain benefits during the initial five-year term of the
Employment Agreement (the "Initial Term"), in the event that Mr. Samson's
employment is terminated without cause. The Employment Agreement also provides
for a severance payment of not less than $200,000 per year plus certain benefits
during the Initial Term, in the event that Mr. Samson voluntarily terminates his
employment.
During Mr. Samson's employment under the Employment Agreement, except as
otherwise consented to or approved by Mr. Samson and the Purchaser, (i) (a) the
Board will be comprised of seven members, three to be designated by Mr. Samson,
three to be designated by the Purchaser (the "SPI directors") and one, who will
be an employee of Bayer Corporation or any of its affiliates (other than the
Purchaser and its subsidiaries), to be designated by the Purchaser, subject to
the approval by Mr. Samson, which approval will not be unreasonably withheld
(the "Bayer director"), (b) the consent or approval of at least one of the SPI
directors will be required prior to the Company taking any extraordinary
corporate actions, including financings, purchases or sales of assets not in the
ordinary course of business, issuances of securities, providing compensation,
perquisites or benefits beyond levels customary in the multisource industry,
actions with respect to the certificate of incorporation or by-laws,
reorganizations, recapitalizations and business combinations, encumbering of
assets and actions that could result in a violation of agreements relating to
indebtedness of the Purchaser or (with the additional consent or approval of the
Bayer director) agreements between the Purchaser (or any of its affiliates) and
Bayer Corporation (or any of its affiliates), and (c) after consultation with
the other directors, the SPI directors will be entitled to authorize and
approve, as actions of the Board, corporate actions not inconsistent with the
provisions of the Employment Agreement, including financings, issuances of
securities and encumbering of assets; (ii) Mr. Samson will be in the slate of
the Purchaser's management nominees for re-election as a director; (iii) neither
the Company's name nor its logo will be modified in any way, and the Company may
continue to use its name and logo on product labelling and the like; (iv) the
headquarters of the Company will remain in Cherry Hill, New Jersey; (v) the
Company will not be required to sell products to or manufacture products for the
Purchaser or any affiliate of the Purchaser on terms less favorable to the
Company than those the Company provides to unaffiliated customers for similar
purchase quantities; and (vi) the Company will have funds made available to it
to the extent of Available Cash (as defined in the Employment Agreement).
The Employment Agreement provides that Mr. Samson will not use or disclose
at any time during or after his employment with the Company any trade secret or
proprietary or confidential information of the Company or any of its affiliates.
During Mr. Samson's employment with the Company, during the advisory period, if
any, during any period in which the Company is making severance payments to Mr.
Samson, and, in the event of termination for cause, until the earlier of the
sixth anniversary of the Control Date and the fourth anniversary of such
termination, Mr. Samson will not be engaged as an officer, director or employee
of, or in any way be associated in a management or ownership capacity with, any
corporation, partnership or other enterprise or venture that conducts a business
in competition with the business of the Company or the Purchaser or their
subsidiaries at the time of such termination or expiration; provided that Mr.
Samson may own not more than three percent of the outstanding securities of any
publicly-held company.
The Purchaser has agreed to cause the Company to perform its obligations
under the Employment Agreement after the Control Date.
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The Employment Agreement provides that a compensation agreement dated
October 19, 1991 (the "Compensation Continuation Agreement") and a split dollar
insurance agreement dated March 25, 1991 (the "Split Dollar Agreement") will
continue in effect in accordance with their terms, unless surrendered by Mr.
Samson. The Compensation Continuation Agreement provides for payment to Mr.
Samson or his designee, for one year after Mr. Samson's retirement, disability
or death, a sum equal to his annual base salary immediately prior to his
retirement, disability or death, as the case may be, and thereafter for a period
of nine years annual payments of 50% of that amount. Payment under the
Compensation Continuation Agreement depends upon Mr. Samson's compliance with
certain covenants, including a covenant against competition. Pursuant to the
Split Dollar Agreement, a trust created by Mr. Samson purchased a split dollar
life insurance policy on the lives of Mr. Samson and his wife. The policy
provides for death benefits aggregating $5,000,000 to be paid to the
beneficiaries of Mr. Samson's trust. The Company pays the annual premiums on the
policy, minus a sum equal to the lesser of the cost of a comparable one-year
term life insurance policy or the applicable one-year term premium cost computed
under the Internal Revenue Service's Revenue Ruling 55-747. The Company has a
security interest in the policy's death benefit equal to the sum of all premium
payments made by the Company.
BOLAR AGREEMENT
Pursuant to an agreement dated as of December 31, 1985 among Marvin Samson,
Agvar Chemicals Inc. (whose sole shareholder is Agnes Varis), Bolar
Pharmaceutical Co., Inc. ("Bolar") and the Company (the "Bolar Agreement"), the
Company was granted a right of first refusal to purchase from any other party to
the agreement all Shares for which such party received a bona fide third-party
offer, for the same consideration as in the third-party offer. The other parties
to the agreement were also granted an option, exercisable on a pro rata basis,
to purchase such Shares, to the extent the Company failed to exercise its
option. Pursuant to a letter agreement dated July 28, 1995, the parties to the
Bolar Agreement, including Circa Pharmaceuticals, the successor to Bolar, waived
any rights they may have had under the Bolar Agreement in connection with the
Offer, the Merger and the Stockholders Agreement. The Bolar Agreement expires in
accordance with its terms on December 31, 1995.
OTHER MATTERS
APPRAISAL RIGHTS. No appraisal rights are available to Stockholders in
connection with the Offer. However, if the Merger is consummated, a Stockholder
will have certain rights under Section 262 of the DGCL to dissent and demand
appraisal of, and payment in cash for the fair value of, that Stockholder's
Shares. Those rights, if the statutory procedures are complied with, could lead
to a judicial determination of the fair value (excluding any value arising from
the Merger) required to be paid in cash to dissenting Stockholders for their
Shares. Any judicial determination of the fair value of Shares could be based
upon considerations other than or in addition to the Offer Price and the market
value of the Shares, including asset values and the investment value of the
Shares. The value so determined could be more or less than the Offer Price or
the Merger Consideration.
If a Stockholder who demands appraisal under Section 262 of the DGCL fails
to perfect, or effectively withdraws or loses, his right to appraisal, as
provided in the DGCL, the Shares of that Stockholder will be converted into the
Merger Consideration in accordance with the Merger Agreement. A Stockholder may
withdraw his demand for appraisal by delivering to the Purchaser a written
withdrawal of such demand for appraisal and acceptance of the Merger.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of those rights.
GOING PRIVATE TRANSACTIONS. Rule 13e-3 under the Exchange Act is applicable
to certain "going-private" transactions. The Purchaser does not believe that
Rule 13e-3 will be applicable to the Merger, unless, among other things, the
Merger is completed more than one year after termination of the Offer. If
applicable, Rule 13e-3 would require, among other things, that certain financial
information
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regarding the Company and certain information regarding the fairness of the
Merger and the consideration offered to minority Stockholders be filed with the
Commission and disclosed to minority Stockholders prior to consummation of the
Merger.
13. DIVIDENDS AND DISTRIBUTIONS
If, on or after the date of the Merger Agreement, the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii)
acquire currently outstanding Shares or otherwise cause a reduction in the
number of outstanding Shares or (iii) issue or sell additional Shares, shares of
any other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, then, subject to the provisions of Section 14
below, the Purchaser, in its sole discretion, may make such adjustments as it
deems appropriate in the Offer Price and other terms of the Offer, including,
without limitation, the number or type of securities offered to be purchased.
If, on or after the date of the Merger Agreement, the Company declares or
pays any cash dividend on the Shares, makes other distributions on the Shares or
issues with respect to the Shares any additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, conditional or otherwise, to acquire, any
of the foregoing, payable or distributable to Stockholders of record prior to
the transfer of the Shares purchased pursuant to the Offer to the Purchaser or
its nominee or transferee on the Company's stock transfer records, then, subject
to Section 14 below, (i) the Offer Price may, in the sole discretion of the
Purchaser, be reduced by the amount of any cash dividend or cash distribution
and (ii) the whole of any non-cash dividend, distribution or issuance to be
received by the tendering Stockholders will (a) be received and held by the
tendering Stockholders for the account of the Purchaser and will be required to
be promptly remitted and transferred by each tendering Stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer or (b) at the direction of the Purchaser, be exercised
for the benefit of the Purchaser, in which case the proceeds of exercise
promptly will be remitted to the Purchaser. Pending the remittance and subject
to applicable law, the Purchaser will be entitled to all rights and privileges
as owner of any non-cash dividend, distribution, issuance or proceeds and may
withhold the entire Offer Price or deduct from the Offer Price the amount or
value of the non-cash dividend, distribution, issuance or proceeds, as
determined by the Purchaser in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two preceding paragraphs and
nothing in this Offer to Purchase shall constitute a waiver by the Purchaser or
the Sub of any of its rights under the Merger Agreement or a limitation of
remedies available to the Purchaser or the Sub for any breach of the Merger
Agreement, including termination of the Merger Agreement.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after expiration or termination of the Offer), to pay for any Shares
tendered, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered, and, subject to
the provisions of the Merger Agreement, may amend or terminate the Offer
(whether or not any Shares have been purchased or paid for), if (i) there has
not been validly tendered and not withdrawn prior to the Expiration Date a
number of Shares that constitutes a majority of the Shares outstanding on a
fully-diluted basis on the date of purchase ("on a fully-diluted basis" meaning,
as of any date, the number of Shares outstanding, together with Shares the
Company is then required to issue pursuant to obligations outstanding at that
date under employee stock option or other benefit plans or otherwise), (ii) any
applicable waiting periods under
26
<PAGE>
the HSR Act have not expired or been terminated prior to the Expiration Date or
(iii) at any time before acceptance for payment of, or payment for, the Shares
any of the following events occur or are deemed by the Purchaser to have
occurred:
(A) there shall be pending by any governmental entity any suit, action
or proceeding (1) challenging the acquisition by the Purchaser or Sub of any
Shares under the Offer or seeking to restrain or prohibit the making or
consummation of the Offer or Merger, (2) seeking to prohibit or materially
limit the ownership or operation by the Company, the Purchaser or any of
their respective subsidiaries of a material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or the
Purchaser and its subsidiaries, taken as a whole, or to compel the Company
or the Purchaser to dispose of or hold separate any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole, or
the Purchaser and its subsidiaries, taken as a whole, as a result of the
Offer or any of the other transactions contemplated by the Merger Agreement,
(3) seeking to impose material limitations on the ability of the Purchaser
or Sub to acquire or hold, or exercise full rights of ownership of, any
Shares accepted for payment pursuant to the Offer, including, without
limitation, the right to vote such Shares on all matters properly presented
to the Stockholders of the Company, or (4) seeking to prohibit the Purchaser
or any of its subsidiaries from effectively controlling in any material
respect any material portion of the business or operations of the Company
and its subsidiaries;
(B) any governmental entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order that is in effect and that (1) materially restricts, prevents or
prohibits consummation of the Offer, the Merger or any material transaction
contemplated by the Merger Agreement, (2) prohibits or limits materially the
ownership or operation by the Company, the Purchaser or any of their
subsidiaries of all or any material portion of the business or assets of the
Company and its subsidiaries taken as a whole, or compels the Company, the
Purchaser or any of their subsidiaries to dispose of or hold separate all or
any material portion of the business or assets of the Company and its
subsidiaries taken as a whole, (3) imposes material limitations on the
ability of the Purchaser or any subsidiary of the Purchaser to exercise
effectively full rights of ownership of any Shares, including, without
limitation, the right to vote any Shares acquired by the Purchaser pursuant
to the Offer or otherwise on all matters properly presented to the
Stockholders, including, without limitation, the approval and adoption of
the Merger Agreement and the transactions contemplated by the Merger
Agreement, or (4) requires divestitures by the Purchaser, the Sub or any
other affiliate of the Purchaser of any Shares, provided that the Purchaser
used all reasonable efforts to cause the decree, judgment, injunction or
other order to be vacated or lifted;
(C) the representations and warranties of the Company contained in the
Merger Agreement were untrue or incorrect in any material respect when made
or (except for those that address matters as of a specific date and except
for changes specifically permitted by the Merger Agreement) thereafter
become and remain untrue or incorrect in any material respect;
(D) the Company shall have breached or failed to comply in any material
respect with any of its obligations under the Merger Agreement and, with
respect to any such breach or failure that can be remedied, the breach or
failure is not remedied within 10 business days after the Purchaser has
furnished the Company written notice of such breach or failure;
(E) the Merger Agreement shall have been terminated in accordance with
its terms, or the Board shall have approved or recommended an Acquisition
Proposal;
(F) the Board shall have withdrawn or materially modified or changed
(including by amendment of the Schedule 14D-9) in a manner adverse to the
Purchaser or the Sub its recommendation of the Offer, the Merger Agreement
or the Merger;
27
<PAGE>
(G) (1) it shall have been publicly disclosed or the Purchaser shall
have otherwise learned that, except as contemplated by the Stockholders
Agreement, any person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than the Purchaser or its affiliates or any group of
which any of them is a member, shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of
more than 25% of the Shares, through the acquisition of stock, the formation
of a group or otherwise, or shall have been granted an option, right or
warrant, conditional or otherwise, to acquire beneficial ownership of more
than 25% of the Shares;
(H) there shall have occurred and continued for at least three business
days (1) any general suspension of, or limitation on prices for, trading in
securities on any national securities exchange or in the over-the-counter
market in the United States, (2) the declaration of any banking moratorium
or any suspension of payments in respect of banks or any limitation (whether
or not mandatory) by any governmental entity on, or other event materially
adversely affecting, the extension of credit by lending institutions in the
United States or (3) in the case of any of the foregoing existing at the
time of the commencement of the Offer, a material acceleration or worsening
of the foregoing; or
(I) for each real property owned or operated by the Company or any of
its subsidiaries located in the state of New Jersey, the Company shall not
have complied with the obligations imposed by the New Jersey Industrial Site
Recovery Act by: (1) securing and providing a copy to the Purchaser and Sub
of a letter of non-applicability, (2) securing and providing a copy to the
Purchaser and Sub of a written approval by the New Jersey Department of
Environmental Protection (the "NJDEP") of a negative declaration submitted
by the Company, (3) securing and providing a copy to the Purchaser and Sub
of a no further action letter from the NJDEP, (4) filing a DE MINIMUS
Quantity Exemption Affidavit and providing the Purchaser and Sub with a copy
evidencing the filing, (5) securing and providing a copy to the Purchaser
and Sub of a letter of authorization from the NJDEP for the transfer of
ownership or (6) securing written approval by the NJDEP of a Remediation
Agreement and providing a copy to the Purchaser and Sub;
which, in the judgment of the Purchaser in any such case, and regardless of the
circumstances (including any action or omission by the Purchaser or the Sub)
giving rise to any such condition, makes it inadvisable to proceed with the
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Purchaser, the Sub
and their affiliates and may be asserted by the Purchaser or the Sub regardless
of the circumstances (including, without limitation, any action or inaction by
the Purchaser, the Sub or any of their affiliates) giving rise to any of the
conditions or may be waived by the Purchaser or the Sub, in whole or in part,
from time to time in its sole discretion, except as otherwise provided in the
Merger Agreement. The failure by the Purchaser or the Sub at any time to
exercise any of the foregoing rights will not be deemed a waiver of any of those
rights and each of those rights will be deemed an ongoing right and may be
asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company, but without any independent
investigation, neither the Purchaser nor the Sub is aware of any license or
regulatory permit that appears to be material to the business of the Company and
its subsidiaries, taken as a whole, that might be adversely affected by the
Purchaser's acquisition of Shares as contemplated in this Offer to Purchase or
of any approval or other action by any governmental authority that would be
required for the acquisition or ownership of Shares by the Purchaser as
contemplated in this Offer to Purchase. Should any such approval or other action
be required, the Purchaser and the Sub presently contemplate that such approval
or other action will be sought, except as described below under "State Takeover
Laws." While, except as otherwise expressly described in this Section 15, the
Purchaser does not presently intend to delay the acceptance for payment of or
28
<PAGE>
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that failure to obtain any such approval or other action might not result in
consequences adverse to the Company's business or that certain parts of the
Company's business might not have to be disposed of if such approvals were not
obtained or other actions were not taken or in order to obtain any such approval
or other action. If certain types of adverse action are taken with respect to
the matters discussed below, the Purchaser could decline to accept for payment
or pay for any Shares tendered. See Section 14 above for certain conditions to
the Offer.
CERTAIN LITIGATION RELATING TO THE OFFER. On July 31, 1995, a class action
complaint was filed in the Delaware Chancery Court on behalf of all persons
(other than the defendants) who own Shares against the Company, Marvin Samson,
Judith U. Arnoff, Agnes Varis, Barry Waxman, Allen Misher, Gus Blass and the
Purchaser. In the suit, entitled Harbor Finance Partners v. Marvin Samson, et
al., Civil Action No. 14447, the plaintiff has alleged, among other things, that
the defendants have breached their fiduciary duties to holders of the Shares by
entering into an agreement with the Purchaser and failing to attempt to maximize
shareholder value. The suit seeks various remedies, including an injunction to
prevent consummation of the transaction, and damages, costs and disbursements of
the action.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in those states.
In EDGAR V. MITE CORP., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS CORP.
V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that the laws were applicable
only under certain conditions.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval of either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that it
properly approved, among other things, the Offer and the Merger for purposes of
Section 203 of the DGCL.
Based on information supplied by the Company and the Company's
representations in the Merger Agreement, the Purchaser does not believe that any
state takeover statutes apply to the Offer or the Merger. Neither the Purchaser
nor the Sub has currently complied with any state takeover statute or
regulation. The Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Offer or the Merger and
nothing in this Offer to Purchase or any action taken in connection with the
Offer or the Merger is intended as a waiver of that right. If it is asserted
that any state takeover statute is applicable to the Offer or the Merger and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer or the Merger, the Purchaser might be required to file
certain information with, or to receive approvals from, the relevant state
authorities, and the Purchaser might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or be delayed in consummating the Offer
or the Merger. In such case, the Purchaser may not be obligated to accept for
payment or pay for any Shares tendered pursuant to the Offer.
29
<PAGE>
ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares under the Offer may be consummated following the expiration
of a 15-calendar-day waiting period following the filing by the Purchaser of a
Notification and Report Form with respect to the Offer, unless the Purchaser
receives a request for additional information or documentary material from the
Antitrust Division or the FTC or unless early termination of the waiting period
is granted. The Purchaser expects that such filing will be made on or about
August 4, 1995 and such waiting period will expire at 11:59 p.m. on or about
August 19, 1995. If, within the initial 15-day waiting period, either the
Antitrust Division or the FTC requests additional information or documentary
material from the Purchaser concerning the Offer, the waiting period will be
extended and would expire 11:59 P.M., New York City time, on the tenth calendar
day after the date of substantial compliance by the Purchaser with such request.
Only one extension of the waiting period pursuant to a request for additional
information is authorized by the HSR Act. Thereafter, the waiting period may be
extended only by court order or with the consent of the Purchaser. In practice,
complying with a request for additional information or documentary material can
take a significant amount of time. In addition, if the Antitrust Division or the
FTC raises substantive issues in connection with a proposed transaction, the
parties frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while the negotiations continue.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of the
Purchaser or its subsidiaries, or the Company or its subsidiaries. Private
parties may also bring legal action under the antitrust laws under certain
circumstances. There can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such a challenge is made, of the
result of that challenge.
16. FEES AND EXPENSES
The Purchaser has retained Georgeson & Company Inc. to act as the
Information Agent, and Chemical to act as the Depositary, in connection with the
Offer. The Information Agent and the Depositary each will receive reasonable and
customary compensation for its services, will be reimbursed for certain
reasonable out-of-pocket expenses and will be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
under the federal securities laws.
Except as set forth above, the Purchaser will not pay any fees or
commissions to any broker or dealer or other person for soliciting tenders of
Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies will be reimbursed by the Purchaser for customary mailing and handling
expenses incurred by them in forwarding the offering materials to their
customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of the jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in that
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser by one or more registered brokers
or dealers that are licensed under the laws of the jurisdiction.
The Purchaser has filed with the Commission the Schedule 14D-1 pursuant to
Rule 14d-1 under the Exchange Act containing certain additional information with
respect to the Offer. The Schedule
30
<PAGE>
and any amendments to the Schedule, including exhibits, may be examined and
copies may be obtained from the principal office of the Commission in the manner
set forth in Section 8 above (except that they will not be available at the
regional offices of the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THE OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
SCHEIN PHARMACEUTICAL, INC.
August 4, 1995
31
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
A. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
The following table sets forth the name, age, present principal occupation
or employment and material occupation, positions, offices or employment for the
past five years of each director and executive officer of the Purchaser. Unless
otherwise indicated below, the address of each director and officer is 100
Campus Drive, Florham Park, New Jersey 07932 and each such person is a citizen
of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME AND BUSINESS ADDRESS AGE EMPLOYMENT HISTORY
------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
Martin Sperber................ 63 Director, Chairman of the Board, President and Chief Executive Officer of
the Purchaser (1985-Present).
James C. McGee................ 49 Director (1989-Present); Executive Vice President and Chief Operating
Officer of the Purchaser since March 1993; formerly President of the
Hospital Division of the Purchaser (1990-1993) and President and Chief
Operating Officer of Steris Laboratories, Inc., a subsidiary of the
Purchaser (1987-1993).
Richard L. Goldberg........... 59 Director (1994-Present); Partner, Proskauer Rose Goetz and Mendelsohn LLP
(1990-Present). Also a director of Anthony Industries, Inc. and Comtech
Telecommunications Corp.
David Ebsworth*............... 41 Director of the Purchaser (1994-Present); President and General Manager,
North American Pharmaceutical Group, Bayer Corporation (1995-Present); and
other senior management positions, Bayer AG (1983-Present)
Kenneth J. Chester............ 49 Senior Vice President -- Sales and Marketing of the Purchaser (May
1995-Present); and also served as Senior Vice President -- Sales
(1989-1995).
Dariush Ashrafi............... 48 Senior Vice President and Chief Financial Officer of the Purchaser (May
1995-Present); formerly Senior Vice President and Chief Financial Officer
of Warnaco, Inc. (1990-May 1995); previously, Audit Partner, Arthur Young
(now, Ernst & Young LLP) (more than five years).
Javier A. Cayado.............. 50 Vice President of the Purchaser and Senior Vice President and General
Manager of Danbury Pharmacal, Inc., a subsidiary of the Purchaser (April
1993-Present); formerly employed at Pfizer Inc. (most recently as General
Manager of Pfizer Pharmaceuticals, Inc., Puerto Rico Operations) (more than
five years).
James Plaza................... 44 Vice President of the Purchaser and Senior Vice President and General
Manager of Steris Laboratories, Inc. (1993-Present); Vice President --
Scientific Operations, Steris Laboratories, Inc. (1987-1992). Member of the
Board of Directors of the University of Arizona.
</TABLE>
------------------------
*Mr. Ebsworth is a citizen of the United Kingdom.
I-1
<PAGE>
B. INITIAL DESIGNEES OF THE PURCHASER TO THE BOARD AFTER THE CONTROL DATE
The following table sets forth the name, age, present principal occupation
or employment and material occupations, positions, offices or employment for the
past five years of each of the initial designees of the Purchaser to the Board
after the Control Date. Unless otherwise indicated below, the address of each
person is: 100 Campus Drive, Florham Park, New Jersey 07932 and each such person
is a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME AND BUSINESS ADDRESS AGE EMPLOYMENT HISTORY
------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
Martin Sperber................ 63 Director, Chairman of the Board, President and Chief Executive Officer of
the Purchaser (1985-Present).
Dariush Ashrafi............... 48 Senior Vice President and Chief Financial Officer of the Purchaser (May
1995-Present); formerly Senior Vice President and Chief Financial Officer
of Warnaco, Inc. (1990-May 1995); previously, Audit Partner, Arthur Young
(now, Ernst & Young LLP) (more than five years).
Paul Feuerman................. 35 General Counsel of the Purchaser (December 1991-Present) and Vice President
(December 1992-Present); formerly Associate, Proskauer Rose Goetz &
Mendelsohn (December 1990-Dec. 1991).
David Ebsworth*............... 41 Director of the Purchaser (1994-Present); President and General Manager,
North American Pharmaceutical Group, Bayer Corporation (1995-Present); and
other senior management positions, Bayer AG (1983-Present).
</TABLE>
------------------------
* Mr. Ebsworth is a citizen of the United Kingdom.
I-2
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each stockholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
THE DEPOSITARY IS:
CHEMICAL BANK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION BY HAND:
Chemical Bank (for Eligible Institutions Chemical Bank
Reorganization Department Only): 120 Broadway, 13th Floor
P.O. Box 817 (201) 296-4293 New York, New York 10271
Midtown Station
New York, New York 10018
CONFIRM BY TELEPHONE:
(201) 296-4209
BY OVERNIGHT DELIVERY:
Chemical Bank
85 Challenger Road
Ridgefield Park, New Jersey
07660
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
GEORGESON & CO., INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
(212) 440-9800
All Others Call Toll Free:
1-800-223-2064
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
MARSAM PHARMACEUTICALS INC.
PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 4, 1995
BY
SCHEIN PHARMACEUTICAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 1, 1995, UNLESS EXTENDED
THE DEPOSITARY FOR THE OFFER:
Chemical Bank
<TABLE>
<S> <C> <C>
BY MAIL BY FACSIMILE TRANSMISSION BY HAND
Chemical Bank (for Eligible Institutions Chemical Bank
Reorganization Department Only): Reorganization Department
P.O. Box 817 (201) 296-4293 120 Broadway
Midtown Station 13th Floor
New York, NY 10018 New York, NY 10271
Confirm by Telephone to BY OVERNIGHT COURIER
(201) 296-4209 Chemical Bank
Reorganization Department
85 Challenger Road
Ridgefield Park NJ 07660
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST
SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW
AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) of Marsam Pharmaceuticals Inc. (the "Stockholders") if
certificates evidencing Shares ("Certificates") are to be forwarded with this
Letter of Transmittal or if delivery of Shares is to be made by book-entry
transfer to an account maintained by Chemical Bank (the "Depositary") at The
Depository Trust Company ("DTC"), Midwest Securities Trust Company ("MSTC") or
Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer
Facility") pursuant to the procedures set forth in section 3 of the Offer to
Purchase (as defined below).
Stockholders whose Certificates are not immediately available or who cannot
deliver either their Certificates for, or a Book-Entry Confirmation (as defined
in section 3 of the Offer to Purchase) with respect to, their Shares and all
other required documents to the Depositary prior to the Expiration Date (as
defined in section 1 of the Offer to Purchase) may tender their Shares according
to the guaranteed delivery procedure set forth in section 3 of the Offer to
Purchase. See Instruction 2 of this Letter of Transmittal. Delivery of documents
to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
<TABLE>
<S> <C>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT
MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY, AND COMPLETE THE FOLLOWING
(ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY
TRANSFER).
Name of Tendering Institution:
Check Box of Book-Entry Transfer Facility:
/ / DTC / / MSTC / / PDTC
Account Number:
Transaction Code Number:
/ / CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF
SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution Which Guaranteed Delivery:
If delivered by book-entry transfer, check box of Applicable Book-Entry Transfer Facility:
/ / DTC / / MSTC / / PDTC
Account Number:
Transaction Code Number:
</TABLE>
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
<CAPTION>
NUMBER OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE SHARES NUMBER OF
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATES REPRESENTED BY SHARES
APPEAR(S) ON THE CERTIFICATE(S)) NUMBER(S) CERTIFICATE(S)(1) TENDERED(2)
<S> <C> <C> <C>
Total Shares
(1) Need not be completed by holders of Shares delivering Shares by Book-Entry Transfer
(2) Unless otherwise indicated, it will be assumed that all Shares represented by Certificates
delivered to the Depositary are being tendered. See Instruction 4.
</TABLE>
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7)
To be completed ONLY if Certificates for Shares not To be completed ONLY if Certificates for Shares not tendered
tendered or not accepted for payment and/or the check for or not accepted for payment and/or the check for the
the purchase price of Shares accepted for payment are to be purchase price of Shares accepted for payment are to be sent
issued in the name of someone other than the undersigned, or to someone other than the undersigned or to the undersigned
if Shares delivered by book-entry transfer that are not at an address other than that shown above.
accepted for payment are to be returned by credit to an
account maintained at a Book-Entry Transfer Facility, other
than to the account indicated above.
Issue (check appropriate box(es): Mail Check/Certificate(s) to:
/ / Check to: Name:
/ / Certificate(s) to: (Please type or print)
Name: Address:
(Please type or
print)
Address: (Tax Identification or Social Security No.)
(Tax Identification or Social Security
No.)
(See Substitute Form W-9)
Credit unpurchased Shares delivered by book-entry
transfer to the Book-Entry Transfer Facility account set
forth below:
/ / DTC / / MSTC / / PDTC
(check one)
(DTC/MSTC/PDTC Account Number)
</TABLE>
<PAGE>
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Schein Pharmaceutical, Inc., a Delaware
corporation (the "Purchaser"), the above-described shares of Common Stock, $.01
par value (the "Shares"), of Marsam Pharmaceuticals Inc., a Delaware corporation
(the "Company"), for $21.00 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated July 28,
1995 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which together constitute the "Offer"). The
undersigned understands that the Purchaser reserves the right to transfer or
assign, in whole or from time to time in part, to one or more of its affiliates,
the right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer or prejudice the rights of tendering holders of the
Shares ("Stockholders") to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares tendered with this Letter of Transmittal in accordance with the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms or conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Purchaser all right, title and interest in and to all of the Shares that are
being tendered hereby and any and all other Shares or other securities issued or
issuable in respect of such Shares on or after August 4, 1995 (a "Distribution")
and irrevocably constitutes and appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares (and
any Distributions), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (i)
deliver Certificates evidencing such Shares (and any Distributions), or transfer
ownership of such Shares (and all Distributions) on the account books maintained
by a Book-Entry Transfer Facility together, in any such case, with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Purchaser, upon receipt by the Depositary, as the undersigned's agent, of
the purchase price with respect to such Shares, (ii) present such Shares (and
any Distributions) for transfer on the books of the Company and (iii) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any Distributions), all in accordance with the terms and subject to
the conditions of the Offer.
The undersigned hereby irrevocably appoints each designee of the Purchaser
as the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to all
Shares tendered hereby and accepted for payment and paid for by the Purchaser
(and any Distributions), including without limitation, the right to vote such
Shares (and any Distributions) in such manner as each such attorney and proxy or
his substitute shall, in his sole discretion, deem proper. All such powers of
attorney and proxies, being deemed to be irrevocable, shall be considered
coupled with an interest in the Shares tendered with this Letter of Transmittal.
Such appointment will be effective when, and only to the extent that, the
Purchaser accepts such Shares for payment. Upon such acceptance for payment, all
prior powers of attorney and proxies given by the undersigned with respect to
such Shares (and any Distributions) will be revoked, without further action, and
no subsequent powers of attorneys and proxies may be given with respect thereto
(and, if given, will be deemed ineffective). The designees of the Purchaser
will, with respect to the Shares (and any Distributions) for which such
appointment is effective, be empowered to exercise all voting and other rights
of the undersigned with respect to such Shares (and any Distributions) as they
in their sole discretion may deem proper. The Purchaser reserves the absolute
right to require that, in order for Shares to be deemed validly tendered,
immediately upon the acceptance for payment of such Shares, the Purchaser or its
designees are able to exercise full voting rights with respect to such Shares
(and any Distributions).
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any Distributions) and that, when the same are accepted for payment
and paid for by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and that the Shares tendered hereby (and any Distributions)
will not be subject to any adverse claim. The undersigned, upon request, will
execute and deliver any additional documents deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of Shares tendered hereby (and any Distributions). In addition, the
undersigned shall promptly remit and transfer to the Depositary for the account
of the Purchaser any and all Distributions issued to the undersigned on or after
August 4, 1995 in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and pending such remittance and transfer
or appropriate assurance thereof, the Purchaser shall be entitled to all rights
and privileges as owner of any such Distributions and may withhold the entire
purchase price or deduct from the purchase price the amount of value thereof, as
determined by the Purchaser in its sole discretion.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in section 3 of the Offer to Purchase and in the
instructions to this Letter of Transmittal will constitute a binding agreement
between the undersigned and the Purchaser with respect to such Shares upon the
terms and subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Purchaser may not be required to accept for payment
any of the Shares tendered hereby or may accept for payment fewer that all of
the Shares tendered hereby.
Unless otherwise indicated in this Letter of Transmittal under "Special
Payment Instructions," please issue the check for the purchase price and/or
return any Certificates evidencing Shares not tendered or not accepted for
payment in the name(s) of the registered holder(s) appearing under "Description
of Shares Tendered." Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price and/or
return any Certificates evidencing Shares not tendered or not accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the "Special Payment Instructions" and the "Special Delivery
Instructions" are completed, please issue the check for the purchase price
and/or return any such Certificates evidencing Shares not tendered or not
accepted for payment (and accompanying documents, as appropriate) in the name(s)
of, and deliver such check and/or return such Certificates (and accompanying
documents, as appropriate) to the person(s) so indicated. Unless otherwise
indicated in this Letter of Transmittal under "Special Payment Instructions," in
the case of a book-entry delivery of Shares, please credit the account
maintained at the Book-Entry Transfer Facility indicated above with respect to
any Shares not accepted for payment. The undersigned recognizes that the
Purchaser has no obligation pursuant to the "Special Payment Instructions" to
transfer any Shares from the name of the registered holder if the Purchaser does
not accept for payment any of the Shares tendered hereby.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on this Letter of Transmittal must be guaranteed by a member firm of a
registered national securities exchange (registered under Section 6 of the
Securities Exchange Act of 1934 (the "Exchange Act")), by a member firm of the
National Association of Securities Dealers, Inc., by a commercial bank or trust
company having an office or correspondent in the United States or by any other
"Eligible Guarantor Institution" (bank, stockholder, savings and loan
association or credit union with membership approved signature guarantee
medallion program) as defined in Rule 17Ad-15 under the Exchange Act (each of
the foregoing constituting an "Eligible Institution"), unless the Shares
tendered hereby are tendered (i) by the registered holder (which term, for
purposes of this document, shall include any participant in a Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of Shares) of such Shares who has completed neither the box entitled "Special
Payment Instructions" nor the box entitled "Special Delivery Instructions" in
this Letter of Transmittal or (ii) for the account of an Eligible Institution.
See Instruction 5. If the Certificates are registered in the name of a person
other than the signer of this Letter of Transmittal, or if payment is to be made
or delivered to, or Certificates evidencing unpurchased Shares are to be issued
or returned to, a person other than the registered owner, then the tendered
Certificates must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the Certificates, with the signatures on the Certificates or
stock powers guaranteed by an Eligible Institution as provided in this Letter of
Transmittal. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed
by Stockholders if Certificates evidencing Shares are to be forwarded with this
Letter of Transmittal or if delivery of Shares is to be made pursuant to the
procedures for book-entry transfer set forth in section 3 of the Offer to
Purchase. For a Stockholder to validly tender Shares pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile), with any required signature guarantees and any other
required documents, must be received by the Depositary at one of its addresses
set forth in this Letter of Transmittal on or prior to the Expiration Date and
either (i) Certificates for tendered Shares must be received by the Depositary
at one of those addresses on or prior to the Expiration Date or (ii) Shares must
be delivered pursuant to the procedures for book-entry transfer set forth in
section 3 of the Offer to Purchase and a Book-Entry Confirmation must be
received by the Depositary on or prior to the Expiration Date or (b) the
tendering Stockholder must comply with the guaranteed delivery procedures set
forth below and in section 3 of the Offer to Purchase.
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary or
complete the procedures for book-entry transfer on or prior to the Expiration
Date may tender their Shares by properly completing and duly executing a Notice
of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth
in section 3 of the Offer to Purchase. Pursuant to such procedure: (i) tender
must be made by or through an Eligible Institution, (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by Purchaser, must be received by the Depositary prior to the
Expiration Date, and (iii) Certificates representing all tendered Shares in
proper form for transfer, or a Book-Entry Confirmation with respect to all the
tendered Shares, together with a Letter of Transmittal (or a manually signed
facsimile), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal, must
be received by the Depositary within three NASDAQ/National Market System trading
days after the date of such Notice of Guaranteed Delivery. If Certificates are
forwarded separately to the Depositary, a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile) must accompany each
delivery.
This method of delivery of Certificates, this Letter of Transmittal and any
other required documents, is at the option and sole risk of the tendering
Stockholder and the delivery will be deemed made only when actually received by
the Depositary. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering Stockholders, by execution of
this Letter of Transmittal (or a facsimile), waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided in this Letter of Transmittal
is inadequate, the information required under "Description of Shares Tendered"
should be listed on a separate signed schedule attached to this Letter of
Transmittal.
4. PARTIAL TENDERS. If fewer than all of the Shares represented by any
Certificates delivered to the Depositary with this Letter of Transmittal are to
be tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered." In such cases, a new Certificate for the
remainder of the Shares that were evidenced by your old certificate(s) will be
sent, without expense, to the person(s) signing this Letter of Transmittal,
unless otherwise provided in the box entitled "Special Payment Instructions" or
the box entitled "Special Delivery Instructions" on this Letter of Transmittal,
as soon as practicable after the Expiration Date. All Shares represented by
certificate(s) delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all the owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or instruments of transfer
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, that person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of that person's authority to so act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on the Certificates or
instruments of transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the Certificate(s) listed and
transmitted hereby, the Certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Certificate(s). Signatures on
the Certificate(s) or instruments of transfer must be guaranteed by an Eligible
Instruction.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or (in the
circumstances permitted hereby) if Certificates for Shares not tendered or not
purchased are to be registered in the name of, any person other than the
registered holder(s), or if tendered Certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
amount of any transfer taxes (whether imposed on the registered holder(s) or
such person) payable on account of the transfer to such person will be deducted
from the purchase priced unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Certificate(s) listed in this Letter of
Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or
Certificates for unpurchased Shares are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if a check is to be sent
and/ or Certificates are to be returned to someone other than the signer of this
Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. If any
tendered Shares are not purchased for any reason and the Shares are delivered by
Book-Entry Transfer Facility, the Shares will be credited to an account
maintained at the appropriate Book-Entry Transfer Facility.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance may be directed to the Information Agent at its address or
telephone number set forth below and requests for additional copies of the Offer
to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or brokers, dealers, commercial banks
and trust companies and such materials will be furnished at Purchaser's expense.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser, in whole or in part, at any time or from time to time, in the
Purchaser's sole discretion.
10. BACKUP WITHHOLDING TAX. Each tendering Stockholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, which is provided under "Important Tax Information" below
and to certify that the Stockholder is not subject to backup withholding.
Failure to provide the information on the Substitute Form W-9 may subject the
tendering Stockholder to 31% federal income tax backup withholding on the
payment of the purchase price for the Shares. The tendering Stockholder should
indicate in the box in Part III of the Substitute Form W-9 if the tendering
Stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the Stockholder has indicated in the box
in Part III that a TIN has been applied for and the Depositary is not provided
with a TIN by the time of payment, the Depositary will withhold 31% of all
payments of the purchase price, if any, made thereafter pursuant to the Offer
until a TIN is provided to the Depositary.
11. LOST OR DESTROYED CERTIFICATES. If any Certificate(s) representing
Shares has been lost or destroyed, the holders should promptly notify the
Company's transfer agent, American Stock Transfer Company. The holders will then
be instructed as to the procedure to be followed in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed Certificates have
been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
(TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY
OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
EXPIRATION DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a Stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payor) with such
Stockholder's correct TIN on Substitute Form W-9 below. If such Stockholder is
an individual, the TIN is his social security number. If the tendering
Stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future, the Stockholder should so indicate on the
Substitute Form W-9. See Instruction 10. If the Depositary is not provided with
the correct TIN, the Stockholder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments that are made to the Stockholder
with respect to Shares purchased pursuant to the Offer may be subject to backup
federal income tax withholding.
Certain Stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that Stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Forms for such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certificates of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the Stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding with respect to payment of
the purchase price for Shares purchased pursuant to the Offer, a Stockholder
must provide the Treasury with his correct TIN by completing the Substitute Form
W-9 below, certifying that the TIN provided on Substitute Form W-9 is correct
(or that the Stockholder is awaiting a TIN) and that (1) the Stockholder has not
been notified by the Internal Revenue Service that he is subject to backup
withholding as a result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified the Stockholder that he is no longer
subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are registered in more than one name or are not
in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report.
IMPORTANT
STOCKHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE
FORM W-9 ON REVERSE
________________________________________________________________________________
(Signature(s) of Stockholder(s))
Dated: _________________________________, 1995
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
the Certificate or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, agents, officers or corporations or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 5.)
Name(s): _______________________________________________________________________
________________________________________________________________________________
(Please type or print)
Capacity (Full Title): _________________________________________________________
(See Instruction 5)
Address: _______________________________________________________________________
________________________________________________________________________________
(Include a Zip Code)
Area code and Telephone Number: ________________________________________________
(Home)
________________________________________________
(Business)
Taxpayer Identification or Social Security No.: ________________________________
(Complete Substitute Form W-9 on Reverse)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
________________________________________________________________________________
(Authorized signature(s))
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Name of Firm)
________________________________________________________________________________
________________________________________________________________________________
(Address Including Zip Code)
________________________________________________________________________________
(Area Code and Telephone Number)
Dated: __________________________________________________________________ , 1995
<TABLE>
<S> <C> <C>
PAYER'S NAME: CHEMICAL BANK
SUBSTITUTE
FORM W-9 PART I--PLEASE PROVIDE YOUR TIN IN PART III--Social Security Number OR
DEPARTMENT OF THE TREASURY THE BOX AT RIGHT AND CERTIFY BY Employer Identification Number
SIGNING AND DATING BELOW
(If awaiting TIN write "Applied
For")
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR PART II--For Payees exempt from backup withholding, see the enclosed
TAXPAYER Guidelines for Certification of Taxpayer Identification Number on
IDENTIFICATION NUMBER (TIN) Substitute Form W-9 and complete as instructed therein
Certifications--Under penalties of perjury, I certify that:
(1) The Number shown on this form is my correct Taxpayer Identification (or I am waiting for a number
to be issued to me); and
(2) I am not subject to backup withholding either because I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or the IRS has notified me that I am no longer subject to backup
withholding.
Certification Instructions--You must cross out item (2) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or dividends on your
tax return. However, if after being notified by the IRS that you are subject to backup withholding,
you receive another notification from the IRS that you were no longer subject to backup withholding,
do not cross out item (2). (Also see instructions in the enclosed guidelines).
SIGNATURE DATE
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number has not
been issued to me, and either (1) I have mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments of the Offer Price made to me thereafter will be withheld until I
provide a number.
Signature ............................... Date ...............................
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
Wall Street Plaza
New York, New York 10005
Call Toll-Free (800) 223-2064
Brokers and Banks, please call collect (212) 440-9800
August 4, 1995
<PAGE>
Chemical Bank
Reorganization Department
P.O. Box 817
Midtown Station
New York, NY 10018
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
MARSAM PHARMACEUTICALS INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 1, 1995, UNLESS EXTENDED.
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates representing
the common stock, $.01 par value (the "Shares"), of Marsam Pharmaceuticals Inc.,
a Delaware corporation, are not immediately available or the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach Chemical Bank (the "Depositary") prior to
the Expiration Date (as defined in the Offer to Purchase). This Notice of
Guaranteed Delivery may be delivered by hand or transmitted by facsimile
transmission or mail to the Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
CHEMICAL BANK
<TABLE>
<S> <C> <C>
BY MAIL BY FACSIMILE TRANSMISSION BY HAND
(for Eligible Institutions
Chemical Bank Only): Chemical Bank
Reorganization Department 201-296-4293 Reorganization Department
P.O. Box 817 120 Broadway
Midtown Station Confirm by Telephone to: 13th Floor
New York, NY 10018 (201-296-4209) New York, NY 10271
BY OVERNIGHT COURIER
Chemical Bank
Reorganization Department
85 Challenger Road
Ridgefield Park, NJ 07660
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions to the Letter of
Transmittal, such signature guarantee must appear in the applicable space
provided in the signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown in this
Notice of Guaranteed Delivery. Failure to do so could result in a financial loss
to the Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Schein Pharmaceutical, Inc., a Delaware
corporation (the "Purchaser"), upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated August 4, 1995 (the "Offer to Purchase"),
and in the related Letter of Transmittal (which together constitute the
"Offer"), receipt of each of which is hereby acknowledged, the number of Shares
indicated below pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares: Names of Record Holder(s):
Certificate Nos. (if available):
(Please type or print)
Check ONE box if Shares will be tendered Address(es):
by book-entry transfer:
/ / DTC (Zip Code)
/ / MSTC
/ / PDTC
Account Number: Area Code and Tel. No.:
Dated: , 1995 Signature(s):
</TABLE>
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as such term is defined in Section
3 of the Offer to Purchase), hereby guarantees to deliver to the Depositary the
certificates representing the Shares tendered hereby, in proper form for
transfer, or a Book-Entry Confirmation (as defined in Section 3 of the Offer to
Purchase) with respect to such Shares, in either case together with a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile), with any required signature guarantees, and any other documents
required by the Letter of Transmittal, all within three NASDAQ/National Market
System trading days after the date hereof.
<TABLE>
<S> <C>
Name of Firm: (Authorized Signature)
Address: Name:
(Please type or print)
Title:
(Zip Code)
Area Code and Tel. No.: Date:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT ONLY TOGETHER WITH YOUR
LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (A)(4)
GEORGESON & COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MARSAM PHARMACEUTICALS INC.
AT
$21.00 NET PER SHARE
BY
SCHEIN PHARMACEUTICAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, SEPTEMBER 1, 1995, UNLESS EXTENDED.
August 4, 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Schein Pharmaceutical, Inc., a Delaware
corporation (the "Purchaser"), to act as Information Agent in connection with
Purchaser's offer to purchase for cash all of the outstanding shares of common
stock, $.01 par value (the "Shares"), of Marsam Pharmaceuticals Inc., a Delaware
corporation (the "Company"), for $21.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated August 4, 1995 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together with the Offer to Purchase constitute the "Offer")
enclosed.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase dated August 4, 1995.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. A letter to stockholders of the Company from Marvin Samson, Chairman
of the Board, President and Chief Executive Officer, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company and mailed to stockholders
of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if neither of the two procedures for tendering Shares set forth in
the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
<PAGE>
7. A return envelope addressed to Chemical Bank, the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 1, 1995, UNLESS THE
OFFER IS EXTENDED.
Please note the following:
1. The tender price is $21.00 per Share, net to the seller in cash.
2. The Offer is subject to there being validly tendered and not
properly withdrawn prior to the expiration of the Offer a majority of the
Shares outstanding on a fully-diluted basis and certain other conditions.
See the Introduction and Sections 1 and 14 of the Offer to Purchase.
3. The Offer is being made for all of the outstanding Shares.
4. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer. However, federal income tax backup
withholding at a rate of 31% may be required, unless an exemption is
provided or unless the required tax identification information is provided.
See Instruction 10 of the Letter of Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, September 1, 1995, unless the Offer is extended.
6. The board of directors of the Company has unanimously determined
that each of the Offer and the Merger (as defined in the Offer to Purchase)
is fair to, and in the best interests of, the Company's stockholders, has
approved the Merger Agreement (as defined in the Offer to Purchase) and the
transactions contemplated by the Merger Agreement, including the Offer and
the Merger, and recommends that the Company's stockholders accept the Offer
and tender all their Shares pursuant to the Offer.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) Certificates pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, or a timely
Book-Entry Confirmation (as defined in the Offer to Purchase) with respect
to such Shares, (b) the Letter of Transmittal (or a manually signed
facsimile), properly completed and duly executed, with any required
signature guarantees, and (c) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering
stockholders at the same time depending upon when Certificates are actually
received by the Depositary.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile) and any
required signature guarantees or other required documents should be sent to the
Depositary and (ii) Certificates representing the tendered Shares or a timely
Book-Entry Confirmation (as defined in the Offer to Purchase) should be
delivered to the Depositary in accordance with the instructions set forth in the
Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may be
effected by following the guaranteed delivery procedures specified in Section 3
of the Offer to Purchase.
The Purchaser will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Shares pursuant to the Offer (other than
the Depositary and the Information Agent as described in the Offer to Purchase).
The Purchaser will, however, upon request, reimburse
2
<PAGE>
you for customary mailing and handling expenses incurred by you in forwarding
any of the enclosed materials to your clients. The Purchaser will pay or cause
to be paid any transfer taxes payable on the transfer of Shares to it, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Georgeson & Company Inc., the Information Agent for the Offer, at Wall Street
Plaza, New York, New York 10005, (212) 440-9800.
Requests for copies of the enclosed materials may also be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
GEORGESON & COMPANY INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE COMPANY, THE DEPOSITARY, THE
INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS
CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MARSAM PHARMACEUTICALS INC.
AT
$21.00 NET PER SHARE
BY
SCHEIN PHARMACEUTICAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 1, 1995, UNLESS EXTENDED.
August 4, 1995
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated August 4,
1995 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by Schein Pharmaceutical,
Inc., a Delaware corporation (the "Purchaser"), to purchase all the outstanding
shares of common stock, $.01 per value (the "Shares"), of Marsam Pharmaceuticals
Inc., a Delaware corporation (the "Company"), at a purchase price of $21.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer. Holders of Shares whose certificates for such Shares
(the "Certificates") are not immediately available or who cannot deliver their
Certificates and all other required documents to the depositary (the
"Depositary") or complete the procedures for book-entry transfer prior to the
Expiration Date (as defined in the Offer to Purchase) must tender their Shares
according to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
Accordingly, we request instruction as to whether you wish to have us tender
on your behalf any or all Shares held by us for your account pursuant to the
terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $21.00 per Share, net to the seller in cash.
2. The Offer is subject to there being validly tendered and not
properly withdrawn prior to the expiration of the Offer a majority of the
Shares outstanding on a fully-diluted basis and certain other conditions.
See the Introduction and Sections 1 and 14 of the Offer to Purchase.
3. The Offer is being made for all of the outstanding Shares.
4. Tendering stockholders will not be obliged to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter
of Transmittal, transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. However, federal income tax backup withholding at a
rate of 31% may be required, unless an exemption is provided or unless the
required taxpayer identification information is provided. See Instruction 10
of the Letter of Transmittal.
<PAGE>
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, September 1, 1995, unless the Offer is extended.
6. The board of directors of the Company has unanimously determined
that each of the Offer and the Merger (as defined in the Offer to Purchase)
is fair to, and in the best interest of, the Company's stockholders, has
approved the Merger Agreement (as defined in the Offer to Purchase) and the
transactions contemplated thereby, including the Offer and the Merger, and
recommends that the Company's stockholders accept the Offer and tender all
of their Shares pursuant to the Offer.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) Certificates pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, or a timely
Book-Entry Confirmation (as defined in the Offer to Purchase) with respect
to such Shares, (b) the Letter of Transmittal (or a manually signed
facsimile), properly completed and duly executed, with any required
signature guarantees, and (c) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering
stockholders at the same time depending upon when Certificates are actually
received by the Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth below. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise specified below. An
envelope to return your instructions to us is enclosed. Your instructions should
be forwarded to us in ample time to permit us to submit a tender on your behalf
prior to the expiration of the Offer.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to be
made on behalf of the Purchaser by one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
COMMON STOCK
OF
MARSAM PHARMACEUTICALS INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated August 4, 1995 and the related Letter of Transmittal in
connection with the offer by Schein Pharmaceutical, Inc., a Delaware corporation
(the "Purchaser"), to purchase all outstanding shares of common stock, par value
$.01 per share ("Shares"), of Marsam Pharmaceuticals Inc., a Delaware
corporation.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to be Tendered*: ____________________________________________
Date: ________________________________________________________________________
______________________________________________________________________________
SIGN HERE
Signature(s): ________________________________________________________________
(Print Name(s)): _____________________________________________________________
(Print Address(es)): _________________________________________________________
(Area Code and Telephone Number(s)): _________________________________________
(Taxpayer Identification or Social Security Number(s)): ______________________
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYOR--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by one
hyphen: i.e., 00-0000000. The table below will help determine the number to give
the payor.
<TABLE>
<C> <S> <C>
------------------------------------------------------------
Give the
SOCIAL
SECURITY
number of--
For this type of account:
------------------------------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner
(joint account) of the account or,
if combined funds,
the first
individual on the
account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable The
savings trust (grantor is grantor-trustee(1)
also trustee)
b. So-called trust account The actual
that is not a legal or valid owner(1)
trust under State law
5. Sole proprietorship The owner(3)
------------------------------------------------------------
Give the
EMPLOYER
IDENTIFICATION
number of--
For this type of account:
------------------------------------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, estate or The legal
pension trust entity(4)
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or
nominee nominee
12. Account with the Department The public entity
of Agriculture in the name of
a public entity (such as a
state or local government,
school district, or prison)
that receives agricultural
program payments
</TABLE>
<TABLE>
<C> <S> <C>
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show your individual name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the valid trust, estate or pension trust.
(Do not furnish the indentifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.)
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER (TIN) ON SUBSTITUTE FORM W-9
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE)
PAGE 2
NAME
If you are an individual, you must generally provide the name shown on your
social security card. However, if you have changed your last name, for instance,
due to marriage, without informing the Social Security Administration of the
name change, please enter your first name, the last name shown on your social
security card, and your new last name.
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN"), apply for one
immediately. To apply, obtain Form SS-5, Application for a Social Security Card,
from your local office of the Social Security Administration, or Form SS-4,
Application for Employer Identification Number, from your local Internal Revenue
Service (the "IRS") office.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in (1)
through (13) and a person registered under the Investment Advisers Act of 1940
who regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except that a corporation
that provides medical and health care services or bills and collects payments
for such services is not exempt from backup withholding or information
reporting.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan ("IRA"), or a custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends generally not subject to backup withholding include the
following:
- Payments to nonresident aliens subject to withholding under
section 1441.
- Payments to partnerships not engaged in a trade or business in
the U.S. and that have at least one nonresident partner.
- Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYOR'S TRADE OR BUSINESS AND YOU HAVE
NOT PROVIDED YOUR CORRECT TIN TO THE PAYOR.
- Payments of tax-exempt interest (including exempt-interest
dividends under section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045,
6049, 6050A, and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE.--Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
qualified to file a tax return. Payors must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
TIN to a payor. Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TIN.--If you fail to furnish your correct TIN to a
requester (the person asking you to furnish your TIN), you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE IRS
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED AUGUST
4, 1995 AND THE RELATED LETTER OF TRANSMITTAL, AND IS BEING MADE TO ALL HOLDERS
OF SHARES. THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR
ON BEHALF OF) HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH THE MAKING OF THE
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS
REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE
DEEMED TO BE MADE ON BEHALF OF SCHEIN PHARMACEUTICAL, INC. BY ONE OR MORE
REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
MARSAM PHARMACEUTICALS INC.
AT
$21 NET PER SHARE
BY
SCHEIN PHARMACEUTICAL, INC.
Schein Pharmaceutical, Inc., a Delaware corporation (the "Purchaser"), is
offering to purchase all outstanding shares of the common stock, $.01 par value
(the "Shares"), of Marsam Pharmaceuticals Inc., a Delaware corporation (the
"Company"), at a price of $21 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
August 4, 1995, and the related Letter of Transmittal (which together constitute
the "Offer").
--------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 1, 1995, UNLESS EXTENDED.
--------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (DEFINED BELOW)
THAT NUMBER OF SHARES THAT WOULD REPRESENT, ON A FULLY DILUTED BASIS, A MAJORITY
OF ALL OUTSTANDING SHARES.
The Offer is being made pursuant to an agreement and plan of merger dated
July 28, 1995 (the "Merger Agreement") among the Purchaser, SM Acquiring Co.,
Inc., a Delaware corporation and a direct wholly-owned subsidiary of the
Purchaser (the "Sub"), and the Company. The Merger Agreement provides, among
other things, that after completion of the Offer and the satisfaction or waiver
of certain conditions, the Purchaser will transfer to the Sub all the Shares
held by it, and the Sub will be merged with and into the Company (the "Merger").
At the effective time of the Merger, each outstanding Share (other than Shares
owned by the Company or any subsidiary of the Company, and Shares owned by the
Purchaser, the Sub or any other subsidiary of the Purchaser, or by stockholders,
if any, who properly exercise their appraisal rights under Delaware law) will be
converted into the right to receive $21 in cash without interest.
Concurrently with the execution of the Merger Agreement, the Purchaser and
the Sub entered into a stockholders agreement dated July 28, 1995 (the
"Stockholders Agreement") with certain stockholders of the Company (the "Selling
Stockholders") owning, in the aggregate, approximately 28% of the Shares.
Pursuant to the Stockholders Agreement, the Selling Stockholders have agreed to
tender pursuant to the Offer and not withdraw an aggregate of 2,871,132 Shares
that are owned of record or beneficially by them plus any Shares issued to them
upon the exercise of outstanding stock options granted to them by the Company
(collectively, the "Founders Shares") or 24% of the Shares calculated on a
fully-diluted basis. Pursuant to the Stockholders Agreement, the Purchaser has
the right to acquire all the Founders Shares under certain circumstances,
including if the Offer is consummated but the Purchaser has not accepted for
payment and paid for the aggregate number of Shares owned by the Selling
Stockholders, or the Offer is terminated by the Purchaser or the Sub due to
failure of certain conditions of the Offer. Such right would be exercisable for
the 30-day period following the occurrence of the events described above.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT EACH OF THE OFFER AND MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY'S STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND MERGER, AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER ALL THEIR
SHARES PURSUANT THERETO.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) tendered Shares as, if and when the
Purchaser gives oral or written notice to the depositary (the "Depositary") of
its acceptance of such Shares for payment. Upon the terms and subject to the
conditions of the Offer, payment for Shares purchased pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering stockholders for the purposes of receiving
payment from the Purchaser and transmitting payment to tendering stockholders
whose Shares have theretofore been accepted for payment. In all cases, payment
for Shares purchased pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares (or a timely
Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with
respect to such Shares), (ii) the Letter of Transmittal (or a manually signed
facsimile), properly completed and duly executed with all required signature
guarantees, and (iii) all other documents required by the Letter of Transmittal.
Under no circumstances will interest be paid on the purchase price for Shares to
be paid by the Purchaser, regardless of any delay in making such payment.
<PAGE>
The term "Expiration Date" shall mean 12:00 midnight, New York City time,
on Friday, September 1, 1995, unless and until the Purchaser, in accordance with
the terms of the Offer and the Merger Agreement, shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended by
the Purchaser, shall expire. Subject to the terms of the Merger Agreement, the
Purchaser expressly reserves the right, at any time, to extend the period of
time during which the Offer is open for a period of no more than ten business
days and thereby delay acceptance for payment of, or payment for, any Shares by
giving oral or written notice of such extension to the Depositary and by making
a public announcement of such extension. The Purchaser shall not have any
obligation to pay interest on the purchase price for tendered Shares whether or
not the Purchaser exercises its right to extend the period of time during which
the Offer is open. Any such extension will be followed by a public announcement
thereof by no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. During any such extension, all
Shares previously tendered and not withdrawn will remain subject to the Offer,
subject to the right of a tendering stockholder to withdraw such stockholder's
Shares. Without limiting the manner in which the Purchaser may choose to make
any public announcement, the Purchaser will have no obligation to publish,
advertise or otherwise communicate any such announcement other than by issuing a
release to the Dow Jones News Service or as otherwise may be required by law.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser,
may also be withdrawn at any time after October 2, 1995. For a withdrawal to be
effective, a written, telegraphic or facsimile transmission notice of withdrawal
must be timely received by the Depositary at its address set forth on the back
cover of the Offer to Purchase. Any such notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder, if different from that of
the person who tendered such Shares. If certificates evidencing Shares have been
delivered or otherwise identified to the Depositary, then prior to the release
of such certificates, the tendering stockholder must also submit the serial
numbers shown on the particular certificates evidencing the Shares to be
withdrawn, and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, as defined in Section 3 of the Offer to Purchase
(except in the case of Shares tendered for the account of an Eligible
Institution). If Shares have been tendered pursuant to the procedure for
book-entry transfer set forth in Section 3 of the Offer to Purchase, the notice
of withdrawal must specify the name and number of the account at the applicable
Book-Entry Transfer Facility (as defined in Section 3 of the Offer to Purchase)
to be credited with the withdrawn Shares. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by the Purchaser, in its sole discretion, whose determination shall be final and
binding on all parties. Any Shares properly withdrawn will be deemed not validly
tendered for purposes of the Offer, but may be tendered at any subsequent time
prior to the Expiration Date by following any of the procedures described in
Section 3 of the Offer to Purchase.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
stockholders. The Offer to Purchase, the related Letter of Transmittal and any
relevant materials will be mailed to record holders of Shares and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the name of whose nominees, appear on the Company's
stockholders list or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares by the Purchaser.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the
Offer to Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase, the Letter of Transmittal and
other tender offer documents may be directed to the Information Agent as set
forth below, and copies will be furnished promptly at the Purchaser's expense.
Questions or requests for assistance also may be directed to the Information
Agent. Neither the Purchaser nor the Sub will pay any fees or commissions to any
broker or dealer or other person (other than the Depositary and the Information
Agent) in connection with the solicitation of tenders of Shares pursuant to the
Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON
& COMPANY INC.
--------------
Wall Street Plaza
New York, New York 10005
Brokers and Banks, please call (212) 440-9800
CALL TOLL FREE: 1-800-223-2064
August 4, 1995
<PAGE>
Exhibit 6
Contact: Suzanne Soderberg (Schein)
(201) 593-5565
Richard A. Baron (Marsam)
(609) 424-5600
SCHEIN PHARMACEUTICAL, INC. TO
ACQUIRE MARSAM PHARMACEUTICALS INC.
FLORHAM PARK, NEW JERSEY, AND CHERRY HILL, NEW JERSEY, JULY 29, 1995 -- Schein
Pharmaceutical, Inc. and Marsam Pharmaceuticals Inc. (NASDAQ:MSAM) today
announced they have entered into a merger agreement. The agreement provides for
the acquisition by Schein of all the outstanding shares of Marsam for
approximately $240 million in cash, or the equivalent of $21 per share.
Schein will make a cash tender offer for all of the outstanding shares of Marsam
common stock. This offer will be subject to a number of conditions, including
that the number of shares tendered equals at least a majority of the Marsam
shares, assuming exercise of all outstanding options, and the expiration of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. The
merger agreement then contemplates that any untendered shares will be converted
into cash at the tender offer price pursuant to a merger as soon as practicable
after the completion of the tender offer.
<PAGE>
Marvin Samson, President and Chief Executive Officer of Marsam, and Agvar
Chemicals Inc., who, in the aggregate, hold approximately 28% of the outstanding
shares of common stock of Marsam, have agreed to tender their shares in the
tender offer and have granted Schein an option to purchase their shares at $21
per share, all in accordance with the terms of such agreement.
Marsam said that its Board of Directors has approved the offer and recommended
its acceptance by stockholders. The tender offer is expected to commence on
Friday, August 4, 1995, and expire at midnight, New York time, on Friday,
September 1, 1995, unless extended. The tender offer will only be made pursuant
to definitive tender offer materials, which will be distributed to Marsam's
stockholders and filed with the Securities and Exchange Commission.
Marvin Samson, who will continue as President and Chief Executive Officer of
Marsam, in announcing the prospective merger, said, "We believe that the
synergies between Marsam and Schein present a unique opportunity for growth in
both organizations. Our complementary strengths and product offerings are
critical success factors in the ever-changing health care environment. Schein's
management shares our vision for the future, and together we have
2
<PAGE>
the expertise and desire to seek out opportunities to make our combined
companies a global leader in the multisource market."
Martin Sperber, Chairman and Chief Executive Officer of Schein Pharmaceutical,
said, "We are excited about the strategic value the combination of our companies
and their management teams will bring us. Both companies share a culture that
promotes excellence, quality service and products, and dedicated teamwork. We
welcome our partners."
Marsam Pharmaceuticals develops, manufacturers and markets high-quality
multisource injectable drug products for the hospital, institutional and home
infusion markets. Based in Cherry Hill, New Jersey, the company employs
approximately 200 people and services customers throughout the United States.
Marsam is the only domestic multisource injectable firm with the ability to
manufacture any type of injectable drug, including penicillins, cephalosporins
and non-antibiotics.
Schein Pharmaceutical, Inc. is one of the leading multisource companies in the
U.S. The company employs over 1,600 people in Florham Park, N.J.; Carmel, N.Y.;
Danbury, Conn.; Phoenix, Ariz.; and Humacao, Puerto Rico; and manufacturers over
400 pharmaceutical products in nearly every therapeutic category. The
3
<PAGE>
company maintains high-quality manufacturing facilities, invests significantly
in product development, and focuses on controlling health care costs through
state-of-the-art production, distribution and competitive pricing of quality
merchandise.
* * *
<PAGE>
CHEMICAL BANK
CHEMICAL SECURITIES INC.
270 Park Avenue
New York, NY 10017
June 6, 1995
Schein Pharmaceutical, Inc.
100 Campus Drive
Florham Park, NJ 07932
Attn: Mr. Martin Sperber
Chairman and Chief Executive Officer
ACQUISITION OF MARSAM
COMMITMENT LETTER
Dear Sirs:
We understand that Schein Pharmaceutical, Inc., a Delaware corporation
(the "Company"), proposes to acquire as described below (the "Acquisition"),
through a special purpose acquisition subsidiary to be organized under the
laws of the State of Delaware ("Acquisition Co."), all the outstanding common
stock (the "Shares") of Marsam Pharmaceuticals Inc. and Subsidiary, a
Delaware corporation ("Marsam"). You have advised us that the Acquisition
will be effected pursuant to a merger agreement (the "Merger Agreement") to
be entered into among the Company, Acquisition Co. and Marsam. The Merger
Agreement will provide that Acquisition Co. will make a cash tender offer
(the "Tender Offer") to acquire up to 100% of the outstanding Shares. Promptly
after the acceptance of Shares pursuant to the Tender Offer, Acquisition Co.
will be merged with and into Marsam (the "Merger") in a transaction in which
each outstanding Share not acquired in the Tender Offer will be converted
into the right to receive the cash price paid in respect of the Shares
purchased in the Tender Offer.
You have advised us that in connection with the Acquisition you will
require the following bank credit facilities in an aggregate principle amount
not to exceed
<PAGE>
2
$350,000,000: (a) pre-Merger facilities (the "Pre-Merger
Facilities") consisting of (i) a senior secured term loan facility (the
"Tender Facility") in the amount of up to $250,000,000 and (ii) a senior
secured revolving credit facility (the "Pre-Merger Revolving Credit
Facility") in an aggregate principal amount up to $100,000,000 and (b)
post-Merger facilities (the "Post-Merger Facilities") consisting of (i) a
senior secured term loan facility (the "Term Facility") in the amount of
$200,000,000 and (ii) a senior secured revolving credit facility (the
"Post-Merger Revolving Facility") in an aggregate principal amount up to
$150,000,000. The Pre-Merger Facilities and the Post-Merger Facilities are
collectively referred to herein as the "Facilities." The Pre-Merger Revolving
Facility and the Post-Merger Revolving Facility are collectively referred to
herein as the "Revolving Facilities."
Chemical Bank ("Chemical") is pleased to advise you of its commitment to
provide the entire amount of the Facilities, and Chemical Securities Inc.
("CSI") is pleased to advise you of its agreement to act as arranger of the
Facilities, in each case upon the terms and subject to the conditions set
forth or referred to herein and in the Summary of Terms and Conditions
attached hereto as Exhibit A (the "Term Sheet"). It is agreed that (a)
Chemical will act as sole administrative agent and collateral agent for the
Facilities and (b) CSI will act as sole arranger of and manager of the
syndication for the Facilities, and that Chemical and CSI will perform all
functions and exercise all authority customarily performed and exercised by
them in such roles. It is further agreed that no additional agents or
arrangers for the Facilities will be appointed except pursuant to our mutual
agreement, PROVIDED that you may without our consent designate a co-agent and
co-arranger (with the respective roles and compensation of Chemical, CSI and
such co-agent and co-arranger to be mutually agreed upon by Chemical, CSI,
such co-agent and co-arranger and you at the time).
Chemical reserves the right, prior to or after execution of definitive
documentation with respect to the Facilities, to syndicate all or part of the
Facilities to one or more financial institutions. It is agreed that no
syndicate lender participating in the Facilities will receive compensation
outside the terms contained herein and in the Fee Letter referred to below in
order to obtain its commitment to participate in this financing. You acknowledge
that CSI may commence syndication efforts
VE
<PAGE>
3
promptly after the execution of this Commitment Letter and you agree actively to
assist CSI in achieving a syndication which is satisfactory to it.
Specifically, such assistance shall include your using your best efforts to seek
to ensure that CSI's syndication efforts benefit materially from your lending
relationships and the lending relationships of your controlled affiliates and
Marsam. This will be accomplished by a variety of means, including direct
contact during the syndication between your senior management and the proposed
syndicate lenders, assistance in the preparation of a confidential information
memorandum and the hosting, with CSI, of a meeting or meetings with proposed
syndicate lenders. You will also use your best efforts to have senior
management of Marsam participate in such meeting or meetings.
As consideration for Chemical's commitment hereunder and CSI's agreement
to manage the syndication of the Facilities, you agree to pay the fees set forth
in the Fee Letter dated the date hereof (the "Fee Letter"). Once paid, such
fees shall not be refundable under any circumstances (except to correct errors
in payment).
To assist CSI in its syndication efforts, you agree promptly to provide,
and to cause your advisors to provide, CSI and the other syndicate lenders upon
request with all information reasonably deemed necessary by them to complete
successfully the syndication, including but not limited to all information and
projections prepared by you or your advisors on your behalf or by Marsam's
management relating to the transactions described herein. You hereby represent
and covenant that (a) to the best of the knowledge of your senior management,
all information (excluding financial projections) prepared by you (the
"Information") which is or has been made available to Chemical or CSI by you or
any of your authorized representatives in connection with the transactions
contemplated hereby is complete and correct in all material respects and does
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not misleading
in light of the circumstances under which such statements are made and (b) all
financial projections (the "Projections") that are or have been prepared by you
and made available to Chemical or CSI have been or will be prepared in good
faith based upon reasonable assumptions. In arranging and syndicating the
Facilities, CSI will be using and relying on the Infor-
<PAGE>
4
mation and the Projections without independent verification thereof.
Chemical's commitment hereunder is subject to (a) the execution by the
Company, Acquisition Co. and Marsam of a Merger Agreement reasonably
satisfactory in form and substance to Chemical and Chemical's reasonable
satisfaction in all respects with the structure and terms of the Acquisition,
the Tender Offer and the Merger, (b) Chemical's completion of, and its
satisfaction in all respects with the results of, its due diligence
investigation with respect to Marsam and its subsidiaries, (c) the negotiation
of definitive documentation with respect to the Facilities satisfactory in all
respects to Chemical, (d) there not occurring or becoming known any material
adverse condition affecting, or any material adverse change with respect to, the
business, condition (financial or otherwise), operations, assets, liabilities or
prospects of the Company and its subsidiaries (including, following the Merger,
Marsam and its subsidiaries), taken as a whole, (e) there not existing any
litigation or administrative proceedings or any other legal or regulatory
development, actual or threatened, that, in Chemical's reasonable judgment, (i)
would be reasonably likely to result in a material adverse effect on the
business, condition (financial or otherwise) operations, assets, liabilities or
prospects of the Company and its subsidiaries (including, following the Merger,
Marsam and its subsidiaries), taken as a whole, or on the rights, remedies and
benefits available to Chemical and the other Lenders under the loan documents,
(ii) would be materially likely to result in any material restriction or
limitation on the transactions contemplated by the Merger Agreement or (iii)
would be materially inconsistent with the assumptions underlying the
Projections, (f) the acquisition in the Tender Offer of Shares sufficient on a
fully diluted basis to enable the Company, acting alone, promptly to effect all
necessary shareholder approvals and cause the Merger to occur in the accordance
with applicable law and the charter and by-laws of Marsam, (g) the sources and
uses of funds in connection with the Acquisition being consistent with the
schedule of sources and uses dated June 6, 1995, heretofore delivered by you to
Chemical and (h) the other conditions set forth in the Term Sheet.
Chemical's commitment hereunder is further subject to (a) there not having
occurred and being continuing a material disruption of or material adverse
change in financial, banking or capital market conditions since the
<PAGE>
5
date hereof that, in CSI's reasonable judgment, would be reasonably likely to
have a material adverse effect on the syndication of the Facilities and (b)
CSI's satisfaction that, prior to and during the syndication of the Facilities,
there shall be no issues of debt securities, issues of equity securities or bank
credit facilities of the Company or its subsidiaries, or Marsam and its
subsidiaries, being offered, placed or arranged in the financial, banking or
capital markets. The terms and conditions of Chemical's commitment hereunder and
of the Facilities are not limited to those set forth herein, and matters that
are not covered by or made clear under the provisions hereof are subject to
the approval and agreement of Chemical and you.
By executing this letter agreement, you agree (i) to indemnify and hold
harmless each of Chemical, CSI and the syndicate lenders and their respective
officers, directors, employees, affiliates and controlling persons from and
against any and all losses, claims, damages and liabilities to which any such
person may become subject arising out of or in connection with this Commitment
Letter, the Facilities or the loans thereunder, the use of any proceeds of such
loans, the Acquisition or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing, regardless of
whether any of such indemnified parties is a party thereto, and to reimburse
each of such indemnified parties upon demand for any reasonable legal or other
expenses incurred in connection with investigating or defending any of the
foregoing; PROVIDED that the foregoing indemnity will not, as to any indemnified
party, apply to losses, claims, damages, liabilities or related expenses to the
extent they are found by a final decision of a court of competent jurisdiction
to have resulted from the wilful misconduct or gross negligence of such
indemnified party; and (ii) to reimburse each of Chemical and CSI from time to
time for all reasonable out-of-pocket expenses (including expenses of their due
diligence investigation, syndication expenses, travel expenses and reasonable
fees, disbursements and other charges of counsel, consultants and advisors
retained by them) incurred in connection with the Facilities and the preparation
of this Commitment Letter, the Term Sheet, the Fee Letter, the definitive
documentation for the Facilities and the security arrangements in connection
therewith. The provisions contained in this paragraph shall remain in full force
and effect regardless of whether definitive financing documentation shall be
executed and delivered and notwith-
<PAGE>
6
standing the termination of the Commitment Letter or the commitment hereunder.
You agree that you will not disclose this Commitment Letter, the Term
Sheet, the Fee Letter, the contents of any of the foregoing or the activities of
Chemical or CSI pursuant hereto or thereto to any person without the prior
approval of Chemical (which shall not be unreasonably withheld), except that
(a) you may disclose this Commitment Letter, the Term Sheet, the Fee Letter and
the contents hereto and thereof (i) to your officers, directors, employees,
attorneys and advisors on a confidential and need-to-know basis and (ii) as
required by applicable law or compulsory legal process and (b) you may disclose
this Commitment Letter and the Term Sheet and the contents hereof and thereof
and the existence of the Fee Letter on a confidential basis to Marsam and its
attorneys and advisors on a confidential and need-to-know basis in connection
with the transactions contemplated hereby, it being expressly understood and
agreed that neither the Fee Letter nor the contents thereof may be so disclosed
pursuant to this clause (b). The provisions contained in this paragraph shall
remain in full force and effect notwithstanding the termination of this
Commitment Letter or Chemical's commitment hereunder.
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
signing in the appropriate spaces provided below and in the Fee Letter and
returning to us the enclosed duplicate originals of this Commitment Letter and
the Fee Letter, together with the amounts agreed upon pursuant to the Fee Letter
to be payable upon your acceptance hereof, no later than 5:00 p.m., New York
City time, on June 8, 1995. Chemical's commitment hereunder will expire at such
time in the event Chemical has not received such executed duplicate originals
and such amounts in accordance with the immediately preceding sentence. In the
event that the definitive agreement for the Acquisition is not executed on or
before July 31, 1995, then this Commitment Letter and the commitment and
agreements contained herein shall in any event terminate, unless Chemical and
CSI shall agree to an extension. In the event that the initial borrowing under
the Facilities does not occur on or before October 31, 1995, then this
Commitment Letter and the commitment and agreements contained herein shall in
any event terminate, unless Chemical and CSI shall agree to an extension. The
Company
<PAGE>
7
may terminate the commitment of Chemical hereunder at any time by written notice
to Chemical. The compensation, reimbursement, indemnification and
confidentiality provisions contained herein and in the Fee Letter shall survive
any termination hereof.
This Commitment Letter may be executed in any number of counterparts, each
of which shall be an original and all of which, when taken together, shall
constitute one agreement. Delivery of an executed counterpart of a signature
page of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart. This Commitment Letter is intended
to be solely for the benefit of the parties hereto and is not intended to confer
any benefits upon, or create any rights in favor of, any person other than the
parties hereto. This
<PAGE>
8
Commitment Letter shall be governed by, and construed in accordance with, the
laws of the State of New York.
Chemical and CSI are pleased to have been given the opportunity to
participate in the financing of the Acquisition.
Very truly yours,
CHEMICAL BANK,
by
/s/ Suzanne Hammett
--------------------------
Name: Suzanne Hammett
Title: M.D.
CHEMICAL SECURITIES INC.,
by
/s/ Carol J. Burt
--------------------------
Name: Carol J. Burt
Title: M.D.
Accepted and agreed to
as of the date first
written above:
SCHEIN PHARMACEUTICAL, INC.,
by
----------------------------------
Name:
Title:
<PAGE>
CONFIDENTIAL EXHIBIT A
ACQUISITION OF MARSAM
SUMMARY OF TERMS AND CONDITIONS
SENIOR SECURED CREDIT FACILITIES
BORROWER: Schein Pharmaceutical, Inc., a Delaware corporation
(the "Company").
ACQUISITION: The Company proposes to acquire as described below (the
"Acquisition"), through a special purpose acquisition
subsidiary to be organized under the laws of the State
of Delaware ("Acquisition Co."), all the outstanding
common stock (the "Shares") of Marsam Pharmaceuticals
Inc. and Subsidiary, a Delaware corporation ("Marsam").
The Acquisition will be effected pursuant to a merger
agreement (the "Merger Agreement") to be entered into
among the Company, Acquisition Co. and Marsam. The
Merger Agreement will provide that Acquisition Co. will
make a cash tender offer (the "Tender Offer") to
acquire up to 100% of the outstanding Shares. Promptly
after the acceptance of Shares pursuant to the Tender
Offer, Acquisition Co. will be merged with and into
Marsam (the "Merger") in a transaction in which each
outstanding Share not acquired in the Tender Offer will
be converted into the right to receive the cash price
paid in respect of the Shares purchased in the Tender
Offer.
GUARANTEES: The Facilities will be unconditionally guaranteed (the
"Guarantees") by each existing and subsequently acquired
or organized domestic subsidiary of the Company
(including Acquisition Co. and
<PAGE>
2
Marsam) and (subject to standards to be agreed between
the Company and Chemical Bank) each such foreign
subsidiary.
FACILITIES AND $350,000,000 of credit facilities, consisting of:
FACILITY AMOUNTS:
A. PRE-MERGER FACILITIES
TENDER FACILITY: Senior Secured Tender Offer
Facility in an aggregate principal amount of
$250,000,000 (the "Tender Facility").
REVOLVING FACILITY: Senior Secured Revolving
Credit Facility in an aggregate principal amount
of $100,000,000 (the "Pre-Merger Revolving
Facility").
B. POST-MERGER FACILITIES
TERM FACILITY: Senior Secured Term Loan Facility
in an aggregate principal amount of $250,000,000
(the "Term Facility").
REVOLVING FACILITY: Senior Secured Revolving
Credit Facility in an aggregate principal amount of
$100,000,000 (the "Post-Merger Revolving
Facility").
Amounts to be agreed upon of the Post-Merger Revolving
Facility will be available as letter of credit
facilities.
The Pre-Merger Facilities and the Post-Merger Facilities
are collectively referred to as the "Facilities". The
Pre-Merger Revolving Facility and the Post-
<PAGE>
3
Merger Revolving Facility are collectively referred to
as the "Revolving Facilities".
PURPOSE: The proceeds of the Facilities will be used for the
purposes set forth below and in the table of sources and
and uses dated June 6, 1995, heretofore furnished to the
Lenders:
A. TENDER FACILITIES
The proceeds of the Tender Facility and a portion to
be agreed of the Pre-Merger Revolving Facility will
be used by Acquisition Co. to finance the
acquisition of shares of Marsam in the Tender Offer
to pay related fees and expenses and to refinance
existing debt of the Company.
The remaining portion of the Pre-Merger Revolving
Facility will be available to provide working
capital for the Company and its subsidiaries and
for other general purposes.
B. POST-MERGER FACILITIES
The proceeds of the Term Facility and a portion of
the Post-Merger Revolving Facility will be used to
finance the consideration payable in the Merger, to
refinance the Tender Facility and to refinance
certain existing debt of Marsam.
The remaining portion of the Post-Merger Revolving
Facility will be available to provide working
capital for the
<PAGE>
4
Company and its subsidiaries (including Marsam) and
for other general corporate purposes.
ADMINISTRATIVE Chemical Bank ("Chemical") will act as sole and
AGENT: exclusive Administrative Agent for a syndicate of
lenders (the "Lenders"), and will perform the duties
customarily associated with such role, PROVIDED that you
may without Chemical's consent designate a co-agent
(with the respective roles and compensation of Chemical
and such co-agent to be mutually agreed upon by the
Company, such co-agent and Chemical at the time).
ARRANGER: Chemical Securities Inc. will act as sole and exclusive
Arranger for the Facilities and will manage the
syndication of the Facilities, PROVIDED that you may
without CSI's consent designate a co-arranger (with the
respective roles and compensation of CSI and such co-
arranger to be mutually agreed upon by the Company, such
co-arranger and CSI at the time).
FINAL MATURITY AND (A) The Pre-Merger Facilities will mature on the earlier
AMORTIZATION: of (i) the date of consummation of the Merger (the
"Merger Date") and (ii) the 270th day following the
initial funding of the Tender Facility (the "Closing
Date").
(B) The Term Facility will mature on a date to be
agreed, between the sixth and seventh anniversaries of
the Merger Date. Amounts outstanding under the Term
Facility will amortize in amounts to be agreed upon.
<PAGE>
5
(C) The Post-Merger revolving Facility will mature on
a date to be agreed, between the sixth and seventh
anniversaries of the Merger Date. The commitments under
the Post-Merger Revolving Facility will step down in
amounts and at times to be agreed upon.
AVAILABILITY: A. PRE-MERGER FACILITIES
Loans under the Tender Facility will be available
upon the acceptance of Shares pursuant to the Tender
Offer. Amounts borrowed under the Tender Facility
that are repaid or prepaid may not be reborrowed.
Loans under the Pre-Merger Revolving Facility will
be available on and after the acceptance of Shares
pursuant to the Tender Offer and prior to the
maturity of such Facility. Except as otherwise
provided herein or in the definitive credit
documentation, amounts repaid under the Pre-Merger
Revolving Facility may be reborrowed.
B. POST-MERGER FACILITIES
Loans under the Term Facility will be available from
and including the Merger Date to and including the
120th day following the Merger Date. Amounts
borrowed under the Term Facility that are repaid or
prepaid may not be reborrowed.
Loans under the Post-Merger Revolving Facility will
be available on and after the
<PAGE>
6
Merger Date and prior to the maturity of such
Facility. Except as otherwise provided herein or in
the definitive credit documentation, amounts repaid
under the Post-Merger Revolving Facility may be
reborrowed.
LETTERS OF CREDIT: Letters of credit under the Post-Merger Revolving
Facility will be issued by a fronting bank acceptable
to the Administrative Agent and the Company (the
"Fronting Bank"). Each letter of credit shall expire no
later than the earlier of (a) one year after its date
of issuance and (b) five business days prior to the
final maturity of the applicable Facility.
Drawings under any letter of credit shall be reimbursed
by the Company on the same business day. To the extent
that the Company does not reimburse the Fronting Bank
on the same business day, the Lenders under the Post-
Merger Revolving Facility shall be irrevocably
obligated to reimburse the Fronting Bank pro rata based
upon their respective Post-Merger Revolving Facility
commitments.
The issuance of all letters of credit shall be subject
to the customary procedures of the Fronting Bank.
INTEREST RATES AND Interest rates and fees in connection with the
FEES: Facilities will be as specified on Annex I attached
hereto.
SECURITY: The Facilities and the related Guarantees will be
secured by (a) a perfected first priority lien on,
<PAGE>
7
and pledge of, all the common stock of Marsam owned
directly or indirectly by the Company and all the common
stock of each existing and subsequently acquired or
organized subsidiary of the Company (including,
following the Merger, subsidiaries of Marsam) that is a
guarantor and 65% of the common stock of foreign,
non-guarantor subsidiaries, and (b) perfected first
priority liens on, and security interests in, all
property and assets, real and personal, tangible and
intangible, including all property, plant and equipment,
intellectual property, receivables and inventory of the
Company and each existing and subsequently acquired or
organized domestic subsidiary of the Company (including,
following the Merger, Marsam and each subsidiary of
Marsam), other than immaterial assets to be agreed.
All the above-described pledges and security interests
shall be created on terms, and pursuant to documentation
satisfactory to the Lenders, and none of the Collateral
shall be subject to any other pledges or security
interests (other than customary exceptions).
MANDATORY The Facilities will be prepaid with (a) a percentage to
PREPAYMENTS: be agreed upon of excess cash flow (to be defined), (b)
percentages to be agreed upon of the net proceeds of (i)
the issuance, incurrence or disposition of certain
indebtedness, (ii) certain non-ordinary course asset
sales and (iii) certain condemnation or insurance
proceeds, and (c) a percentage to be agreed upon
(subject to a leverage test) of the
<PAGE>
8
net proceeds of any issuance of equity securities.
All mandatory prepayments will be allocated, first,
to the Term Facility in a manner to be agreed upon.
VOLUNTARY PREPAY- (A) Borrowings under the Term Facility will be
MENTS/REDUCTIONS permitted to be prepaid in whole or in part at the
IN COMMITMENTS: option of the Company, in minimum principal amounts
to be agreed upon, without premium or penalty,
subject to reimbursement of the Lenders' redeployment
costs in the case of a prepayment of Adjusted LIBOR
borrowings other than on the last day of the relevant
Interest Period. All voluntary prepayments under the
Term Facility will be allocated in a manner to be agreed
upon.
(B) Voluntary reductions of the unutilized portion of
the Revolving Facility commitments and voluntary
prepayments of loans under the Revolving Facilities will
be permitted at any time, in minimum principal amounts
to be agreed upon, without premium or penalty, subject
to reimbursement of Lenders' redeployment costs in the
case of a prepayment of Adjusted LIBOR borrowings other
than on the last day of the relevant interest period.
CONDITIONS TO The effectiveness of the Facilities and the initial
EFFECTIVENESS AND borrowings thereunder shall be subject to conditions
TO INITIAL precedent that are usual for facilities and
BORROWING: transactions of this type, to those specified below
or in the Commitment Letter and to such additional
conditions precedent as may be required by the
Administrative Agent (all such conditions to be
satisfied in a
<PAGE>
9
manner satisfactory in all respects to the
Administrative Agent), including but not limited to
execution and delivery of definitive documentation
acceptable in form and substance to the Lenders,
delivery of borrowing certificates and legal opinions,
delivery of financial statements, receipt of valid
security interests as contemplated hereby, accuracy of
representations and warranties, absence of defaults,
absence of litigation relating to the Acquisition that
would reasonably be expected to have a material adverse
effect on the Company or the rights, remedies or
interests of the Lenders and other material litigation,
evidence of authority, receipt of governmental and other
necessary approvals and satisfaction of applicable
waiting periods (including those under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976), receipt of
all required consents of any other person, compliance
with laws and regulations (including, in connection with
the security arrangements contemplated hereby, the
Federal Reserve margin regulations), maintenance of
adequate insurance and payment of fees.
The Lenders shall be reasonably satisfied with the
terms of the Merger Agreement (including provisions
relating to any shareholder rights plan or other
defensive measures of Marsam), the Tender Offer and the
Merger and shall be satisfied that such terms, and the
legal, tax and accounting consequences of the
Acquisition, shall be consistent with the schedule of
sources and uses dated
<PAGE>
10
June 6, 1995, and the projections heretofore
furnished to them. All conditions to the purchase of
shares in the Tender Offer shall have been satisfied
without giving effect to any waiver or amendment thereof
not approved by the Lenders, and the Company shall have
acquired pursuant to the Tender Offer a number of
Shares which, on a fully diluted basis, shall be
sufficient to enable the Company, acting alone, promptly
to effect shareholder approval of the Merger under
applicable law and the charter and by-laws of Marsam.
The consummation of the Tender Offer and the other
transactions contemplated hereby shall not (a) violate
any applicable law, statute, rule or regulation or
(b) conflict with, or result in a default or event of
default under, any agreement of the Company, Marsam or
any of their respective subsidiaries that will be in
effect following consummation of the Acquisition, and
the Lenders shall have received one or more legal
opinions to such effect, satisfactory to the Lenders,
from counsel to the Company.
The Lenders shall be satisfied that, so long as the
Shares constitute "margin stock", at the time of any
borrowing, 50% of the market value of the Shares held
by the Company or Acquisition Co., together with the
good faith loan value of all other collateral for the
Facilities, shall exceed the amounts outstanding under
the Facilities.
No change, and no development or event involving a
prospective
<PAGE>
11
change, in respect of assets, capitalization, corporate
structure, securities, condition (financial or
otherwise), prospects or results of operations of the
Company or Marsam shall have occurred which is deemed by
the Lenders, in their good faith judgment, to involve a
reasonable likelihood of a material adverse effect on
the creditworthiness of the Company and its subsidiaries
(including, after the Merger, Marsam and its
subsidiaries), taken as a whole, the ability of the
parties to consummate the Tender Offer or the Merger or
to perform their obligations under the loan documents or
the Merger Agreement or on the validity or
enforceability of such agreements or the rights,
remedies or benefits available to the Lenders
thereunder.
The Lenders shall have received a customary collateral
review, reasonably satisfactory in form and substance to
the Administrative Agent.
The Lenders shall have completed their environmental due
diligence investigation of the Company, Marsam and their
respective subsidiaries, and the Lenders shall not have
become aware of any environmental liabilities that
would reasonably be expected to have a material adverse
effect on the Company or the rights, remedies
or interests of the Lenders.
The Lenders shall be reasonably satisfied as to the
amount and nature of any employee health and safety and
pension benefit plan exposures and liabilities to which
<PAGE>
12
the Company and Marsam and their respective subsidiaries
may be subject, and their plans with respect thereto.
There shall be no governmental or judicial action,
actual or threatened, that is reasonably likely to
restrain, prevent or impose materially burdensome
conditions on the transactions contemplated hereby.
The Lenders shall have received (a) satisfactory pro
forma consolidated balance sheets of the Company, Marsam
and their respective subsidiaries after giving effect to
the transactions contemplated hereby and (b)
satisfactory consolidated income statement projections,
consolidated cash flow projections, consolidated balance
sheet projections and related assumptions for the
Company for each year until the final maturity of the
Facilities, after giving effect to the transactions
contemplated hereby; and the Lenders shall be satisfied
that such balance sheets and projections are not
materially inconsistent with the projections heretofore
furnished to them.
There shall be additional conditions precedent to the
initial borrowings under the Post-Merger Facilities that
(a) the Merger shall have been, or simultaneously
therewith shall be, consummated in accordance with
applicable law and the terms of the Merger Agreement
(and without giving effect to any waiver or amendment
not approved by the Lenders), (b) arrangements
satisfactory to the Lenders shall have been made for the
prepayment
<PAGE>
13
or redemption of certain existing debt of Marsam and (c)
the Lenders shall be satisfied that, immediately prior
to such initial borrowings, Marsam and its subsidiaries
shall not have any material indebtedness other than debt
approved by, and having terms satisfactory to, the
Lenders.
The Lenders shall have received a solvency letter from
an independent valuation firm satisfactory to the
Lenders, confirming the solvency of the Company after
giving effect to the Tender Offer and the Merger.
CONDITIONS TO Each borrowing and each issuance of a letter of credit
SUBSEQUENT under the Facilities shall be subject to the conditions
BORROWINGS: precedent that (a) the representations and warranties
set forth in the credit agreement shall be true and
correct in all material respects on and as of the date
of such borrowing or issuance and (b) no default or
event of default shall have occurred and be continuing
on the date of such borrowing or issuance.
REPRESENTATIONS The usual for facilities and transactions of this type
AND WARRANTIES and such additional representations and warranties as
may be required by the Administrative Agent, including
but not limited to no Default or Event of Default;
absence of material adverse change; accuracy of
financial statements (including pro forma financial
statements); absence of undisclosed liabilities;
compliance with Federal Reserve margin regulations;
compliance with laws (including environmental laws,
relevant healthcare regulations and ERISA); solvency;
absence of conflicts; organization, power and
<PAGE>
14
good standing; inapplicability of the Investment Company
Act of 1940 and the Public Utility Holding Company Act
of 1935; payment of taxes; ownership of properties;
validity of security documents; and absence of other
liens and security interests.
AFFIRMATIVE The usual for facilities and transactions of this type
COVENANTS: and such additional covenants as may be required by the
Administrative Agent, including but not limited to
maintenance of corporate existence and rights;
compliance with laws; performance of obligations;
maintenance of properties in good repair; maintenance
of appropriate and adequate insurance; inspection of
books and properties; payment of taxes and other
liabilities; notice of defaults, litigation and other
adverse action; delivery of financial statements and
compliance certificates; and further assurances.
NEGATIVE COVENANTS: The usual for facilities and transactions of this type
and such others as may be required by the Administrative
Agent, including but not limited to limitations on
dividends, redemptions and repurchases of capital stock;
limitations on capital expenditures; limitations on
liens and sale-leaseback transactions; limitations on
loans and investments; limitations on indebtedness;
limitations on operating leases; limitations on mergers,
acquisitions and asset sales; limitations on
transactions with stockholders and affiliates;
limitations on changes in business conducted;
limitations on amendment of and on prepayment,
redemption or
<PAGE>
15
repurchase of other indebtedness; and limitations on
amendment or termination of material agreements.
FINANCIAL COVENANTS: The usual for facilities and transactions of this type
and others to be specified by the Administrative Agent,
including but not limited to maximum total debt to
EBITDA and senior debt to EBITDA (including a covenant
that the ratio of senior debt to EBITDA will be reduced
to a mutually satisfactory level within 30 months),
minimum net worth, minimum working capital and minimum
fixed charge coverage.
EVENTS OF DEFAULT: The usual for facilities and transactions of this type
and others to be specified by the Administrative Agent,
including but not limited to nonpayment of principal,
interest, fees or other amounts when due; violation of
covenants; failure of any representation or warranty to
be true in all material respects; cross-default and
cross-acceleration; change in control; bankruptcy
events; material judgments; ERISA; and invalidity of
loan documents or security interests.
YIELD PROTECTION The usual for facilities of this type, including but not
AND INCREASED COSTS: limited to compensation in respect of redeployment
costs, reserve requirements, taxes (including gross-up
provisions for withholding taxes) and decreased
profitability resulting from U.S. or foreign capital
adequacy requirements, guidelines or policies or their
interpretation or application, whether or not having the
force of law, and any other customary yield
<PAGE>
16
and increased cost protection deemed appropriate by the
Administrative Agent to provide customary protection for
U.S. and non-U.S. banks. The Company will have the right
to require any Lender claiming compensation under these
provisions to assign its loans and commitments to
another financial institution designated by the Company
and reasonably satisfactory to the Administrative Agent.
ASSIGNMENT AND Lenders will be permitted to participate and assign
PARTICIPATIONS: loans and commitments. Assignments by novation will be
permitted with the consent of the Company, which shall
not be unreasonably withheld (except that assignments to
another Lender or one of its affiliates or to a Federal
Reserve Bank will not require the Company's consent).
Assignees will assume all the rights and obligations of
the assigning Lender. Each assignment (other than to
another Lender or one of its affiliates) will be in a
minimum amount of $10,000,000. Assignments of
commitments need not be pro rata among the Facilities.
Participations will be without restriction and
participants will have the same benefits as the original
syndicate Lenders with regard to yield protection and
increased costs (except that a participant shall not be
entitled to such protections in amounts greater than the
applicable participating Lender), rights in the
collateral and provision of information on the Company,
Marsam and their respective subsidiaries. Voting rights
of participants will be limited to proposed increases in
amount, certain releases of
<PAGE>
17
collateral, decreases in interest rates or fees and
extensions of scheduled principal payments. Any
assignment will require payment of a $3,500 service fee
to the Administrative Agent.
REQUIRED LENDERS: Lenders holding a majority, in aggregate, of loans and
commitments.
EXPENSES AND All out-of-pocket expenses of the Administrative Agent
INDEMNIFICATION and the Arranger (and the Lenders for enforcement costs
and documentary taxes) associated with the performance
of due diligence by the Administrative Agent and the
Arranger, the syndication of the Facilities (including
but not limited to printing, duplicating, mailing and
similar expenses) and the preparation, execution and
delivery, waiver or modification, and enforcement of the
definitive credit documentation contemplated hereby
(including the reasonable fees, disbursements and other
charges of counsel, consultants and advisors for the
Administrative Agent and the Arranger) are to be paid
by the Company.
The Company will indemnify Chemical and the other
Lenders and hold them harmless from and against all
costs, expenses (including fees, disbursements and other
charges of counsel) and liabilities arising out of or
relating to any litigation or other proceeding
(regardless of whether Chemical or any such other Lender
is a party thereto) that relate to the proposed
transactions or any transactions related thereto,
provided that no Lender will be
<PAGE>
18
indemnified for its gross negligence or wilful
misconduct.
GOVERNING LAW New York.
AND FORUM:
COUNSEL TO Cravath, Swaine & Moore.
ADMINISTRATIVE AGENT
AND ARRANGER:
<PAGE>
Exhibit 1
AGREEMENT AND PLAN OF MERGER
AMONG
SCHEIN PHARMACEUTICAL, INC.,
SM ACQUIRING CO., INC.
AND
MARSAM PHARMACEUTICALS INC.
Dated July 28, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Company Actions. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Stockholder Lists. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Consummation of the Merger . . . . . . . . . . . . . . . . . . . . 5
2.3 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Certificate of Incorporation and By-laws . . . . . . . . . . . . . 5
2.5 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Conversion of Common Stock of the Sub. . . . . . . . . . . . . . . 6
2.8 Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Merger Without Meeting of Stockholders . . . . . . . . . . . . . . 6
2.10 Withholding Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Dissenting Shares; Payment For Shares; Options. . . . . . . . . . . . . 7
3.1 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Payment for Shares . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Closing of the Company's Transfer Books. . . . . . . . . . . . . . 9
3.4 Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. Representations and Warranties of the Company . . . . . . . . . . . . . 9
4.1 Organization and Qualification . . . . . . . . . . . . . . . . . . 9
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Authority for this Agreement . . . . . . . . . . . . . . . . . . . 11
4.4 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . 12
4.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Consents and Approvals; No Violation . . . . . . . . . . . . . . . 13
4.7 Regulatory Compliance. . . . . . . . . . . . . . . . . . . . . . . 13
4.8 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . 14
4.9 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Environmental Compliance. . . . . . . . . . . . . . . . . . . . . 18
4.13 Delaware Takeover Statute Inapplicable. . . . . . . . . . . . . . 19
4.14 Required Vote of Company Stockholders . . . . . . . . . . . . . . 20
4.15 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5. Representations and Warranties of the Parent and Sub. . . . . . . . . . 20
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Authority for this Agreement . . . . . . . . . . . . . . . . . . . 20
5.3 Consents and Approvals; No Violation . . . . . . . . . . . . . . . 21
5.4 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.5 Interim Operations of Sub. . . . . . . . . . . . . . . . . . . . . 21
5.6 FDA Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.7 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
i
<PAGE>
6. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Conduct of Business of the Company . . . . . . . . . . . . . . . . 22
6.2 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Access to Information. . . . . . . . . . . . . . . . . . . . . . . 25
6.4 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . 25
6.5 Indemnification; Directors' and Officers' Insurance. . . . . . . . 26
6.6 State Takeover Statutes. . . . . . . . . . . . . . . . . . . . . . 27
6.7 Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.8 Notification of Certain Matters. . . . . . . . . . . . . . . . . . 28
6.9 Compliance with ISRA . . . . . . . . . . . . . . . . . . . . . . . 28
6.10 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 28
6.11 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . 28
8. Termination; Amendment; Waiver. . . . . . . . . . . . . . . . . . . . . 29
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . 30
8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 31
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 31
9.2 Enforcement of the Agreement . . . . . . . . . . . . . . . . . . . 31
9.3 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.7 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . 33
9.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.9 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . 34
9.10 Press Releases. . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.11 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 34
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED JULY 28, 1995
The parties to this agreement and plan of merger are Schein
Pharmaceutical, Inc., a Delaware corporation (the "Parent"), SM Acquiring Co.,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Parent (the
"Sub"), and Marsam Pharmaceuticals Inc., a Delaware corporation (the "Company").
The board of directors of each of the Parent, the Sub and the Company
has determined it is in the best interests of its stockholders for the Parent to
acquire the Company upon the terms and subject to the conditions set forth in
this agreement.
Accordingly, the parties agree as follows:
1. THE OFFER
1.1 THE OFFER.
(a) Provided this agreement shall not have been terminated in
accordance with section 8.1, promptly (but in no event later than five business
days following the public announcement of the terms of this agreement), the
Parent shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934 (the "Exchange Act")), or cause the Sub to commence, an
offer to purchase all the outstanding shares of common stock of the Company, par
value $.01 per share (the "Shares"), at a price of $21.00 per Share, net to the
seller in cash (the "Offer"). The obligation to consummate the Offer and to
accept for payment and to pay for any Shares tendered pursuant to the Offer
shall be subject only to those conditions set forth in exhibit A. The Company
agrees that no Shares held by the Company or any of its subsidiaries shall be
tendered to the Parent or the Sub pursuant to the Offer. Neither the Parent nor
the Sub shall, without the prior written consent of the Company, (i) decrease or
change the form of the consideration payable in the Offer, (ii) decrease the
number of Shares sought pursuant to the Offer, (iii) impose additional
conditions to the Offer, (iv) change the conditions to the Offer, except the
Parent or the Sub, as applicable, in its sole discretion may waive any condition
to the Offer, other than the condition set forth in clause (1) of exhibit A,
which may not be waived without the Company's prior written consent, or (v) make
any other change in the terms of the Offer adverse to the holders of the Shares.
The Parent or the Sub, as applicable, agrees that, subject to the terms and
conditions of the Offer and this agreement, it will accept for payment and pay
for all Shares validly tendered and not withdrawn pursuant to the Offer promptly
after expiration of the Offer. The Offer shall initially provide that the Offer
shall expire 20 business days after it is commenced or on September 1, 1995,
whichever is later. The Parent or the Sub, as applicable, may
<PAGE>
extend the Offer in accordance with applicable law, but if the conditions set
forth in exhibit A are satisfied as of the then scheduled expiration date of the
Offer, the Offer may be extended only with the prior written consent of the
Company or as required by law; provided that the Parent or the Sub, as
applicable, may, without the consent of the Company, extend the Offer on one
occasion for a period not to exceed 10 business days, if the number of Shares
tendered, together with any Shares beneficially owned by the Parent or the Sub,
is less than 90% of the Shares outstanding on the scheduled expiration date of
the Offer. If the conditions set forth in exhibit A are not satisfied or, to
the extent permitted by this agreement, waived by the Parent or the Sub, as
applicable, as of the scheduled expiration date, the Parent or the Sub, as
applicable, shall extend the Offer from time to time until the earliest of the
consummation of the Offer, November 30, 1995 (provided, that neither the Parent
nor the Sub shall be obligated to make any such extension, if, in the reasonable
belief of the Parent or the Sub, as applicable, all such conditions are not
capable of being satisfied by that date) or the termination of this agreement.
Any individual extension of the Offer shall be for a period of no more than 10
business days.
(b) On the date of commencement of the Offer, the Parent or the Sub,
as applicable, shall file or cause to be filed with the Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with
all amendments, the "Schedule 14D-1") with respect to the Offer, which shall
contain the Offer to purchase and related letter of transmittal and other
ancillary Offer documents and instruments pursuant to which the Offer will be
made (collectively, with any supplements or amendments, the "Offer Documents").
The Parent or the Sub, as applicable, shall disseminate the Offer Documents to
holders of the Shares. Each of the Parent or the Sub, as applicable, and the
Company agrees promptly to correct any information provided by it for use in the
Offer Documents that becomes false or misleading in any material respect, and
the Parent and the Sub shall take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by law. The
Company and its counsel shall have a reasonable opportunity to review and
comment on the Offer Documents prior to the filing of the respective Offer
Documents with the SEC. The Parent or the Sub, as applicable, shall provide the
Company and its counsel with any comments that may be received from the SEC or
its staff with respect to the Offer Documents promptly after receipt. The Offer
Documents shall comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations under the Exchange Act. The
Parent and the Sub agree that none of the information in the Offer Documents or
any related schedule required to be filed with the SEC or in any related
amendment shall, on the date of filing with the SEC or on the date first
published, sent or given to stockholders of
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the Company, as the case may be, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading (but excluding statements made in any of the
foregoing documents based on information supplied by the Company specifically
for inclusion therein). The Parent and the Sub agree that none of the
information supplied by the Parent or the Sub or any of their affiliates
specifically for inclusion in the Proxy Statement (as defined in section 1.2) or
Schedule 14D-9 (as defined in section 1.2) or any related amendment shall, at
the date of filing with the SEC, and, in the case of the Proxy Statement, at the
time the Proxy Statement is mailed and at the time of the Special Meeting (as
defined in section 2.8), contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
1.2 COMPANY ACTIONS. The Company consents to the Offer and represents and
warrants that, subject to the terms and conditions set forth in this agreement,
(a) its board of directors (at a meeting duly called and held) has (i)
determined that the Offer and Merger (as defined in section 2.1) are fair to and
in the best interests of the stockholders of the Company, (ii) resolved to
recommend acceptance of the Offer and approval and adoption of this agreement by
stockholders of the Company, (iii) taken all necessary steps to render section
203 of the Delaware General Corporation Law (the "DGCL") inapplicable to the
Merger and (iv) resolved to elect not to be subject, to the extent permitted by
law, to any state takeover law other than section 203 of the DGCL that may
purport to be applicable to the Offer, the Merger or the transactions
contemplated by this agreement and (b) Bear, Stearns & Co. Inc., the Company's
independent financial advisor, has advised the Company's board of directors
that, in the opinion of Bear, Stearns & Co. Inc., the consideration to be paid
to the Company's stockholders in the Offer and Merger is fair, from a financial
point of view, to those stockholders. As promptly as practicable after
commencement of the Offer, the Company shall, subject to the terms and
conditions set forth in this agreement, file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
containing the recommendations of its board of directors in favor of the Offer
and Merger and shall permit the inclusion in the Offer Documents of such
recommendations, in each case subject to the fiduciary duties of the board of
directors of the Company as advised by outside counsel. The Company, the Parent
and the Sub shall promptly correct any information provided by them for use in
the Schedule 14D-9 that becomes false or misleading in any material respect, and
the Company shall take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by law. The Parent and its
counsel shall
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have a reasonable opportunity to review and comment on the Schedule 14D-9 prior
to its filing with the SEC. The Company agrees to provide the Parent and its
counsel with any comments that may be received from the SEC or its staff with
respect to the Schedule 14D-9 promptly after receipt. The Company agrees that
neither the Schedule 14D-9, nor any related amendments nor any information
supplied by the Company specifically for inclusion in the Offer Documents or the
Proxy Statement (but excluding statements made in any of the foregoing documents
based on information supplied by the Parent or Sub or any of their affiliates
specifically for inclusion therein) shall, at the respective times the Schedule
14D-9 or Offer Documents are filed with the SEC or are first published, sent or
given to stockholders, as the case may be, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Schedule 14D-9 and the Proxy
Statement shall comply as to form in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations under the
Exchange Act. The letter to stockholders, notice of meeting, proxy statement
and form of proxy, or the information statement, as the case may be, that may be
distributed to stockholders in connection with the Merger (including any
supplements), and any schedules required to be filed with the SEC in connection
therewith, as from time to time amended or supplemented, are collectively
referred to as the "Proxy Statement".
1.3 STOCKHOLDER LISTS. In connection with the Offer, the Company shall
promptly furnish the Sub with mailing labels, security position listings and any
available listing or computer file containing the names and addresses of the
record holders of the Shares as of a recent date and shall furnish the Sub with
such information and assistance as the Sub or its agents may reasonably request
in communicating the Offer to the record and beneficial stockholders of the
Company. Subject to the requirements of applicable law and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer and Merger, the Parent and Sub and
their affiliates and associates shall hold in confidence such listings and other
information, shall use such information only in connection with the Offer and
Merger and, if this agreement is terminated in accordance with its terms, shall
deliver to the Company all copies of all such information (and extracts or
summaries of such information) then in their or their agents' or advisors'
possession.
1.4 DIRECTORS
(a) Promptly upon the purchase by the Parent or the Sub, as
applicable, pursuant to the Offer of a number of Shares that represents at least
a majority of the outstanding Shares on
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a fully-diluted basis and from time to time thereafter, the parties shall,
subject to the provisions of section 14(f) of the Exchange Act and Rule 14f-1
under the Exchange Act, promptly use all reasonable efforts necessary to cause
the persons listed on schedule 2.5 to comprise the entire board of directors of
the Company. The date on which such persons first comprise the Company's board
of directors is referred to as the "Control Date".
(b) From and after the Control Date and prior to the Effective Time
and as long as there is at least one director who is designated as a "Continuing
Director" on schedule 2.5 (a "Continuing Director" and, collectively, the
"Continuing Directors"), if requested by a majority of the Continuing Directors,
all other directors shall abstain from acting upon, and the approval of a
majority of the Continuing Directors shall be required to authorize, any
termination of this agreement by the Company, any amendment of this agreement
requiring action by the board of directors of the Company, any extension of time
for the performance of any obligation or other act of the Parent or the Sub
under this agreement and any waiver of compliance with any provision of this
agreement for the benefit of the Company.
2. THE MERGER
2.1 THE MERGER. Upon the terms of this agreement and subject to the
provisions of the DGCL, the Parent shall transfer to the Sub all Shares held by
it, and the Sub shall be merged with and into the Company (the "Merger") as soon
as practicable following the satisfaction or waiver, if permissible, of the
conditions set forth in section 7. The Company shall be the surviving
corporation in the Merger (the "Surviving Corporation") under the name "Marsam
Pharmaceuticals Inc." and shall continue its existence under the law of
Delaware. At the Effective Time, the separate corporate existence of the Sub
shall cease.
2.2 CONSUMMATION OF THE MERGER. Subject to the provisions of this
agreement, the parties shall cause the Merger to be consummated by filing with
the secretary of state of the state of Delaware a duly executed and verified
certificate of merger, and shall take all other action required by law to effect
the Merger. Prior to the filing referred to in this section, a closing (the
"Closing") shall be held at the offices of Proskauer Rose Goetz & Mendelsohn
LLP, 1585 Broadway, New York, New York (or such other place as the parties may
agree) for the purpose of completing the foregoing. The time the Merger becomes
effective in accordance with applicable law is referred to as the "Effective
Time".
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the DGCL and this agreement.
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2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The certificate of
incorporation and by-laws of the Sub, as in effect on the date of this
agreement, shall be the certificate of incorporation and by-laws, respectively,
of the Surviving Corporation; PROVIDED, HOWEVER, that section 1 of the
certificate of incorporation of the Surviving Corporation shall be amended to
read in its entirety as follows: "Section 1. The name of the Corporation is
Marsam Pharmaceuticals Inc."
2.5 DIRECTORS AND OFFICERS. The persons listed on schedule 2.5 and the
officers of the Company immediately prior to the Effective Time shall be the
directors and officers, respectively, of the Surviving Corporation, until their
respective successors are duly elected and qualified.
2.6 CONVERSION OF SHARES. Each Share issued and outstanding immediately
prior to the Effective Time (other than Shares owned by the Parent, the Sub or
any subsidiary of the Parent or Sub or held in the treasury of the Company, all
of which shall be cancelled, and other than Dissenting Shares (as defined in
section 3.1)) shall, by virtue of the Merger and without any action on the part
of the Parent, the Sub, the Company or the holder, be converted into the right
to receive in cash an amount per Share (subject to any applicable withholding
tax, as specified in section 2.10) equal to the highest price per share payable
in the Offer, without interest (the "Merger Consideration"), upon the surrender
of the certificate representing the Share in accordance with section 3.2.
2.7 CONVERSION OF COMMON STOCK OF THE SUB. Each share of common stock,
par value $.01, of the Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the Parent, the Sub or the Company, be converted into and become one share of
common stock of the Surviving Corporation.
2.8 STOCKHOLDERS' MEETING. Unless the Merger is consummated in accordance
with section 253 of the DGCL as contemplated by section 2.9, and subject to
applicable law, the Company, acting through its board of directors, shall, in
accordance with applicable law, duly call, give notice of, convene and hold a
special meeting (the "Special Meeting") of its stockholders as soon as
practicable following the consummation of the Offer for the purpose of
considering and taking action upon the agreement of merger (within the meaning
of section 251 of the DGCL) set forth in this agreement; and, subject to the
fiduciary duties of its board of directors under applicable law as advised by
outside counsel, the Company shall include in the Proxy Statement the
recommendation of its board of directors that stockholders of the Company vote
in favor of the approval and adoption of the agreement of merger set forth in
this agreement. The Parent and the Sub agree that, at the Special Meeting, all
the Shares acquired pursuant to the Offer or otherwise by the
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Parent or Sub or any of their affiliates shall be voted in favor of the approval
and adoption of the agreement of merger set forth in this agreement.
2.9 MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding section 2.8,
if the Parent, directly or indirectly through the Sub or any other subsidiary,
acquires at least 90 percent of the outstanding Shares, each of the Parent, the
Sub and the Company shall take all necessary and appropriate action to cause the
Merger to become effective, as soon as practicable after the consummation of the
Offer, without a meeting of stockholders of the Company, in accordance with
section 253 of the DGCL.
2.10 WITHHOLDING TAXES. If so specified in the Offer Documents, the Parent
and Sub shall be entitled to deduct and withhold from the consideration
otherwise payable to a holder of Shares or Options pursuant to the Offer or
Merger such amounts as are required under section 3406 of the Internal Revenue
Code of 1986 (the "Code"). To the extent amounts are so withheld by the Parent
or Sub, the withheld amounts shall be treated for all purposes of this agreement
as having been paid to the holder of the Shares in respect of which the
deduction and withholding was made by the Parent or Sub, in the circumstances
described in the Offer Documents.
3. DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
3.1 DISSENTING SHARES. Notwithstanding anything in this agreement to the
contrary, Shares issued and outstanding immediately prior to the Effective Time
and held by any stockholder who did not vote in favor of the Merger and comply
with section 262 of the DGCL (the "Dissenting Shares") shall not be converted
into or be exchangeable for the right to receive the Merger Consideration,
unless and until any such stockholder shall have failed to perfect or shall have
effectively withdrawn or lost his rights to appraisal under the DGCL. If any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost that right, that holder's Shares shall thereupon be converted into and
become exchangeable for the right to receive, as of the Effective Time, the
Merger Consideration without any interest. The Company shall give the Parent or
the Sub, as applicable, (a) prompt notice of any written demands for appraisal
of any Shares, attempted withdrawals of such demands and any other instruments
served pursuant to the DGCL and received by the Company relating to
stockholders' rights of appraisal and (b) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of the
Parent or the Sub, as applicable, voluntarily make any payment with respect to
any demands for appraisal of capital
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stock of the Company, offer to settle or settle any demands or approve any
withdrawal of any such demands.
3.2 PAYMENT FOR SHARES
(a) Prior to the Effective Time, the Parent shall cause the Sub to
deposit with Chemical Bank (or another bank or trust company reasonably
satisfactory to the Company) (the "Paying Agent") sufficient funds to make the
payments pursuant to section 2.6 on a timely basis to holders of Shares issued
and outstanding immediately prior to the Effective Time (such funds, the
"Payment Fund"). The Paying Agent shall, pursuant to irrevocable instructions,
make the payments provided for in the preceding sentence out of the Payment
Fund. The Payment Fund shall not be used for any purpose, except as provided in
this agreement.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause the Paying Agent to mail to each record holder of Shares, as of the
Effective Time, a form of letter of transmittal, the form and content of which
shall be reasonably acceptable to the Company (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates representing
the Shares (the "Certificates") shall pass, only upon proper delivery of the
Certificates to the Paying Agent), and instructions for use in effecting the
surrender of the Certificates for payment of the Merger Consideration. Upon
surrender to the Paying Agent of a Certificate, together with the letter of
transmittal duly executed, the holder of the Certificate shall be paid cash in
an amount (subject to any applicable withholding tax, as specified in section
2.10) equal to the product of the number of Shares represented by the
Certificate and the Merger Consideration, and the Certificate shall be
cancelled. No interest shall be paid or accrued on the cash payable upon the
surrender of a Certificate. If payment is to be made to a person other than the
person in whose name a Certificate surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that the tax has been
paid or is not applicable. From and after the Effective Time and until
surrendered in accordance with this section 3.2, each Certificate (other than
Certificates representing Shares owned by the Parent or Sub or any of their
subsidiaries, and Dissenting Shares) shall represent for all purposes solely the
right to receive in cash an amount equal to the product of the Merger
Consideration and the number of Shares evidenced by the Certificate, without
interest.
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(c) Any portion of the Payment Fund (including the proceeds of any
investments of the Payment Fund) that remains unclaimed by the former
stockholders of the Company for six months after the Effective Time shall be
repaid to the Surviving Corporation. Any former stockholders of the Company who
have not theretofore complied with section 3.1 shall thereafter look only to the
Surviving Corporation (subject to abandoned property, escheat or other similar
laws) for payment of their claim for the Merger Consideration per Share, without
interest. Neither the Parent, the Sub nor the Surviving Corporation shall be
liable to any holder of Shares for any monies delivered from the Payment Fund or
otherwise to a public official pursuant to any applicable abandoned property,
escheat or similar law.
3.3 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Shares
shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for cash as provided in this section 3, subject to applicable law in the case of
Dissenting Shares.
3.4 OPTIONS. Upon the consummation of the Offer, the Parent or the Sub,
as applicable, shall pay each holder of a then outstanding option to purchase
Shares under the Company's 1986 Stock Option Plan, 1993 Stock Option Plan or
1995 Stock Purchase Plan (collectively, the "Stock Option Plans"), whether or
not then exercisable (collectively, the "Options"), in settlement of the
Options, for each Share subject to an Option, an amount (subject to any
applicable withholding tax) in cash equal to the excess, if any, of the Merger
Consideration over the per Share exercise price of that Option (that amount, the
"Option Consideration"); PROVIDED, HOWEVER, that with respect to any person
subject to section 16 of the Exchange Act, any such amount shall be paid by the
Surviving Corporation as soon as practicable after the first date payment can be
made without liability to that person under section 16(b) of the Exchange Act.
Upon receipt of the Option Consideration, the Option shall be cancelled. The
surrender of an Option to the Company in exchange for the Option Consideration
shall be deemed a release of all rights the holder had or may have had in
respect of that Option. Prior to the Effective Time, the Company shall use all
reasonable efforts to obtain all necessary consents or releases from holders of
Options under the Stock Option Plans and take all other action necessary to give
effect to the transactions contemplated by this section 3.4. Except as
otherwise agreed by the parties, (a) all Stock Option Plans shall terminate as
of the Effective Time and all rights under any provision of any other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company or any subsidiary of the Company
shall be cancelled as of the Effective Time, and (b) the Company shall take all
reasonable action to ensure that, after the Effective Time, no person shall have
any
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right under any Stock Option Plan (or any option granted under any Stock Option
Plan) or other plan, program or arrangement with respect to equity securities of
the Company, the Surviving Corporation or any direct or indirect subsidiary of
either.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Parent and Sub as follows:
4.1 ORGANIZATION AND QUALIFICATION. Each of the Company and its
subsidiaries is a duly organized and validly existing corporation in good
standing under the law of its jurisdiction of incorporation, with the corporate
power and authority to own its properties and conduct its business as now being
conducted, and is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the character of the
properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing would not have a Material Adverse Effect
(as defined in section 9.9). The Company has made available to the Parent
accurate and complete copies of the certificates of incorporation and by-laws as
currently in effect of the Company and each of its subsidiaries.
4.2 CAPITALIZATION
(a) The authorized capital stock of the Company consists of
30,000,000 Shares and 1,000,000 shares of preferred stock, $.01 par value (the
"Preferred Stock"). As of the close of business on July 26, 1995, 11,084,137
Shares were issued and outstanding; no shares of Preferred Stock were issued or
outstanding; no Shares were held in the Company's treasury; and there were
outstanding Options to purchase an aggregate of 1,166,649 Shares under the
Company's Stock Option Plans (copies of which have previously been furnished to
the Parent). Since July 26, 1995, the Company (i) has not issued any Shares,
other than upon the exercise of Options then outstanding, (ii) has not granted
any options or rights to purchase Shares (under the Company's Stock Option Plans
or otherwise) and (iii) has not split, combined or reclassified any of its
shares of capital stock. All the outstanding Shares have been duly authorized
and validly issued and are fully paid and nonassessable and are free of
preemptive rights. Except as set forth in this section 4.2 or in section 4.2(a)
of the disclosure letter dated the date of this agreement and delivered by the
Company to the Parent prior to the execution of this agreement setting forth
certain matters referred to in this agreement (the "Disclosure Letter"), there
are no outstanding (i) shares of capital stock or other voting securities of the
Company, (ii) securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company or (iii) options,
warrants, rights or other agreements or commitments to acquire from the
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Company, or obligations of the Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company, or obligations of the Company to grant, extend
or enter into any subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment (the items in clauses (i),
(ii) and (iii), collectively, the "Company Securities"). Except as set forth in
section 4.2(a) of the Disclosure Letter, there are no outstanding obligations of
the Company or any subsidiary to repurchase, redeem or otherwise acquire any
Company Securities and there are no other outstanding stock related awards.
Except as set forth in section 4.2(a) of the Disclosure Letter, there are no
voting trusts or other agreements or understandings to which the Company or any
of its subsidiaries is a party with respect to the voting of capital stock of
the Company or any of its subsidiaries.
(b) Except as set forth in section 4.2(b) of the Disclosure Letter,
the Company is, directly or indirectly, the record and beneficial owner of all
the outstanding shares of capital stock of each of its subsidiaries, free and
clear of any lien, mortgage, pledge, charge, security interest or encumbrance,
and there are no irrevocable proxies with respect to any such shares. Except as
set forth in section 4.2(b) of the Disclosure Letter, there are no outstanding
(i) securities of the Company or any subsidiary convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests in
any subsidiary, or (ii) options or other rights to acquire from the Company or
any of its subsidiaries, or other obligations of the Company or any of its
subsidiaries to issue, any capital stock, voting securities or other ownership
interests in, or any securities convertible into or exchangeable for any capital
stock, voting securities or ownership interests in, any of its subsidiaries, or
other obligations of the Company or any of its subsidiaries to grant, extend or
enter into any subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment (the items in clauses (i) and
(ii), collectively, the "Subsidiary Securities"). Except as set forth in
section 4.2(b) of the Disclosure Letter, there are no outstanding obligations of
the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any outstanding Subsidiary Securities.
4.3 AUTHORITY FOR THIS AGREEMENT. The Company has the requisite corporate
power and authority to execute and deliver this agreement and to consummate the
transactions contemplated by this agreement. The execution and delivery of this
agreement by the Company and the consummation by the Company of the transactions
contemplated by this agreement have been duly and validly authorized by the
board of directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this agreement or to consummate the
transactions so contemplated (other than the approval and
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adoption of the agreement of merger (within the meaning of section 251 of the
DGCL) in this agreement by the holders of a majority of the Shares prior to the
consummation of the Merger, if required by applicable law). This agreement has
been duly and validly executed and delivered by the Company and, assuming this
agreement constitutes the valid and binding obligation of each of the Parent and
Sub, constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject to general principles of equity (whether
considered in a proceeding in equity or at law).
4.4 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC Reports
(as defined in section 4.5) or in section 4.4 of the Disclosure Letter, since
March 31, 1995: (a) the Company and its subsidiaries have not suffered any
Material Adverse Effect, (b) the Company and its subsidiaries have conducted
their respective businesses only in the ordinary course consistent with past
practice, except in connection with the negotiation and execution and delivery
of this agreement and the exploration of other alternative transactions, and (c)
there has not been (i) any declaration, setting aside or payment of any dividend
or other distribution in respect of the Shares or any repurchase, redemption or
other acquisition by the Company or any of its subsidiaries of any outstanding
shares of capital stock or other securities in, or other ownership interests in,
the Company or any of its subsidiaries; (ii) any entry into any written
employment agreement (other than the agreements identified in section 4.4 of the
Disclosure Letter that are being entered into contemporaneously with this
agreement) with, or any increase in the rate or terms (including, without
limitation, any acceleration of the right to receive payment pursuant to
arrangements set forth in section 4.4 of the Disclosure Letter) of compensation
payable or to become payable by the Company or any of its subsidiaries to, their
respective directors or officers; (iii) any increase in the rate or terms
(including, without limitation, any acceleration of the right to receive
payment) of any bonus, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any such directors, officers or key
employees, except increases occurring in the ordinary course of business or as
required by law or as necessary to maintain tax-qualified status; or (iv) any
action by the Company that, if taken after the date of this agreement, would
constitute a breach of section 6.1.
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4.5 REPORTS
(a) The Company has filed with the SEC all forms, reports and
documents required to be filed by it pursuant to applicable law since January 1,
1994, all of which have complied as of their respective filing dates in all
material respects with all applicable requirements of the Exchange Act and the
rules under the Exchange Act. True and correct copies of all filings made by
the Company with the SEC since January 1, 1994 (the "SEC Reports"), whether or
not required under applicable law, rules and regulations and including any
registration statement filed by the Company under the Securities Act of 1933,
have been furnished to the Parent. None of the SEC Reports, including, without
limitation, any financial statements or schedules included or incorporated by
reference in the SEC Reports, at the time filed, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The audited and unaudited consolidated financial statements of
the Company included (or incorporated by reference) in the SEC Reports have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis (except to the extent set forth in
those financial statements, including the notes, if any) and present fairly in
all material respects the consolidated financial position of the Company as of
their respective dates, and the consolidated results of operations and changes
in financial condition and cash flows for the periods presented, subject, in the
case of the unaudited interim financial statements, to normal, recurring, year-
end adjustments.
4.6 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this agreement by the Company nor the consummation of the
transactions contemplated by this agreement will, except as disclosed in section
4.6 of the Disclosure Letter, (a) conflict with or result in a breach of any
provision of the certificate of incorporation or by-laws (or other similar
governing documents) of the Company or any of its subsidiaries; (b) require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, except (i) in connection with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (ii)
pursuant to the Exchange Act, (iii) the filing of a certificate of merger
pursuant to the DGCL, (iv) any applicable filings under state securities, or
"Blue Sky", laws or state anti-takeover laws, [(v) consents, approvals,
authorizations or filings under laws of jurisdictions outside the United States
(E.G., Canada),] or (vi) filings with the New Jersey Department of Environmental
Protection (the "NJDEP") pursuant to the New Jersey Industrial Site Recovery Act
("ISRA"); (c) result in a material default (or
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give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any material note, license, agreement
or other instrument or obligation to which the Company is a party or by which
the Company or any of its assets or subsidiaries may be bound; or (d) violate in
any material respect any material order, writ, injunction, decree, statute, rule
or regulation applicable to the Company or any of its subsidiaries or by which
any material portion of their respective assets are bound.
4.7 REGULATORY COMPLIANCE. Section 4.7 of the Disclosure Letter lists:
(a) each product manufactured, marketed, sold or licensed by the Company (the
"Pharmaceutical Products") as of the date of this agreement; (b) (i) all
Pharmaceutical Products that have been recalled, withdrawn or suspended by the
Company (whether voluntarily or otherwise) since January 1, 1990, and all (ii)
proceedings of which the Company is aware (whether completed or pending at any
time since January 1, 1990) seeking the recall, withdrawal, suspension or
seizure of any Pharmaceutical Product; (c) each of the Company's New Drug
Applications ("NDAs"), Investigatory New Drug Applications ("INDAs") or
Abbreviated New Drug Applications ("ANDAs"); (d) (i) all Form 483s, (ii) all
EIRs, (iii) all Notices of Adverse Findings and (iv) all warning or other
letters from the United States Food and Drug Administration (the "FDA") or Drug
Enforcement Agency (the "DEA") in which the FDA or DEA asserted that the
operations of the Company may not be in compliance with applicable law and
regulations, in each case received by the Company from the FDA or DEA since
January 1, 1990 and the response of the Company to each such notice from the FDA
or DEA; and (e) all Adverse Reaction Reports filed by the Company with the FDA
since January 1, 1990.
4.8 EMPLOYEE BENEFIT MATTERS
(a) For purposes of this agreement, the term "Plan" refers to the
following maintained by the Company, any of its subsidiaries or any entity that
would be deemed a "single employer" with the Company under section 414(b), (c),
(m) or (o) of the Code or section 4001 of the Employee Retirement Income
Security Act of 1974 ("ERISA") (an "ERISA Affiliate") on behalf of any employee
of the Company (whether current, former or retired) or their beneficiaries, any
"employee benefit plan" (within the meaning of section 3(3) of ERISA), or any
other plan, program, agreement or commitment, an employment, consulting or
deferred compensation agreement, or an executive compensation, incentive bonus
or other bonus, employee pension, profit-sharing, savings, retirement, stock
option, stock purchase, severance pay, life, health, disability or accident
insurance plan. Section 4.8(a) of the Disclosure Letter lists each Plan.
(b) Neither the Company nor any of the ERISA Affiliates nor any of
their respective predecessors has ever contributed to or contributes to, or
otherwise participated in or
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participates in any "multiemployer plan" (within the meaning of section
4001(a)(3) of ERISA or section 414(f) of the Code), any single employer pension
plan (within the meaning of section 4001(a)(15) of ERISA) that is subject to
sections 4063 and 4064 of ERISA or any plan that is subject to Title IV of ERISA
or section 412 of the Code.
(c) The Company, each ERISA Affiliate, each Plan and each "plan
sponsor" (within the meaning of section 3(16) of ERISA) of each "welfare benefit
plan" (within the meaning of section 3(1) of ERISA) has complied in all respects
with the requirements of section 4980B of the Code and Title I, Subtitle B, Part
6 of ERISA, except for a failure or failures to comply that, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(d) With respect to each of the Plans set forth in section 4.08 of
the Disclosure Letter:
(i) each Plan intended to qualify under section 401(a) of the
Code has been qualified since its inception and has received a determination
letter from the IRS to the effect that the Plan is qualified under section 401
of the Code and any trust maintained pursuant thereto is exempt from federal
income taxation under section 501 of the Code and nothing has occurred that
would cause the loss of such qualification or exemption or the imposition of any
material penalty or tax liability upon the Company or any of its subsidiaries;
the Company or an ERISA Affiliate, as the case may be, has applied, or prior to
the end of the remedial amendment period, as defined under Treasury Regulation
section 1.401(b) and as modified by Internal Revenue Service pronouncements,
will apply, for a determination letter from the Internal Revenue Service
pursuant to Revenue Procedure 93-39, for each Plan intended to qualify under
section 401(a) of the Code;
(ii) no event has occurred in connection with which the Company,
any of its subsidiaries or any ERISA Affiliate could be subject to any material
liability under ERISA, the Code or any other law, regulation or governmental
order applicable to any Plan, including, without limitation, section 406, 409,
502(i) or 502(l) of ERISA, or section 4975 of the Code; and
(iii) each material Plan complies in all material respects with
the applicable requirements of ERISA and the Code.
(e) The Company has furnished the Parent, with respect to each Plan:
(i) a copy of the annual report, if required by ERISA to be
prepared, with respect to the Plan for each of the last two years, together with
a copy of the financial statements
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for each Plan for each of the last two years, if required by ERISA to be
prepared;
(ii) a copy of the most recent Summary Plan Description,
together with each Summary of Material Modifications thereto, required under
ERISA with respect to the Plan, and, unless the Plan is embodied entirely in an
insurance policy to which the Company or any of its subsidiaries is a party, a
true and complete copy of the Plan; and
(iii) if the Plan is funded through a trust or any third party
funding vehicle (other than an insurance policy), a copy of the trust or other
funding agreement and the latest related financial statements, if any.
(f) Except as disclosed in section 4.8(f) of the Disclosure Letter or
in the SEC Reports, neither the Company nor any of its subsidiaries has any
announced plan or commitment to create any additional Plans or, except in the
ordinary course of business in accordance with its customary practices or as
required by law or as necessary to maintain tax-qualified status, to amend or
modify any Plan.
(g) Except as disclosed in section 4.8(g) of the Disclosure Letter or
in the SEC Reports, neither the Company nor any of its subsidiaries is a party
to any collective bargaining agreement.
(h) Except as disclosed in section 4.8(h) of the Disclosure Letter,
the consummation of the transactions contemplated by this agreement will not
give rise to any liability for severance pay, unemployment compensation,
termination pay or withdrawal liability, or accelerate the time of payment or
vesting or increase the amount of compensation or benefits due to any current,
former, or retired employee or their beneficiaries solely by reason of such
transactions. No amounts payable under any Plan will fail to be deductible for
federal income tax purposes by virtue of section 280G of the Code.
(i) Except as disclosed in section 4.8(i) of the Disclosure Letter,
neither the Company nor any ERISA Affiliate maintains, contributes to, or in any
way provides for any benefits of any kind whatsoever (other than under section
4980B of the Code, the Federal Social Security Act or a plan qualified under
section 401(a) of the Code) to any current or future retiree or terminee.
4.9 LITIGATION, ETC. Except as set forth in section 4.9 of the Disclosure
Letter or as disclosed in the SEC Reports, there is no claim, action, proceeding
or governmental investigation pending or, to the knowledge of the Company,
threatened against the Company, any of its subsidiaries or in respect of any
Plan before any court or governmental or regulatory authority that,
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individually or in the aggregate, (a) could reasonably be expected to have a
Material Adverse Effect or (b) has had or could reasonably be expected to have a
material adverse effect on the ability of the Company to consummate the
transactions contemplated by this agreement or in any manner challenges or seeks
to prevent, enjoin or delay the Offer or Merger.
4.10 TAX MATTERS
(a) Except as set forth in section 4.10(a) of the Disclosure Letter
or in the SEC Reports:
(i) All returns and reports relating to income, franchise and all
material other Taxes (as defined in section 9.9) required to be filed with
respect to each of the Company and its subsidiaries or any of their income,
properties or operations have been duly filed in a timely manner (taking
into account all extensions of due dates), and, to the knowledge of the
Company, all information in such returns, declarations and reports is true,
correct and complete in all material respects. All taxes attributable to
each of the Company and its subsidiaries that were shown to be due and
payable on such returns and reports have been paid.
(ii) Adequate provisions in accordance with United States generally
accepted accounting principles consistently applied have been made in the
consolidated financial statements included in the SEC Reports for the
payment of all material Taxes for which any of the Company or its
subsidiaries may be liable for the periods covered by those financial
statements that were not yet due and payable as of the dates of those
financial statements, regardless of whether the liability for those Taxes
is disputed.
(iii) There is no claim or assessment pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries for
any alleged material deficiency in income, franchise or other Taxes
attributable to the Company or any of its subsidiaries.
(iv) Each of the Company and its subsidiaries has satisfied in all
material respects for all periods all applicable withholding Tax
requirements (including, without limitation, income, social security and
employment tax withholding for all types of compensation).
(v) No consent has been filed relating to the Company or any of its
subsidiaries pursuant to section 341(f) of the Code.
(vi) There is no contract, agreement or intercompany account system
under which the Company or any of its
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subsidiaries has, or may at any time in the future have, an obligation to
contribute to the payment of any portion of a Tax (or pay any amount
calculated with reference to any portion of a Tax) of any group of
corporations of which the Company or its subsidiaries is or was a part.
(vii) The Company has furnished the Parent complete and accurate copies
of all income and franchise Tax returns, and all related amendments, filed
by or on behalf of the Company or any of its subsidiaries or any member of
a group of corporations including the Company or any of its subsidiaries
for the taxable years 1990 through 1993.
(b) Except as set forth in section 4.10(b) of the Disclosure Letter,
there are no agreements in effect to extend the period of limitations for the
assessment or collection of any income, franchise or material other Tax for
which the Company or any of its subsidiaries may be liable.
4.11 COMPLIANCE WITH LAW. Except as set forth in section 4.11 of the
Disclosure Letter or in the SEC Reports, to the knowledge of the Company,
neither the Company nor any of its subsidiaries is in conflict with, or in
default or violation of, any law, rule, regulation, order, judgment or decree
applicable to the Company or any subsidiary or by which any property or asset of
the Company or any subsidiary is bound or affected, except where such conflicts,
defaults or violations, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.
4.12 ENVIRONMENTAL COMPLIANCE
(a) Except as set forth in section 4.12(a) of the Disclosure Letter
or in the SEC Reports, to the knowledge of the Company:
(i) the Company and each of its subsidiaries are in compliance with
all applicable Environmental Laws, except where non-compliance, in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect;
(ii) the Company and each of its subsidiaries possess all permits,
licenses, approvals and other authorizations ("Authorizations") that are
required with respect to their businesses, properties or assets under
applicable Environmental Laws, have timely filed applications for or
complied with any applicable requirements for renewal of all such
Authorizations and are in compliance with all terms and conditions of such
Authorizations, except where the absence of such Authorizations or the
failure to comply with any terms or conditions of such Authorizations, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect;
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(iii) neither the Company nor any of its subsidiaries nor any
predecessor in interest has been adjudged to have liability that has not
been satisfied or has received written notice of any potential material
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") or under the federal Resource Conservation
and Recovery Act ("RCRA") or under any other Environmental Law that imposes
remedial response or corrective action obligations, natural resource
damages, remedial response obligations or corrective action obligations
with respect to any property presently or previously owned, leased or
operated by the Company or any of its subsidiaries, or with respect to any
property not presently or previously owned, leased or operated by the
Company or any of its subsidiaries at which the Company may have disposed
or arranged for disposal of Hazardous Substances; and
(iv) neither the Company nor any of its subsidiaries has any liability
under any Environmental Law or is subject to any pending or threatened
claim, litigation or unsatisfied judgment under any Environmental Law,
except for such liabilities that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(b) For purposes of this agreement:
(i) "Environmental Laws" means the common law and all federal, state,
local and foreign laws or regulations, and including codes, orders,
decrees, judgments or injunctions issued, promulgated, approved or entered
thereunder, now or previously in effect, relating to pollution or
protection of human health and safety or the environment, including laws
relating to:
(1) the emission, discharge, release or threatened release into
the environment of any Hazardous Substance;
(2) the manufacture, processing, distribution, labeling,
reporting, use, generation, treatment, storage, re-use,
recycling, disposal, transport or handling of Hazardous
Substances;
(3) underground storage tanks and related piping and emissions,
discharges, releases or threatened releases therefrom; or
(4) exposure of persons, including employees, to any Hazardous
Substance; and
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(ii) "Hazardous Substance" means any substance subject to the OSHA
Hazard Communication Rule, or any similar applicable state law or
regulation, any substance defined as a hazardous substance under CERCLA or
any substance listed as a hazardous waste under RCRA, and including, to the
extent not encompassed within the foregoing, polychlorinated biphenyls,
asbestos containing materials and petroleum, including crude oil or any
fraction thereof.
4.13 DELAWARE TAKEOVER STATUTE INAPPLICABLE. The board of directors of
the Company has approved the transactions contemplated by this agreement and the
stockholders agreement dated this date among the Parent and certain stockholders
of the Company upon the terms specified in this agreement and in that agreement,
which will result in each of the Parent and Sub becoming an "interested
stockholder", within the meaning of section 203(a)(1) of the DGCL.
4.14 REQUIRED VOTE OF COMPANY STOCKHOLDERS. Unless the Merger is
consummated in accordance with section 253 of the DGCL as contemplated by
section 2.9, the only vote of the stockholders of the Company required to
approve and adopt the plan of merger in this agreement and approve the Merger is
the affirmative vote of the holders of not less than a majority of the
outstanding Shares. No other vote of the stockholders of the Company is
required by law, the certificate of incorporation or the by-laws of the Company
or otherwise to adopt the agreement of merger in this agreement and approve the
Merger.
4.15 BROKERS. No broker, finder or other investment banker (other than
Bear, Stearns & Co. Inc.) is entitled to receive any brokerage, finder's or
other fee or commission in connection with this agreement or the transactions
contemplated by this agreement based upon agreements made by or on behalf of the
Company.
5. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND SUB. The Parent and Sub
represent and warrant to the Company as follows:
5.1 ORGANIZATION. Each of the Parent and Sub is a duly organized and
validly existing corporation in good standing under the law of the state of
Delaware, with all requisite corporate power and authority to own its properties
and conduct its business. All the issued and outstanding capital stock of the
Sub is owned directly by the Parent.
5.2 AUTHORITY FOR THIS AGREEMENT. Each of the Parent and Sub has full
corporate power and authority to execute and deliver this agreement and to
consummate the transactions contemplated by this agreement. The execution and
delivery of this agreement by the Parent and Sub and the consummation by the
Parent and Sub of the transactions contemplated by this agreement have been duly
and validly authorized by the board of directors and stockholders of the Parent
and Sub and no other corporate proceedings on the
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part of the Parent or Sub are necessary to authorize this agreement, or to
commence the Offer or to consummate the transactions contemplated by this
agreement (including the Offer). This agreement has been duly and validly
executed and delivered by the Parent and Sub and, assuming this agreement
constitutes a valid and binding obligation of the Company, this agreement
constitutes the valid and binding agreement of each of the Parent and Sub,
enforceable against each of the Parent and Sub in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency and
similar laws affecting creditors rights generally and subject to general
principles of equity (whether considered in a proceeding in equity or at law).
5.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this agreement by the Parent or Sub nor the consummation of the
transactions contemplated by this agreement will (a) conflict with or result in
a breach of any provision of the certificate of incorporation or by-laws of the
Parent, the Sub or any of their subsidiaries; (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) in connection with the HSR Act, (ii)
pursuant to the Exchange Act, (iii) the filing of a certificate of merger
pursuant to the DGCL, (iv) any applicable filings under state securities, or
"Blue Sky", laws or state anti-takeover laws, (v) consents, approvals,
authorizations or filings under laws of jurisdictions outside the United States,
or (vi) filings with the NJDEP pursuant to ISRA; (c) result in a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, license, agreement or other
instrument or obligation to which the Parent or Sub is a party or by which any
of its assets may be bound, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained or that would not materially and adversely affect the ability of
the Parent or Sub to consummate the transactions contemplated by this agreement;
or (d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Parent, the Sub or any of their respective assets, except for
violations that would not materially adversely affect the ability of the Parent
or Sub to consummate the transactions contemplated by this agreement.
5.4 FINANCING. The Parent has furnished the Company a true and correct
copy of the written commitment letter dated June 6, 1995 of Chemical Bank with
respect to financing to purchase Shares pursuant to the Offer and Merger and to
pay related fees and expenses, which agreement is in full force and effect as of
the date of this agreement. Subject to the terms and conditions of this
agreement, the Parent agrees to provide Sub access to funds to the extent
necessary to enable the Parent and Sub to
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satisfy their obligations to purchase the Shares under the Offer and Merger.
5.5 INTERIM OPERATIONS OF SUB. The Sub was formed solely for the purpose
of engaging in the transactions contemplated by this agreement, and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated by this agreement.
5.6 FDA MATTERS. Neither the Parent, its subsidiaries, affiliates nor
their respective officers, employees or agents has been convicted of any crime
or engaged in any conduct for which debarment is mandated by 21 U.S.C. Section
335a(a) or authorized by 21 U.S.C. Section 335a(b).
5.7 BROKERS. No broker, finder or other investment banker (other than
Tanner & Co., Inc.) is entitled to any brokerage, finder's or other similar fee
or commission in connection with this agreement or the transactions contemplated
by this agreement based upon agreements made by or on behalf of the Parent or
Sub.
6. COVENANTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this
agreement, from the date of this agreement to the Control Date, the Company
shall, and shall cause its subsidiaries to, conduct its and their operations in
the ordinary course and consistent with past practice and use all reasonable
efforts to preserve intact their business organizations and to maintain existing
relationships with those having significant business relationships with them.
Without limiting the foregoing and except as contemplated by this agreement,
during the period specified in the preceding sentence, the Company shall not,
and shall not permit any of its subsidiaries to, without the prior written
consent of the Parent (not to be unreasonably withheld), (a) except for
issuances of capital stock of the Company's subsidiaries to the Company or to a
wholly-owned subsidiary of the Company, issue, sell or pledge, or authorize or
propose the issuance, sale or pledge of (i) additional shares of capital stock
of any class (including the Shares) or any other ownership interest in any of
its subsidiaries, or securities convertible into or exchangeable for any such
shares or ownership interest or any rights, warrants or options to acquire or
with respect to any such shares of capital stock, ownership interest or other
convertible or exchangeable securities, or grant or accelerate any right to
convert or exchange any securities for any such shares (including the Shares) or
ownership interest, other than Shares issuable upon exercise of the Options, or
(ii) any other securities in respect of, in lieu of or in substitution for
Shares outstanding on the date of this agreement; (b) otherwise acquire or
redeem, directly or indirectly, any of its outstanding securities (including the
Shares); (c) split, combine or
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reclassify its capital stock or declare, set aside, make or pay any dividend or
distribution (whether in cash, stock or property) on any shares of capital stock
of the Company or any of its subsidiaries (other than cash dividends paid to the
Company by its wholly-owned subsidiaries); (d) make any acquisition, by means of
a merger or otherwise, of assets or securities, or any sale, lease, encumbrance
or other disposition of assets or securities, in each case other than in the
ordinary course of business and in circumstances not requiring approval of its
board of directors; (e) incur or assume any debt for borrowed money (other than
short-term debt pursuant to existing credit facilities); (f) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person (except
wholly-owned subsidiaries of the Company), except in the ordinary course of
business; (g) make any loans, advances or capital contributions to, or
investments in, any other person (except wholly-owned subsidiaries of the
Company), in each case other than in the ordinary course of business; (h) change
any of the accounting principles or practices used by it or any of its
subsidiaries, except as required by the SEC or by United States generally
accepted accounting principles; (i) make any tax election not required by law or
settle or compromise any federal, state or local income tax liability, in each
case that is material to the Company and its subsidiaries taken as a whole; (j)
adopt any amendments to its certificate of incorporation or by-laws; (k) grant
any stock related or performance awards; (l) forgive any loans to employees,
officers or directors of more than $10,000 with respect to any particular
individual; (m) enter into any new employment, severance, consulting or salary
continuation agreements with any officers, directors or employees other than as
contemplated by this agreement; (n) adopt, amend or terminate any material
employee benefit plan, except in the ordinary course of business or as required
by law or as necessary to maintain tax qualified status; or (o) agree in writing
or otherwise to take any of the foregoing actions or any action that would make
any representation or warranty in this agreement untrue or incorrect in any
material respect as of the date when made or as of a future date or otherwise
would result in any of the conditions set forth in exhibit A not being
satisfied.
6.2 NO SOLICITATION
(a) Until the termination of this agreement, the Company shall not,
and shall not permit any of its subsidiaries, or any of its or their officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by the
Company or any of its subsidiaries), to, directly or indirectly, initiate,
solicit or knowingly encourage (including by way of furnishing non-public
information or assistance), or take any other action knowingly to facilitate,
any inquiries or the making of any proposal that constitutes, or
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may reasonably be expected to lead to, an Acquisition Proposal (as defined
below), or enter into or maintain or continue discussions or negotiate with any
person or entity in furtherance of such inquiries or to obtain an Acquisition
Proposal or agree to or endorse any Acquisition Proposal, or authorize or permit
any of its or their officers, directors or employees or any of its subsidiaries
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to take any such
action; PROVIDED, HOWEVER, that nothing in this agreement shall prohibit the
board of directors of the Company from furnishing information to, or entering
into, maintaining or continuing discussions or negotiations with, any person or
entity that (a) has made inquiries or proposals prior to the date of this
agreement regarding an Acquisition Proposal or (b) makes an unsolicited
Acquisition Proposal, if the board of directors of the Company, after
consultation with and based upon the advice of independent legal counsel (who
may be the Company's regularly engaged independent legal counsel), determines in
good faith that such action is necessary for the board of directors of the
Company to comply with its fiduciary duties to stockholders under applicable law
and, prior to taking such action, the Company (i) provides reasonable notice to
the Parent to the effect that it is taking such action (unless the board of
directors of the Company determines in good faith after consultation with and
based upon the advice of independent legal counsel that giving such notice would
breach the fiduciary duties of the board in connection with an Acquisition
Proposal that is more favorable to the stockholders of the Company than the
Offer and the Merger (a "Superior Proposal")) and (ii) receives from such person
or entity an executed confidentiality agreement in reasonably customary form.
The Company shall use reasonable efforts to keep the Parent informed of the
status of any such Acquisition Proposal (unless the board of directors of the
Company determines in good faith after consultation with and based upon the
advice of independent legal counsel that keeping the Parent so informed would
breach the fiduciary duties of the board in connection with a Superior
Proposal). For purposes of this agreement, "Acquisition Proposal" means an
inquiry, offer or proposal regarding any of the following (other than the
transactions contemplated by this agreement with the Parent or Sub) involving
the Company or any of its subsidiaries: (w) any merger, consolidation, share
exchange, recapitalization, business combination or other similar transaction;
(x) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of all or substantially all the assets of the Company and its subsidiaries,
taken as a whole, in a single transaction or series of related transactions; (y)
any tender offer or exchange offer for 20 percent or more of the outstanding
shares of capital stock of the Company or the filing of a registration statement
under the Securities Act of 1933 in connection therewith; or (z) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
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(b) Except as set forth in this section 6.2(b), the board of
directors of the Company shall not (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Parent or the Sub, the approval
or recommendation by the board of directors of the Offer, this agreement or the
Merger, (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal or (iii) cause the Company to enter into any agreement with
respect to any Acquisition Proposal. Notwithstanding the foregoing, in the
event that prior to the time of acceptance for payment of Shares in the Offer
the board of directors of the Company determines in good faith, after
consultation with and based upon the advice of independent legal counsel, that
it is necessary to do so in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, the board of directors of the
Company may withdraw or modify its approval or recommendation of the Offer, this
agreement and the Merger, approve or recommend a Superior Proposal or cause the
Company to enter into an agreement with respect to a Superior Proposal. The
Company shall provide reasonable notice to the Parent or the Sub to the effect
that it is taking such action. If the Company proposes to enter into an
agreement with respect to any Superior Proposal, it shall concurrently with
proposing such an agreement pay, or cause to be paid, to the Parent the fee
provided for in section 6.10.
6.3 ACCESS TO INFORMATION
(a) Subject to any limitations imposed by applicable law, between the
date of this agreement and the Control Date, the Company shall (i) give the
Parent and Sub and their authorized representatives all reasonable access
(during regular business hours upon reasonable notice) to all employees, plants,
offices, warehouses and other facilities and to all books and records
(including, without limitation, tax returns) of the Company and its subsidiaries
and cause the Company's and its subsidiaries' independent accountants to provide
access to their work papers and such other information as the Parent or Sub may
reasonably request, (ii) permit the Parent and Sub to make such inspections as
they may reasonably require and (iii) cause its officers and those of its
subsidiaries to furnish the Parent and Sub with such financial and operating
data and other information with respect to the business, properties and
personnel of the Company and its subsidiaries as the Parent or Sub may from time
to time reasonably request.
(b) All information obtained by the Parent or Sub pursuant to this
section 6.3 shall constitute Evaluation Material and shall be subject to the
provisions of the letter agreement dated May 15, 1995 between the Parent and the
Company (the "Confidentiality Agreement") relating to the confidential treatment
of Evaluation Material (as defined in the Confidentiality Agreement).
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6.4 REASONABLE EFFORTS. Subject to the terms of this agreement and the
fiduciary duties of the board of directors of the Company under applicable law
as advised by independent legal counsel, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable law to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this agreement. Without limiting
the foregoing, (a) the Company and its board of directors shall use all
reasonable efforts promptly to make any required submissions under the HSR Act
that the Company and Parent determine should be made, in each case with respect
to the Offer, the Merger and the transactions contemplated by this agreement,
and (b) the parties shall cooperate with one another (i) in promptly determining
whether any filings are required to be or should be made or consents, approvals,
permits or authorizations are required to be or should be obtained under any
other federal, state or foreign law or regulation or whether any consents,
approvals or waivers are required to be or should be obtained from other parties
to loan agreements or other contracts or instruments material to the Company's
business in connection with the consummation of the Offer, the Merger and the
transactions contemplated by this agreement, and (ii) in promptly making any
such filings, furnishing information required in connection with such filings
and seeking to obtain timely any such consents, permits, authorizations,
approvals or waivers.
6.5 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
(a) The Parent and Sub agree that all rights to indemnification or
exculpation now existing in favor of the directors, officers, employees and
agents of the Company and its subsidiaries as provided in their respective
charters or by-laws or otherwise in effect as of the date of this agreement with
respect to matters occurring prior to the Effective Time shall survive the
Merger and shall continue in full force and effect. To the maximum extent
permitted by the DGCL, such indemnification shall be mandatory rather than
permissive and the Surviving Corporation shall advance expenses in connection
with such indemnification. The by-laws of the Surviving Corporation shall
contain provisions substantially similar to the provisions with respect to
indemnification and insurance set forth in Article ELEVENTH of the Company's
restated certificate of incorporation, as amended, which provisions shall not be
amended in any manner that would adversely affect the rights under those by-laws
of the Company's employees, agents, directors or officers for acts or omissions
on or prior to the Effective Time, except if such amendment is required by law.
(b) In addition to the rights provided for in section 6.5(a), and not
in limitation of those rights, the Parent shall cause the Surviving Corporation
to indemnify, defend and hold
26
<PAGE>
harmless each present and former director and officer, employee and agent of the
Company and its subsidiaries ("Indemnified Parties") to the fullest extent
permitted by law for all claims, losses, damages, liabilities, costs, judgments
and amounts paid in settlement, including advancement of expenses (including
attorneys' fees) as incurred in respect of any threatened, pending or
contemplated claim, action, suit or proceeding, whether criminal, civil,
administrative or investigative, including, without limitation, any action by or
on behalf of any or all security holders of the Company or by or in the right of
the Company or the Surviving Corporation, or investigation relating to any
action or omission by such party in its capacity as such (including service to
any other entity, plan, trust or the like at the Company's request) occurring on
or prior to the Effective Time (including, without limitation, any that arise
out of or relate to the transactions contemplated by this agreement).
(c) The Parent shall cause the Surviving Corporation to maintain in
effect for not fewer than six years from the Effective Time the policies of
directors' and officers' liability insurance most recently maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies with reputable and financially sound carriers of at least the same
coverage and containing terms and conditions no less advantageous, as long as
such substitution does not result in gaps or lapses in coverage) with respect to
claims arising from or related to matters occurring prior to the Effective Time;
PROVIDED, HOWEVER, that in no event shall the Surviving Corporation be required
to expend more than an amount per year equal to 200% of the current annual
premiums paid by the Company (the "Premium Amount") to maintain or procure
insurance coverage pursuant to this section 6.5(c); and FURTHER PROVIDED that,
if the Surviving Corporation is unable to obtain the insurance called for by
this section 6.5(c), the Surviving Corporation shall obtain as much comparable
insurance as is available for the Premium Amount per year. The Parent shall
cause the Surviving Corporation to pay all expenses (including reasonable
attorneys' fees) that may reasonably be incurred by the Indemnified Party in
successfully enforcing the rights to which the Indemnified Party is entitled
under this agreement or the Surviving Corporation's by-laws or is otherwise
entitled. The Parent agrees that, should the Surviving Corporation fail to
comply with the foregoing obligations, the Parent shall be responsible for those
obligations.
(d) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of
27
<PAGE>
the Surviving Corporation or Parent shall assume its obligations set forth in
this section 6.5.
(e) The provisions of this section 6.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her personal representatives.
6.6 STATE TAKEOVER STATUTES. The Company shall, upon the request and at
the expense of the Parent, take all reasonable steps to assist in any challenge
by the Parent or the Sub to the validity, or applicability to the Offer or
Merger, of any state takeover law.
6.7 PROXY STATEMENT. Unless the Merger is consummated in accordance with
section 253 of the DGCL as contemplated by section 2.9, the Company shall
prepare and file with the SEC, and in consultation with the Parent and Sub, as
soon as practicable after the consummation of the Offer, a preliminary proxy or
information statement (the "Preliminary Proxy Statement") relating to the Merger
in accordance with the Exchange Act and the rules and regulations under the
Exchange Act, with respect to the transactions contemplated by this agreement.
The Company, the Parent and the Sub shall cooperate with each other in the
preparation of the Preliminary Proxy Statement. The Company shall use all
reasonable efforts to respond promptly to any comments made by the SEC with
respect to the Preliminary Proxy Statement, and to cause the Proxy Statement to
be mailed to the Company's stockholders at the earliest practicable date.
6.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice
to the Parent and Sub, and the Parent or Sub, as the case may be, shall give
prompt notice to the Company, of (a) the occurrence or non-occurrence of any
event the occurrence, or non-occurrence of which is likely to cause any
representation or warranty of that party in this agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (b) any
failure of that 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 the delivery of any notice pursuant to this section 6.8 shall not
limit or otherwise affect the remedies available under this agreement to any of
the parties receiving such notice.
6.9 COMPLIANCE WITH ISRA. The Company has complied or shall comply with
all obligations imposed by the New Jersey Industrial Site Recovery Act ("ISRA"),
all regulations promulgated under ISRA and all directives, orders and
requirements of the New Jersey Department of Environmental Protection ("NJDEP")
issued under ISRA and resulting from this agreement.
28
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6.10 FEES AND EXPENSES
(a) Whether or not the Merger is consummated and except as otherwise
provided in this section 6.10, all costs and expenses incurred in connection
with this agreement and the transactions contemplated by this agreement shall be
paid by the party incurring the expense.
(b) The Company agrees to pay the Parent a fee in immediately
available funds equal to $6,000,000 upon the termination of this agreement by
the Parent pursuant to Section 8.1(f) or by the Company pursuant to Section
8.1(g).
6.11 EMPLOYEE BENEFITS. The Parent and Sub agree that, for a period of at
least two years following the Effective Time, the Surviving Corporation shall
maintain benefit plans for the employees of the Company and its subsidiaries
with terms that, in the aggregate, are substantially equivalent or better than
those in the benefit plans now in place for such employees, to the extent
permitted under laws and regulations in force from time to time; to the extent
appropriate to carry out the foregoing, the Parent agrees that, following the
Effective Time, employees of the Surviving Corporation shall be eligible to
participate in the Parent's various compensation plans on a basis comparable to
that of similarly situated employees of the Parent and its subsidiaries.
7. CONDITIONS TO CONSUMMATION OF THE MERGER. The obligation of each party to
effect the Merger is subject to the satisfaction or waiver, where permissible,
prior to the proposed Effective Time, of the following conditions:
(a) unless the Merger is consummated pursuant to section 253 of the
DGCL as contemplated by section 2.9, the agreement of merger in this agreement
shall have been approved and adopted by the affirmative vote of the stockholders
of the Company required by and in accordance with applicable law;
(b) all necessary waiting periods under the HSR Act applicable to the
Merger shall have expired or been terminated;
(c) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
court or governmental authority against the Parent, the Sub or the Company and
be in effect that prohibits or restricts the consummation of the Merger or makes
such consummation illegal (each party agreeing to use all reasonable efforts to
have such prohibition lifted); and
(d) the Parent or the Sub, as applicable, shall have accepted for
purchase and paid for the Shares tendered and not withdrawn pursuant to the
Offer; PROVIDED, HOWEVER, that this
29
<PAGE>
condition shall be deemed satisfied with respect to the Parent and Sub, if the
Parent or the Sub, as applicable, shall have failed to purchase Shares pursuant
to the Offer in violation of this agreement or the terms of the Offer.
8. TERMINATION; AMENDMENT; WAIVER
8.1 TERMINATION. This agreement may be terminated and the Merger
abandoned at any time, notwithstanding approval of the Merger by the
stockholders of the Company, but prior to the Effective Time:
(a) by mutual written consent of the boards of directors of the
Company and Parent, subject, in the case of the Company, to section 1.4(b);
(b) by the Parent or Company, if, without any material breach by such
terminating party of its obligations under this agreement, the purchase of
Shares pursuant to the Offer shall not have occurred on or before November 30,
1995;
(c) by the Parent or the Company, if the Offer expires or is
terminated or withdrawn pursuant to its terms without any Shares being purchased
in accordance with section 1.1(b); PROVIDED, HOWEVER, that the Parent may not
terminate this agreement pursuant to this section 8.1(c), if the Parent's
termination of, or its or the Sub's failure to accept for payment or pay for any
Shares tendered pursuant to, the Offer does not follow the occurrence, or
failure to occur, as the case may be, of any condition set forth in exhibit A or
is otherwise in violation of the terms of the Offer or this agreement;
(d) by the Parent or the Company, if any court of competent
jurisdiction shall have issued an order (other than a temporary restraining
order), decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the purchase of Shares pursuant to the Offer or the
Merger; PROVIDED, HOWEVER, that the party seeking to terminate this agreement
shall have used its reasonable best efforts, subject to section 6.4, to remove
or lift such order, decree or ruling;;
(e) by the Company, if the Offer has not been timely commenced in
accordance with section 1.1;
(f) by the Parent, if the board of directors of the Company shall
withdraw, modify or change its recommendation or approval in respect of this
agreement or the Offer in a manner adverse to the Parent or the board of
directors of the Company shall have approved or recommended any proposal other
than by the Parent or Sub in respect of an Acquisition Proposal;
30
<PAGE>
(g) assuming the Company shall not have contravened section 6.2, by
the Company, to allow the Company to enter into an agreement in respect of an
Acquisition Proposal; and
(h) prior to the consummation of the Offer, by the Company, if any of
the representations or warranties of the Parent or Sub in this agreement were
untrue or incorrect in any material respect when made or have since become, and
at the time of termination remain, untrue or incorrect in any material respect,
or the Parent or Sub shall have breached or failed to comply in any material
respect with any of its obligations under this agreement, or any other events or
circumstances have occurred that render the conditions set forth in section 7,
as applicable to the Company's obligation to effect the Merger, not able to be
satisfied on or before November 30, 1995.
8.2 EFFECT OF TERMINATION. If this agreement is terminated and the Merger
abandoned pursuant to section 8.1, this agreement, except for sections 6.3(b)
and 6.10 and (to the extent applicable to the foregoing sections), section 9,
shall forthwith become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders. Nothing in this
section 8.2 shall relieve any party of liability for breach of this agreement.
8.3 AMENDMENT. To the extent permitted by applicable law, this agreement
may be amended by action by or on behalf of the boards of directors of the
Company, the Parent and the Sub, subject, in the case of the Company, to section
1.4(b), at any time before or after adoption of this agreement by the
stockholders of the Company, but, after any such stockholder approval, no
amendment shall be made that decreases the Merger Consideration or adversely
affects the rights of the Company's stockholders under this agreement, without
the approval of the stockholders of the Company. This agreement may not be
amended, except by an instrument in writing signed on behalf of all the parties.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties, by action by or on behalf of the boards of directors of the Company,
the Parent and the Sub, subject, in the case of the Company, to section 1.4(b),
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties in this agreement, (b) waive any inaccuracies in the
representations and warranties by any other party or in any document,
certificate or writing delivered pursuant to this agreement by any other party
or (c) waive compliance with any of the agreements or conditions in this
agreement. Any agreement by any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of that
party.
31
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9. MISCELLANEOUS
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties in
sections 4 and 5 shall not survive beyond the Effective Time.
9.2 ENFORCEMENT OF THE AGREEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction to prevent breaches of this agreement and to enforce specifically the
terms and provisions of this agreement in any federal or state court located in
the state of Delaware (as to which the parties agree to submit to jurisdiction
for the purposes of such action), this being in addition to any other remedy to
which they are entitled at law or in equity.
9.3 VALIDITY. The invalidity or unenforceability of any provision of this
agreement shall not affect the validity or enforceability of any other provision
of this agreement, which shall remain in full force and effect, unless the
invalidity or unenforceability of such provision would (a) result in such a
material change to this agreement as to be unreasonable, or (b) materially or
adversely frustrate the obligations of the parties in this agreement as
originally written.
9.4 NOTICES. All notices, requests, claims, demands and other
communications under this agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, by facsimile transmission with
confirmation of receipt, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
if to the Parent or Sub:
Schein Pharmaceutical, Inc.
100 Campus Drive
Florham Park, New Jersey 07932
Telecopier: (201) 593-5820
Attention: Mr. Martin Sperber, Chairman and
Chief Executive Officer
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Telecopier: (212) 969-2900
Attention: Richard L. Goldberg, Esq.
32
<PAGE>
if to the Company:
Marsam Pharmaceuticals Inc.
Building 31
Olney Avenue
Cherry Hill, New Jersey 08003
Telecopier: (609) 751-8784
Attention: President
with copies to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10006
Telecopier: (212) 310-8774
Attention: Dennis J. Block, Esq.
and
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, Pennsylvania 19103-7396
Telecopier: (215) 979-1213
Attention: Frederick W. Dreher, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt of notice of the change).
9.5 GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the law of the state of Delaware, regardless of the law that
might otherwise govern under principles of conflicts of laws applicable thereto.
9.6 HEADINGS. The headings in this agreement are for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this agreement.
9.7 PARTIES IN INTEREST. This agreement shall be binding upon and inure
solely to the benefit of each party to this agreement, and nothing in this
agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature under or by reason of this agreement, except
for section 6.5 (which is intended to be for the benefit of the persons referred
to in that section, and may be enforced by such persons).
9.8 COUNTERPARTS. This agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
33
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9.9 CERTAIN DEFINITIONS.
(a) "Material Adverse Effect" means any adverse change in the
business or financial condition of the Company or its subsidiaries that is
material to the Company and its subsidiaries taken as a whole.
(b) A "subsidiary" of any entity is another entity a majority of the
outstanding voting securities of which are beneficially owned by the first
entity.
(c) "Tax" means all taxes or similar governmental charges, duties,
imposts or levies (including, without limitation, income taxes, franchise taxes,
gross receipt taxes, occupation taxes, real and personal property taxes,
transfer taxes or fees, stamp taxes, sales taxes, use taxes, excise taxes, ad
valorem taxes, withholding taxes, employee withholding taxes, worker's
compensation, payroll taxes, unemployment insurance, social security, minimum
taxes, customs duties or windfall profits taxes), together with any related
liabilities, penalties, fines, additions to tax or interest, imposed by any
country, any state, county, provincial or local government or any subdivision or
agency of any of the foregoing.
9.10 PRESS RELEASES. The Parent, the Sub and the Company shall consult
with each other before issuing any press release or otherwise making any public
statement with respect to the transactions contemplated by this agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law or by obligations
pursuant to any agreement with NASDAQ/NMS.
9.11 ENTIRE AGREEMENT. Except for the Confidentiality Agreement and the
Disclosure Letter, this agreement constitutes the entire agreement among the
parties with respect to its subject matter and supersedes all other prior
agreements and
34
<PAGE>
understandings, both written and oral, among the parties with respect to that
subject matter.
SCHEIN PHARMACEUTICAL, INC.
By:
--------------------------------------
Name:
Title:
SM ACQUIRING CO., INC.
By:
--------------------------------------
Name:
Title:
MARSAM PHARMACEUTICALS INC.
By:
--------------------------------------
Name:
Title:
35
<PAGE>
EXHIBIT A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, the Sub shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, to pay
for any Shares tendered, and may postpone the acceptance for payment or, subject
to the restriction referred to above, payment for any Shares tendered, and,
subject to the provisions of the Merger Agreement, may terminate the Offer
(whether or not any Shares have theretofore been purchased or paid for), if, (1)
there have not been validly tendered and not withdrawn prior to the time the
Offer shall otherwise expire a number of Shares that constitutes a majority of
the Shares outstanding on a fully-diluted basis on the date of purchase ("on a
fully-diluted basis" meaning, as of any date, the number of Shares outstanding,
together with Shares the Company is then required to issue pursuant to
obligations outstanding at that date under employee stock option or other
benefit plans or otherwise), (2) any applicable waiting periods under the HSR
Act shall not have expired or been terminated prior to the expiration of the
Offer or (3) at any time before acceptance for payment of, or payment for, such
Shares, any of the following events shall occur or be deemed to have occurred:
(A) there shall be pending by any governmental entity any suit,
action or proceeding (1) challenging the acquisition by the Parent or Sub
of any Shares under the Offer or seeking to restrain or prohibit the making
or consummation of the Offer or Merger, (2) seeking to prohibit or
materially limit the ownership or operation by the Company, the Parent or
any of their respective subsidiaries of a material portion of the business
or assets of the Company and its subsidiaries, taken as a whole, or the
Parent and its subsidiaries, taken as a whole, or to compel the Company or
the Parent to dispose of or hold separate any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or the Parent and its subsidiaries, taken as a whole, as a result of the
Offer or any of the other transactions contemplated by this agreement, (3)
seeking to impose material limitations on the ability of the Parent or Sub
to acquire or hold, or exercise full rights of ownership of, any Shares
accepted for payment pursuant to the Offer, including, without limitation,
the right to vote such Shares on all matters properly presented to the
stockholders of the Company, or (4) seeking to prohibit the Parent or any
of its subsidiaries from effectively controlling in any material respect
any material portion of the business or operations of the Company and its
subsidiaries; or
A-1
<PAGE>
(B) any governmental entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order that is in effect and that (1) materially restricts, prevents or
prohibits consummation of the Offer, the Merger or any material transaction
contemplated by the Merger Agreement, (2) prohibits or limits materially
the ownership or operation by the Company, the Parent or any of their
subsidiaries of all or any material portion of the business or assets of
the Company and its subsidiaries taken as a whole, or compels the Company,
the Parent or any of their subsidiaries to dispose of or hold separate all
or any material portion of the business or assets of the Company and its
subsidiaries taken as a whole, (3) imposes material limitations on the
ability of the Parent or any of its subsidiaries to exercise effectively
full rights of ownership of any Shares, including, without limitation, the
right to vote any Shares acquired by the Sub pursuant to the Offer or
otherwise on all matters properly presented to the Company's stockholders,
including, without limitation, the approval and adoption of the Merger
Agreement and the transactions contemplated by the Merger Agreement, or (4)
requires divestitures by the Parent, the Sub or any other affiliate of the
Parent of any Shares; provided that the Parent shall have used all
reasonable efforts to cause any such decree, judgment, injunction or other
order to be vacated or lifted; or
(C) the representations and warranties of the Company in the Merger
Agreement were untrue or incorrect in any material respect when made or
(except for those that address matters as of a specific date and except for
changes specifically permitted by the Merger Agreement) thereafter become
and remain untrue or incorrect in any material respect; or
(D) the Company shall have breached or failed to comply in any
material respect with any of its obligations under the Merger Agreement
and, with respect to any such breach or failure that can be remedied, the
breach or failure is not remedied within 10 business days after the Parent
has furnished the Company written notice of such breach or failure; or
(E) the Merger Agreement shall have been terminated in accordance
with its terms; or
(F) the board of directors of the Company shall have withdrawn or
materially modified or changed (including by amendment of the Schedule 14D-
9) in a manner adverse to the Sub its recommendation of the Offer, the
Merger Agreement or
A-2
<PAGE>
the Merger, or the board of directors of the Company shall have approved or
recommended an Acquisition Proposal; or
(G) it shall have been publicly disclosed or the Sub shall have
otherwise learned that, except as contemplated by the stockholders
agreement dated July 28, 1995 among the Parent and certain stockholders of
the Company, any person or "group" (as defined in section 13(d)(3) of the
Exchange Act), other than the Parent or its affiliates or any group of
which any of them is a member, shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 under the Exchange Act) of more than 25
percent of the Shares, through the acquisition of stock, the formation of a
group or otherwise, or shall have been granted an option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 25
percent of the Shares; or
(H) there shall have occurred and continued for at least three
business days (1) any general suspension of, or limitation on prices for,
trading in securities on any national securities exchange or in the over-
the-counter market in the United States, (2) the declaration of any banking
moratorium or any suspension of payments in respect of banks, or any
limitation (whether or not mandatory) by any governmental entity on, or
other event materially adversely affecting, the extension of credit by
lending institutions in the United States or (3) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof; or
(I) for each real property owned or operated by the Company or any of
its subsidiaries located in the state of New Jersey, the Company shall not
have complied with the obligations imposed by ISRA by either: (1) securing
and providing a copy to the Parent and Sub of a letter of non-
applicability, (2) securing and providing a copy to the Parent and Sub of a
written approval by NJDEP of a negative declaration submitted by the
Company, (3) securing and providing a copy to the Parent and Sub of a no
further action letter from NJDEP, (4) filing a DE MINIMUS Quantity
Exemption Affidavit and providing the Parent and Sub with a copy evidencing
the filing, (5) securing and providing a copy to the Parent and Sub of a
letter of authorization from NJDEP for the transfer of ownership or (6)
securing written approval by NJDEP of a Remediation Agreement and providing
a copy to the Parent and Sub;
which, in the judgment of the Parent in any such case, and regardless of the
circumstances (including any action or omission by the Parent or Sub) giving
rise to any such condition, makes it inadvisable to proceed with such acceptance
for payment or payments.
A-3
<PAGE>
The foregoing conditions are for the sole benefit of the Parent, the
Sub and their affiliates and may be asserted by the Parent or Sub regardless of
the circumstances (including, without limitation, any action or inaction by the
Parent, the Sub or any of their affiliates) giving rise to any such condition or
may be waived by the Parent or Sub, in whole or in part, from time to time in
its sole discretion, except as otherwise provided in the Merger Agreement. The
failure by the Parent or Sub at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right and may be asserted at any time and from time to time.
Unless otherwise defined in this exhibit A, capitalized terms used in this
exhibit A have the meanings ascribed to them in the Merger Agreement among the
Parent, the Sub and the Company to which this exhibit A is attached (the "Merger
Agreement").
<PAGE>
SCHEDULE 2.5
Marvin Samson*
Agnes Varis*
Allen Misher*
Three individuals to be designated by the Parent
One employee of Bayer Corporation or any of its affiliates (other
than the Parent and its subsidiaries) to be designated by the Parent
(subject to the approval thereof by Marvin Samson, which approval
shall not be unreasonably withheld).
__________________________
* Continuing Directors. If any Continuing Director is not willing to serve,
or capable of serving, as a director of the Surviving Corporation, a
replacement will be designated by the other Continuing Directors.
<PAGE>
Exhibit 2
STOCKHOLDERS AGREEMENT
DATED JULY 28, 1995
The parties to this agreement are Schein Pharmaceutical, Inc., a
Delaware corporation (the "Parent"), SM Acquiring Co., Inc., a Delaware
corporation and a subsidiary of the Parent (the "Sub"), and the other parties to
this agreement (each, a "Stockholder", and, collectively, the "Stockholders").
Simultaneously with the execution and delivery of this agreement and
in reliance on the parties entering into this agreement, the Parent, the Sub and
Marsam Pharmaceuticals, Inc., a Delaware corporation (the "Company"), are
entering into an agreement and plan of merger (the "Merger Agreement"), pursuant
to which the Sub will merge into the Company (the "Merger"). Under the Merger
Agreement, the Parent or Sub will commence a cash tender offer to purchase all
the outstanding shares of common stock of the Company (the "Shares").
The parties agree as follows:
1. TENDER OF SHARES. Each Stockholder shall validly tender (and not
withdraw) pursuant to and in accordance with the Offer (as defined in the Merger
Agreement), not later than the tenth business day after commencement of the
Offer pursuant to section 1.1 of the Merger Agreement, the number of shares of
common stock of the Company set forth opposite that Stockholder's name on
schedule 1 (the "Existing Shares") beneficially owned by the Stockholder. Each
Stockholder agrees that the Parent's obligation to accept for payment and pay
for Shares in the Offer is subject to the terms and conditions of the Offer.
The Parent and Sub agree that Shares (as such term is defined in the Merger
Agreement) may not be accepted for payment in the Offer in violation of the
terms of the Merger Agreement. The Stockholders shall have no obligation under
this section 1 after the earliest of (a) the termination, expiration,
abandonment or withdrawal of the Offer, (b) December 30, 1995 and (c) the
termination of the Merger Agreement in accordance with clause (a), (b), (c),
(d), (e) or (h) of section 8.1 of the Merger Agreement. In addition, no
Stockholder shall have any obligation under this section 1 in the event that the
Parent has taken any action with respect to or in connection with the Offer
that, pursuant to the provisions of section 1.1(a) of the Merger Agreement, the
Parent is prohibited from taking without the prior written consent of the
Company, unless such Stockholder has given its written consent to such action.
2. VOTING OF SHARES. At any meeting of stockholders of the Company
or in connection with any written consent of
<PAGE>
stockholders of the Company, each Stockholder shall vote (or cause to be voted)
all the Shares beneficially owned by that Stockholder as of the applicable
record date (other than Shares that are not outstanding) (a) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval of the terms of the Merger Agreement; (b) against any action or
agreement that would result in a breach of any agreement of the Company under
the Merger Agreement; and (c) against any other action that could reasonably be
expected to interfere with, delay or otherwise adversely affect the Merger and
the transactions contemplated by the Merger Agreement. The Stockholders shall
have no obligation under this section 2 or under section 8 after the earlier of
(a) December 30, 1995 and (b) the termination of the Merger Agreement in
accordance with its terms. In addition, no Stockholder shall have any
obligation under this section 2 or under section 8 following any decrease in, or
change in the form of, the consideration payable to stockholders of the Company
in the Merger, unless that Stockholder shall have given its consent to the
decrease or change.
3. OPTIONS
(a) Each Stockholder grants the Parent an irrevocable option
(collectively, the "Stock Options") to purchase the number of Shares set forth
opposite that Stockholder's name on schedule 1 (the "Option Shares") at a
purchase price per Share equal to the price per Share payable in the Offer (the
"Purchase Price"). If (a) the Offer is terminated, abandoned or withdrawn by
the Parent or Sub due to the failure of the condition to the Offer set forth in
clause (1) or in sub-clause (C), (D), (F) or (G) of clause (3) of exhibit A to
the Merger Agreement, (b) the Offer is terminated, abandoned or withdrawn by the
Parent or Sub in a circumstance referred to in section 8.1(d) of the Merger
Agreement that involves a suit, action or proceeding by a party that has made an
Acquisition Proposal (as defined in the Merger Agreement) or (c) the Offer is
consummated but the Parent or the Sub has not accepted for payment and paid for
the aggregate number of Shares set forth opposite each Stockholder's name on
schedule 1 and such non-acceptance and non-payment is not in contravention of
the Parent's or Sub's obligations under the Merger Agreement or the Offer, the
Stock Options shall, in each case, become exercisable, in whole but not in part,
upon the first to occur of any such event and remain exercisable in whole but
not in part until 30 days after the date of the occurrence of that event, as
long as: (y) all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") required for the purchase of the Option
Shares upon such exercise shall have expired or been waived, and (z) there shall
not be in effect any injunction or other order issued by any court or
governmental, administrative or regulatory agency or authority prohibiting the
exercise of the Stock Options. If the Parent wishes to exercise
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the Stock Options, the Parent shall send a written notice to the Stockholders
identifying the place and date (not fewer than two nor more than 10 business
days from the date of the notice) for the closing of the purchase.
Notwithstanding the foregoing, if the Parent exercises the Stock Options, (i)
the Parent shall, within 30 calendar days after the date of exercise, offer to
all other stockholders of the Company the opportunity to sell their shares of
common stock of the Company to the Parent on the same terms provided in this
section 3 with respect to the purchase of Shares upon the exercise of Stock
Options, subject only to the conditions set forth in clauses (y) and (z) in this
section 3 and in clause (3)(I) of exhibit A to the Merger Agreement, and (ii) if
the amount of cash or fair value of consideration per share paid in that tender
offer or otherwise (including, without limitation, in a merger) for the
acquisition of Shares by the Parent or any of its affiliates (as defined in
section 3(b)) at any time within 183 days after the purchase of Shares pursuant
to the Stock Options exceeds the amount per Share paid upon the purchase of
Shares pursuant to the Stock Options, the Parent shall promptly pay each
Stockholder an amount equal to the product of that excess and the number of
Shares sold by that Stockholder pursuant to the Stock Options. Anything in this
agreement to the contrary notwithstanding, (i) no Stockholder shall have any
obligation under this section 3(a) if the Stock Options have not been exercised
in accordance with this section 3(a) on or prior to December 30, 1995, and (ii)
no Stock Option may be exercised in respect of the Option Shares of any
Stockholder on or after the date, if any, on which such Stockholder has no
obligation under section 1 of this agreement by reason of the provisions of the
last sentence of section 1 of this agreement.
(b) If the Parent purchases Shares pursuant to the Stock Options,
and, at any time(s) within 183 days after the consummation of the purchase, the
Parent or any of its affiliates (as such term is defined in Rule 405 under the
Securities Act of 1933) sells, exchanges or otherwise disposes of any of those
Shares, or agrees to sell, exchange or otherwise dispose of any of those Shares,
voluntarily or otherwise (including, without limitation, pursuant to a merger),
and if the cash or fair value of the consideration per Share received in
exchange exceeds the Purchase Price, then the Parent shall promptly pay or
deliver an aggregate of 60% of that excess to the respective Stockholders pro
rata in relation to the number of Shares sold by them pursuant to the Stock
Options.
(c) The Parent shall not offer, sell or otherwise dispose of any
Shares purchased pursuant to the Stock Options in violation of applicable
federal or state securities laws.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder represents and warrants to the Parent as follows:
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(a) OWNERSHIP OF SHARES. That Stockholder is the beneficial owner of
not fewer than the number of Shares set forth opposite that Stockholder's name
on schedule 1. That Stockholder has sole voting power and sole power to issue
instructions with respect to the matters set forth in sections 1 and 2, sole
power of disposition, sole power to demand appraisal rights and sole power to
agree to all the matters set forth in this agreement, in each case with respect
to all the Existing Shares set forth opposite that Stockholder's name on
schedule 1. That Stockholder's Existing Shares are held by that Stockholder, or
by a nominee or custodian for the benefit of that Stockholder, free and clear of
all liens, claims, security interests and other encumbrances, except for
encumbrances arising under this agreement.
(b) POWER; BINDING AGREEMENT. That Stockholder has the legal
capacity to enter into and perform all of that Stockholder's obligations under
this agreement. The execution, delivery and performance of this agreement by
that Stockholder will not violate any other agreement to which that Stockholder
is a party, including, without limitation, any voting agreement, stockholders
agreement or voting trust. This agreement has been duly and validly executed
and delivered by that Stockholder and constitutes a valid and binding obligation
of that Stockholder, enforceable against that Stockholder in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and subject to
general principles of equity. There is no other person or entity whose consent
is required for the execution and delivery of this agreement by that Stockholder
or the consummation by that Stockholder of the transactions contemplated by this
agreement. If that Stockholder is married and that Stockholder's Shares
constitute community property, this agreement has been duly authorized, executed
and delivered by, and constitutes a valid and binding obligation of, that
Stockholder's spouse, enforceable against that spouse in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and subject to
general principles of equity.
(c) CONSENTS AND APPROVALS; NO VIOLATION. Assuming the compliance by
the Parent with section 3(c), neither the execution and delivery of this
agreement by that Stockholder nor the consummation by that Stockholder of the
transactions contemplated by this agreement will: (i) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except in connection with the HSR Act or
pursuant to the Securities Exchange Act of 1934; (ii) result in a default (or
give rise to a right of termination, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, license, agreement or other
instrument or obligation to which that
4
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Stockholder is a party or by which that Stockholder or any of that Stockholder's
assets may be bound; or (iii) violate any order, writ injunction, decree,
statute, rule or regulation applicable to that Stockholder or by which any of
that Stockholder's assets are bound.
(d) BROKERS. No broker, finder or other investment banker (with the
possible exception of Bear, Stearns & Co. Inc.) is entitled to any broker's,
finder's or other similar fee or commission in connection with this agreement or
the sale of that Stockholder's Option Shares pursuant to this agreement based
upon agreements made by or on behalf of that Stockholder.
5. REPRESENTATIONS AND WARRANTIES OF THE PARENT. The Parent
represents and warrants to the Stockholders as follows:
(a) POWER; BINDING AGREEMENT. The Parent has the corporate power and
authority to enter into and perform all its obligations under this agreement.
The execution, delivery and performance of this agreement by the Parent will not
violate any other agreement to which the Parent is a party. This agreement has
been duly and validly authorized, executed and delivered by the Parent and
constitutes a valid and binding obligation of the Parent, enforceable against
the Parent in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject to general principles of equity. There is no other
person or entity whose consent is required for the execution and delivery of
this agreement by the Parent or the consummation by the Parent of the
transactions contemplated by this agreement.
(b) CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this agreement by the Parent nor the consummation by the Parent of
the transactions contemplated by this agreement will: (i) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except in connection with the HSR Act or
pursuant to the Securities Exchange Act of 1934; (ii) result in a default (or
give rise to a right of termination, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, license, agreement or other
instrument or obligation to which the Parent is a party or by which the Parent
or any of its assets may be bound; or (iii) violate any order, writ injunction,
decree, statute, rule or regulation applicable to the Parent or by which any of
its assets are bound.
(c) BROKERS. No broker, finder or other investment banker (other
than Tanner & Co., Inc.) is entitled to any broker's, finder's or other similar
fee or commission in connection with this agreement or the transactions
contemplated
5
<PAGE>
by this agreement based upon agreements made by or on behalf of the Parent.
6. NO SOLICITATION. Prior to December 31, 1995, no Stockholder
shall, in that Stockholder's capacity as such, directly or indirectly, initiate,
solicit or knowingly encourage (including by way of furnishing non-public
information or assistance), or take any other action knowingly to facilitate,
any inquiries or the making of any proposal that constitutes, or reasonably may
be expected to lead to, an Acquisition Proposal (as defined in the Merger
Agreement), or enter into or maintain or continue discussions or negotiate with
any person or entity in furtherance of such inquiries or to obtain an
Acquisition Proposal, or agree to or endorse an Acquisition Proposal, or
authorize or permit any person or entity acting on behalf of that Stockholder to
do any of the foregoing. If any Stockholder receives any inquiry or proposal
regarding any Acquisition Proposal, that Stockholder shall promptly inform the
Parent of that inquiry or proposal. Anything in this agreement to the contrary
notwithstanding, the sole and exclusive remedy for any nonperformance or breach
by any Stockholder or Stockholders of the provisions of this section 6 shall be
an injunction or injunctions to prevent the breach of this section 6 and/or to
enforce specifically the terms and provisions of this section 6. Without
limiting the generality of the preceding sentence, it is expressly understood
and agreed that monetary damages shall not be awarded for any nonperformance or
breach of this section 6.
7. RESTRICTIONS ON TRANSFER, ETC. Except as provided in this
agreement, prior to the earliest of (a) December 31, 1995, (b) the termination,
abandonment, withdrawal or consummation of the Offer under circumstances other
than those referred to in clause (a), (b) or (c) of the second sentence of
section 3(a) of this agreement or (c) the 30th day after the termination of the
Merger Agreement in accordance with its terms, no Stockholder shall, directly
or indirectly: (i) except for transfers to that Stockholder's family or trusts
for the benefit of that Stockholder's family (provided that the transferee of
the Shares agrees in writing, in form reasonably satisfactory to the Parent, to
be bound by the terms of this agreement), offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, or enter into any
agreement, arrangement or understanding with respect to, or consent to the offer
for sale, transfer, tender, pledge, encumbrance, assignment or other disposition
of, any or all of that Stockholder's Existing Shares or any interest in those
Shares; or (ii) take any action (including the grant of any proxies or powers of
attorney with respect to any Shares, the deposit of any Shares into a voting
trust or the entry into a voting agreement with respect to any Shares) that
would make any representation or warranty of that Stockholder in this agreement
untrue in any material respect or have the effect of preventing or disabling
that Stockholder from performing that Stockholder's obligations under this
agreement.
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8. WAIVER OF APPRAISAL RIGHTS. Each Stockholder waives any rights
of appraisal or rights to dissent from the Merger that Stockholder may have.
9. STOCKHOLDER CAPACITY. No person executing this agreement who is
or becomes during the term of this agreement a director of the Company makes any
agreement in his or her capacity as a director. Each Stockholder is executing
and delivering this agreement solely in that Stockholder's capacity as the
record and beneficial owner of, or the trustee of a trust whose beneficiaries
are the beneficial owners of, that Stockholders' Shares. Notwithstanding
anything to the contrary in this agreement, no action or inaction by a
Stockholder in his capacity as a director of the Company shall be deemed to
contravene section 6, as long as the action or inaction does not contravene
section 6.2 of the Merger Agreement.
10. MISCELLANEOUS
(a) DEFINITION. The terms "beneficially own" and "beneficial
ownership" with respect to any securities shall have the same meaning as in, and
shall be determined in accordance with, Rule 13d-3 under the Securities Exchange
Act of 1934.
(b) LIABILITY AFTER TRANSFER. Each Stockholder agrees that,
notwithstanding any transfer of that Stockholder's Existing Shares in accordance
with section 7, that Stockholder shall remain liable for his or her performance
of all obligations under this agreement.
(c) AMENDMENTS, WAIVERS, ETC. This agreement may not be amended,
changed, supplemented, waived or otherwise modified or, except as otherwise
provided in this agreement, terminated with respect to any party, except upon
the execution and delivery of a written agreement executed by the party to be
charged (it being understood, however, that schedule 1 may be supplemented
unilaterally by the Parent adding the name and other relevant information
concerning any stockholder of the Company who agrees to be bound by this
agreement, and thereafter the added stockholder shall be treated as a
"Stockholder" for all purposes of this agreement).
(d) NOTICES. All notices, requests, claims, demands and other
communications in this agreement shall be in writing and shall be deemed to have
been duly given when delivered in person, by facsimile transmission with
confirmation of receipt or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
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If to a Stockholder: At the address set forth on schedule 1
If to the Parent or Sub: Schein Pharmaceutical, Inc.
100 Campus Drive
Florham Park, New Jersey 07932
Telecopier: (201) 593-5590
Attention: Mr. Martin Sperber
Chairman and Chief
Executive Officer
copy to: Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Telecopier: (212) 969-2900
Attention: Richard L. Goldberg, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt of notice of the change).
(e) SEVERABILITY. If any provision of this agreement is invalid,
illegal or unenforceable, the invalidity, illegality or unenforceability shall
not affect any other provision.
(f) SPECIFIC PERFORMANCE. Each party agrees that irreparable damage
would occur in the event that any of the provisions of this agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this agreement and to enforce specifically
the terms and provisions of this agreement, this being (except as provided in
section 6) in addition to any other remedy to which they are entitled at law or
in equity.
(g) NO WAIVER. The failure of any party to exercise any right, power
or remedy under this agreement or otherwise available in respect of this
agreement at law or in equity, or to insist upon compliance by any other party
with that party's obligations under this agreement, shall not constitute a
waiver of any right to exercise any such or other right, power or remedy or to
demand such compliance.
(h) GOVERNING LAW. This agreement shall be governed and construed in
accordance with the law of the state of Delaware, regardless of the law that
might otherwise govern under principles of conflicts of laws applicable thereto.
(i) HEADINGS. The headings in this agreement are for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this agreement
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(j) COUNTERPARTS. This agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same agreement.
(k) ENTIRE AGREEMENT. This agreement constitutes the entire
agreement among the parties with respect to its subject matter and supersedes
all other prior agreements and understandings, both written and oral, among the
parties with respect to that subject matter.
SCHEIN PHARMACEUTICAL, INC.
By:
-----------------------------
Name:
Title:
SM ACQUIRING CO., INC.
By:
-----------------------------
Name:
Title:
STOCKHOLDERS:
-----------------------------
-----------------------------
-----------------------------
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<PAGE>
SCHEDULE 1
Number of
Name of Stockholder Address for Notices Shares
------------------- ------------------- --------
Agvar Chemicals Inc. Agvar Chemicals Inc. 1,322,566
96 Route 23
Little Falls, NJ 07424
ATTN: Agnes Varis
Tel: (201) 256-3232
Fax: (201) 256-6526
Agnes Varis and Agvar Chemicals Inc. 92,500
Karl Leichtman (jointly) 96 Route 23
Little Falls, NJ 07424
ATTN: Agnes Varis
Tel: (201) 256-3232
Fax: (201) 256-6526
Agnes Varis Agvar Chemicals Inc. 5,625
96 Route 23 plus any
Little Falls, NJ 07424 shares issued
ATTN: Agnes Varis upon exercise
Tel: (201) 256-3232 of options
Fax: (201) 256-6526
FOR ALL THREE ABOVE,
WITH A COPY TO:
Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
ATTN: Martin Balsam, Esq.
Tel: (212) 715-9100
Fax: (212) 715-8000
Marvin Samson Marsam Pharmaceuticals Inc. 1,450,441
24 Olney Avenue, Bldg. 31 plus any
Cherry Hill, NJ 08034 shares issued
Tel: (609) 424-5600 upon exercise
Fax: (609) 751-8784 of options
WITH A COPY TO:
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, Pennsylvania
19103-7396
ATTN: Frederick W. Dreher,
Esq.
Fax: (215) 979-1213
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July 28, 1995
Circa Pharmaceuticals, Inc.
33 Ralph Avenue
P.O. Box 30
Copiague, NY 11726-0030
Gentlemen:
Reference is made to the Stockholders' Agreement (the "Agreement"), dated as of
December 31, 1985, by and among Marsam Pharmaceuticals Inc., Marvin S. Samson,
Agvar Chemicals Inc. and Bolar Pharmaceutical Co., Inc. (now known as Circa
Pharmaceuticals, Inc.) Marsam is contemplating a transaction pursuant to which a
third party will make an offer to all of the Marsam stockholders to purchase
their Marsam shares on the same terms and conditions and Agvar and Samson are
granting an option (including an option to tender) to the third party to
purchase their Marsam shares exercisable under certain circumstances. This
letter, when executed on behalf of the parties hereto in the spaces provided
below, will evidence each party's waiver or any rights that it otherwise would
have had under the Agreement in respect of all the transactions referred to
above, and except as set forth herein, the Agreement shall remain in full force
and effect until December 31, 1995.
Very truly yours,
MARSAM PHARMACEUTICALS INC.
By: /s/ Marvin Samson
--------------------------------
Marvin Samson, President
ACCEPTED AND AGREED TO: /s/ Marvin Samson
--------------------------------
Marvin Samson
ACCEPTED AND AGREED TO:
CIRCA PHARMACEUTICALS, INC.
By: /s/ illegible AGVAR CHEMICALS INC.
-------------------------
By: /s/ Agnes Varis
--------------------------------
Agnes Varis, President
<PAGE>
Exhibit 3
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 28, 1995 by and between MARSAM
PHARMACEUTICALS INC., a Delaware corporation having its principal office at
Building 31, Olney Avenue, Cherry Hill, New Jersey (the "Company"), and Marvin
S. Samson, residing at 1905 Owl Court, Cherry Hill, New Jersey 08003 (the
"Executive").
The parties are entering into this Agreement to set forth and confirm
their respective rights and obligations with respect to Executive's employment
by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto mutually agree as follows:
1. EMPLOYMENT AND TERM. (a) The Company hereby employs the Executive
as president, chief executive officer and chief operating officer of the Company
and, as of the Acquisition Date, the Executive shall be appointed an Executive
Vice President of Schein Pharmaceutical, Inc., a Delaware corporation ("SPI")
(collectively, the "Position"). The Executive agrees to serve in the employ of
the Company in the Position for a term (the "Initial Term") which shall commence
on the date of the acquisition by SPI or a subsidiary of SPI of more than a
majority of the outstanding shares of the common stock of the Company on a
fully-diluted basis (the "Acquisition Date"), and, subject to paragraphs 1(b)
and 1(c) hereof, shall terminate on the fifth anniversary of the Acquisition
Date.
(b) Unless written notice terminating the term of employment is
given by either the Company or the Executive not less than one hundred eighty
(180) days in advance of the termination date of this Agreement, this Agreement
shall be automatically extended, on all of the terms and conditions hereof, for
additional periods of one-year.
(c) The Company shall have the right to terminate the
Executive's employment hereunder prior to the fifth anniversary of the
Acquisition Date, but only for cause. For purposes of this Agreement, "cause"
means (i) the Executive's willful and continued failure substantially to perform
his duties with the Company or SPI, (ii) fraud, misappropriation or intentional
material damage to the property or business of the Company or SPI or (iii) the
Executive's admission or conviction of, or plea of nolo contendere to, any
felony that, in the judgment of the Board of Directors of the Company (the
"Board"),
<PAGE>
adversely affects the Company's reputation or the Executive's ability to carry
out his obligations under this Agreement. The Executive shall not be entitled
to any compensation under this Agreement for any period after such termination
pursuant to this paragraph 1(c) except to the extent the Executive is entitled
to receive benefits under the Plans (as defined herein) following such
termination.
(d) The Executive shall have the right to terminate his
employment hereunder at any time prior to the fifth anniversary of the
Acquisition Date.
(e) Anything in this Agreement to the contrary notwithstanding,
the Company, at its option, may retain the Executive as a consultant for a
period (the "advisory period") of one year after (i) the Initial Term (or any
extension under paragraph 1(b) hereof) or (ii) a termination by the Executive
pursuant to paragraph 1(d) hereof, all on the terms and conditions hereinafter
provided, in which event, the Executive shall continue to be bound by the
restrictions of paragraph 7(b) hereof during the advisory period, as if he were
an employee for such period. During the advisory period, the Executive will
provide such advisory services concerning the business, affairs and management
of the Company as may be from time to time requested by the Company, but the
Executive shall not be required to devote more than five (5) days (up to an
aggregate of forty (40) hours) each month to such services, which shall be
performed at a time mutually convenient to both parties. The Company, at its
option, may terminate the advisory period upon not less than thirty (30) days'
prior written notice; PROVIDED, that upon termination of the advisory period,
the Executive shall no longer be bound by the restrictions of paragraph 7(b)
hereof. The Executive may, subject to the restrictions set out in paragraph
7(b) hereof, engage in other employment during the advisory period, and his
advisory services hereunder shall be required only at times and places
consistent with his other employment and his private activities. During the
advisory period, the Company shall pay the Executive a consulting fee in an
amount equal to the Executive's base salary immediately prior to the termination
of employment, payments of such fee to be made in accordance with the Company's
standard payroll policies in effect from time to time, and provide the Executive
and his eligible dependents with health insurance coverage and disability
insurance coverage for the Executive comparable to coverage while he was an
employee hereunder or, at the Company's option, reimburse the Executive in an
amount equal to not more than 125% of the cost to the Company thereof while an
employee during the previous year; PROVIDED, HOWEVER, that, should the Executive
engage in other employment, such consulting fee shall be reduced, on a dollar-
for-dollar, basis, by an amount equal to the compensation received by the
Executive for such other employment; and the consulting fee shall be reduced, on
a dollar-for-dollar basis, by compensation paid to the Executive by the Company
under paragraph 3(d) hereof for the
2
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same period of time. Without limiting the application of any other provision of
this Agreement during the advisory period, the Company expressly confirms that
the provisions of paragraph 4 hereof shall apply during the advisory period.
2. DUTIES. (a) Subject to the ultimate control and discretion of
the Board, the Executive shall serve in the Position and perform all duties and
services of an executive nature commensurate with the Position which the Board
may from time to time reasonably assign to him. Except for travel normally
incidental and reasonably necessary to the business of the Company and the
duties of the Executive hereunder, the duties of the Executive shall be
performed in the Cherry Hill, New Jersey area. SPI shall also make available to
the Executive an office for his use in its corporate headquarters.
(b) The Executive shall, consistent with his position as
president and chief executive officer of the Company and executive vice
president of SPI, be responsible for the management of the Company and its
organizational structure, subject to the Board and to the provisions of this
Agreement, his authority to include, without limitation, supplier relationships
and salary, perquisites and, with respect to stock options, (subject
additionally to SPI's Board of Directors) stock options for SPI common stock for
the Company's employees.
(c) The Executive shall, consistent with his position as
president and chief executive officer of the Company and executive vice
president of SPI, be responsible for, and shall co-ordinate, all product
development activities for SPI's and the Company's parenteral products.
(d) The Executive shall, consistent with his position as
president and chief executive officer of the Company and executive vice
president of SPI, be responsible for and shall co-ordinate, all sales and
marketing activities for SPI's and the Company's hospital and home care
accounts.
(e) The Executive shall devote all of the Executive's time and
attention during regular business hours to the performance of the Executive's
duties hereunder and, during the term of his employment hereunder, shall not
engage in any other business enterprise which requires the Executive's personal
time or attention, unless granted the prior permission of the Board. The
foregoing shall not prevent the Executive's purchase, ownership or sale of any
interest in, or the Executive's engaging (but not to exceed an average of five
hours per week) in, any business which does not compete with the business of the
Company or SPI or any subsidiary of the Company or SPI or the Executive's
involvement in charitable or community activities, provided, that the time and
attention which the Executive devotes to such business and activities does not
materially interfere with the performance of his duties hereunder.
3
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(f) The Executive shall be entitled to such personal vacations
with full compensation, and to be taken at such time or times, as the Executive
and the Company shall mutually determine.
3. COMPENSATION. (a) For all services to be rendered by the
Executive hereunder, the Company shall pay the Executive an annual salary at a
rate of not less than Four Hundred Thousand Dollars ($400,000) per year, plus
such other compensation as may, from time to time, be determined by the Company.
Such salary and other compensation shall be payable in accordance with the
Company's normal payroll practices as in effect from time to time. At the end
of each fiscal year, the Company shall review the Executive's salary level, and
shall increase such level for the following year to such amount as the Board may
determine.
(b) The compensation provided for in paragraph 3(a) above shall
be in addition to such rights as the Executive may have, during the Executive's
employment hereunder or thereafter, to participate in and receive benefits from
or under any bonus, stock option, pension, profit-sharing, insurance or other
employee benefit plan or plans of the Company which may exist now or hereafter
(collectively, the "Plans"). During the period ending on the first anniversary
of the Acquisition Date, the Executive shall have the right, on a basis
reasonably acceptable to the Company and SPI (such acceptance not to be
unreasonably withheld), to elect to participate (with credit to the greatest
extent possible for prior years of service with the Company), to the extent he
is eligible, and subject to applicable law, in one or more SPI benefit plans in
which senior executives of SPI participate, in lieu of one or more Company
benefit plans relating to the same type of benefit.
(c) If the Company terminates the Executive's employment
hereunder, other than in accordance with paragraph 1(c) above, the Company shall
continue to pay the Executive the salary provided in paragraph 3(a) above, in
accordance with the Company's normal payroll practices in effect from time to
time, and provide the Executive and his eligible dependents with health
insurance coverage and disability insurance coverage comparable to coverage
while he was an employee hereunder or, at the Company's option, reimburse the
Executive in an amount equal to not more than 125% of the cost to the Company
thereof while an employee during the previous year, all for the remainder of the
Initial Term or any extension thereof; and the Executive shall have no further
or other rights, and the Company no further or other liabilities or obligations,
under this Agreement.
(d) If the Executive terminates his employment hereunder prior
to the end of the Initial Term under paragraph 1(d) above, the Company shall
continue to pay the Executive 50% of the salary provided for in paragraph 3(a)
above, in accordance with the Company's normal practices in effect from time to
time,
4
<PAGE>
and provide the Executive and his eligible dependents with health insurance
coverage and disability insurance coverage comparable to coverage while he was
an employee hereunder or, at the Company's option, reimburse the Executive in an
amount equal to not more than 125% of the cost to the Company thereof while an
employee during the previous year, all for a period beginning on the date of
such termination and ending on the earlier of the third anniversary of the
termination or the fifth anniversary of the Acquisition Date; and the Executive
shall have no further or other rights, and the Company no further or other
liabilities or obligations, under this Agreement.
(e) During any period in which the Company is obligated to pay
salary to the Executive under this paragraph 3 or a consulting fee under
paragraph 1(e) of this Agreement, the Company shall provide the Executive with
an automobile or, at the Company's option, an automobile allowance, in
accordance with the Company's policies in effect from time to time.
4. EXPENSES. The Company shall promptly reimburse the Executive, or
cause the Executive promptly to be reimbursed, for all reasonable expenses paid
or incurred by the Executive in connection with the performance of the
Executive's duties and responsibilities hereunder, upon presentation of expense
vouchers or other appropriate documentation therefor.
5. ADDITIONAL COVENANTS. During the Executive's employment under
this Agreement, except as otherwise consented to or approved by the Executive
and SPI:
(a) (1) the Board will be comprised of seven members, three to
be designated by the Executive, three to be designated by SPI (the "SPI
directors") and one, who shall be an employee of Bayer Corporation or any of its
affiliates (other than SPI and its subsidiaries), to be designated by SPI,
subject to the approval thereof by the Executive, which approval shall not be
unreasonably withheld (the "Bayer director");
(2) the consent or approval of at least one of the SPI
directors shall be required prior to the Company taking any extraordinary
corporate actions, which, for purposes of this Agreement, shall include, without
limitation, financings; purchases or sales of assets not in the ordinary course
of business; issuances of securities; providing compensation, perquisites or
benefits beyond levels customary in the multisource industry; actions with
respect to the certificate of incorporation or by-laws; reorganizations,
recapitalizations and business combinations; encumbering of assets; and actions
that could result in a violation of agreements relating to indebtedness of SPI
or (with the additional consent or approval of the Bayer director) agreements
between SPI (or any of its affiliates) and Bayer Corporation (or any of its
affiliates);
5
<PAGE>
(3) after consultation with the other directors, the SPI
directors shall be entitled to authorize and approve, as actions of the Board,
corporate actions not inconsistent with the provisions of this paragraph 5,
including, without limitation, financings; issuances of securities; and
encumbering of assets;
(b) the Executive, having been elected a director of SPI
effective upon the Acquisition Date, shall be included in the slate of SPI's
management nominees for re-election as a director;
(c) neither the Company's name nor logo shall be modified in any
way, and the Company may continue to use its name and logo on product labelling
and the like;
(d) the headquarters of the Company shall remain in Cherry Hill,
New Jersey;
(e) the Company shall not be required to sell products to or
manufacture products for SPI or any SPI affiliate on terms less favorable to the
Company than those the Company provides to unaffiliated customers for similar
purchase quantities; and
(f) the Company shall have funds made available to it to the
extent of "Available Cash", which shall equal: cash on hand at the Company at
the Acquisition Date, PLUS out-of-pocket transaction costs of the Company paid
in connection with the acquisition referred to in paragraph 1(a), PLUS 50% of
Operating Cash Flow (I.E., net income (after taxes, calculated on a stand-alone
basis) PLUS depreciation PLUS amortization PLUS/LESS working capital
decreases/increases LESS capital expenditures), PLUS interest income (at 30-day
LIBOR), LESS interest expense (at SPI's cost of funds), but only in respect of
borrowings outstanding when Available Cash is negative, LESS 50% of negative
Operating Cash Flow, to the extent of Available Cash, and thereafter 100% of
negative Operating Cash Flow.
6. INDEMNIFICATION. The Company shall indemnify the Executive, to
the fullest extent permitted by law, for any and all liabilities to which the
Executive may be subject as a result of, in connection with or arising out of
his employment by the Company hereunder, as well as the costs and expenses
(including attorneys' fees) of any legal action brought or threatened to be
brought against him or the Company as a result of, in connection with or arising
out of such employment. The Executive shall be entitled to the full protection
of any insurance policies which the Company may elect to maintain generally for
the benefit of its directors and officers.
7. CONFIDENTIALITY AND NON-COMPETITION. (a) The Executive shall not
use or disclose at any time during the
6
<PAGE>
Executive's employment with the Company, or at any time thereafter, any trade
secret or proprietary or confidential information of the Company or any of its
affiliates.
(b) During the Executive's employment with the Company; during
the advisory period, if any; during the period the Company continues to make
payments under paragraph 3(c) or 3(d) above; and, in the case of termination of
employment under paragraph 1(c) above, until the earlier of the sixth
anniversary of the Acquisition Date and the fourth anniversary of such
termination, the Executive shall not be engaged as an officer, director, or
employee of, or in any way be associated in a management or ownership capacity
with, any corporation, partnership or other enterprise or venture which conducts
a business which is in competition with the business of the Company or SPI or
their subsidiaries as at the time of such termination or expiration, PROVIDED,
HOWEVER, that the Executive may own not more than three percent (3%) of the
outstanding securities, or equivalent equity interests, of any class of any
corporation or firm which is in competition with the business of the Company or
SPI or their subsidiaries, which securities are listed on a national securities
exchange or traded in the over-the-counter market. The provisions of this
paragraph shall survive the termination or expiration of this Agreement.
8. REPRESENTATION AND WARRANTY OF THE EXECUTIVE. The Executive
represents and warrants that he is not under any obligation, contractual or
otherwise, to any other firm or corporation, which would prevent his entry into
the employ of the Company or his performance of the terms of this Agreement.
9. ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Compensation
Continuation Agreement dated October 19, 1991 (as currently in effect) and the
Split Dollar Insurance Agreement dated March 25, 1991 (as currently in effect)
(which Compensation Continuation Agreement and Split Dollar Insurance Agreement
shall continue in effect in accordance with their terms unless surrendered by
the Executive under the last sentence of paragraph 3(b) hereof) contain the
entire agreement between the Company and the Executive with respect to the
subject matter hereof, and may not be amended, waived, changed, modified or
discharged except by an instrument in writing executed by the parties hereto and
SPI.
10. ASSIGNABILITY. The services of the Executive hereunder are
personal in nature, and neither this Agreement nor the rights or obligations of
the Company hereunder may be assigned by the Company, whether by operation of
law or otherwise, without the Executive's prior written consent. This Agreement
shall be binding upon, and inure to the benefit of, the Company and its
permitted successors and assigns hereunder. This Agreement shall not be
assignable by the Executive, but shall inure to the benefit of the Executive's
heirs, executors, administrators and legal representatives.
7
<PAGE>
11. NOTICE. Any notice which may be given hereunder shall be in
writing and be deemed given when hand delivered and acknowledged or, if mailed,
one day after mailing by registered or certified mail, return receipt requested,
to either party hereto at their respective addresses stated above, or at such
other address as either party may be similar notice designate.
12. SPECIFIC PERFORMANCE. The parties agree that irreparable damage
would occur in the event that any of the provisions of paragraph 5 or 7 above
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of paragraph 5 or 7 above and to
enforce specifically the terms and provisions of paragraph 5 or 7 above, this
being in addition to any other remedy to which they are entitled at law or in
equity.
13. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, express
or implied, is intended to confer upon any person or entity other than the
parties (and the Executive's heirs, executors, administrators and legal
representatives as provided in paragraph 10 hereof) and SPI any rights or
remedies of any nature under or by reason of this Agreement.
14. CONSTRUCTION. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New Jersey, without giving
effect to principles of conflict of laws. All headings in this Agreement have
been inserted solely for convenience of reference only, are not to be considered
a part of this Agreement and shall not affect the interpretation of any of the
provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
MARSAM PHARMACEUTICALS INC.
By
------------------------
Authorized Signatory
---------------------------
Marvin S. Samson
8
<PAGE>
Schein Pharmaceutical, Inc. hereby agrees, commencing on the
Acquisition Date, to be bound by the provisions of Paragraphs 1(a), 2(a), 2(b),
2(c), 2(d), 3(b), 5(a), 5(b), 5(c), 5(d), 5(e) and 5(f), to the extent they
refer to SPI, of the foregoing Employment Agreement and to cause the Company to
perform the obligations of the Company under the foregoing Employment Agreement.
SCHEIN PHARMACEUTICAL, INC.
By
--------------------------
Authorized Signatory
<PAGE>
COMPENSATION CONTINUATION AGREEMENT
AGREEMENT made this 19th day of October, 1991, by and between MARSAM
PHARMACEUTICALS INC., a Delaware corporation ("Company") and MARVIN SAMSON,
1905 Owl Court, Cherry Hill, New Jersey ("Employee").
BACKGROUND
Employee is, and since the Company's inception in 1985 has been, chief
executive officer and a key employee of the Company. Employee and the Company
entered into an Employment Agreement dated as of December 19, 1986, which has
been amended to extend its term to December 31, 1996, and year to year
thereafter (the "Employment Agreement")>
The continued services of Employee and his knowledge of the Company's
activities and of the industry in which the Company participates are of great
value to the Company. The Company believes that it is in its best interests
to provide Employee with the security of a level of continuing payments to
Employee or Employee's designee in the event of his retirement, disability or
death.
NOW, THEREFORE, intending to be legally bound hereby, the Company and
Employee agree as follows:
1. TERM OF AGREEMENT. This Agreement shall remain in effect and confer
upon Employee the benefits set forth herein so long as Employee's employment
by the Company is not terminated by the Company based upon a clear showing of
due
<PAGE>
cause, as hereinafter defined, and with Employee first having had a reasonable
opportunity to cure. Termination of Employee's employment by the Company shall
be for due cause hereunder in the event that the termination is in connection
with (i) any dishonest action against the Company, (ii) admission or conviction
of any fraud or embezzlement, or (iii) a breach or violation by Employee during
his employment of the confidentiality or non-competition covenants set forth in
paragraph 6 of the Employment Agreement.
2. RETIREMENT. In the event of the Employee's retirement, as
hereinafter defined, the Company shall pay to the Employee in the first
year following commencement of retirement an amount equal to Employee's
annual base salary immediately prior to his retirement and, thereafter, fifty
percent (50%) of such amount for each of the next nine years. In the event of
Employee's death after his retirement, there shall be a continuation of the
retirement payments for a period of ten (10) years from the commencement of
Employee's retirement, with the payments after death being made to the
beneficiary designated by Employee. All payment obligations under this
agreement shall be met by periodic payments on the same dates as executive
compensation is paid by the Company, except as otherwise agreed by the
parties.
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<PAGE>
3. DEFINITION OF RETIREMENT. Employee may elect to retire by giving
written notice of such election to the Company not less than ninety (90) days
prior to the proposed commencement of retirement, but in no event shall such
retirement be effective prior to the end of Employee's employment term under
the Employment Agreement or any agreement superseding or extending the
Employment Agreement. Furthermore, for the purposes of paragraph 2 hereof,
termination of Employee's employment as the result of either party giving
notice of termination pursuant to paragraph 1(b) of the Employment Agreement
shall be deemed to be Employee's retirement hereunder. The retirement
payments provided for herein shall be made on the same dates as those on
which the Company makes compensation payments to executive employees
generally.
4. DISABILITY. If Employee, while employed by the Company, becomes
unable, for a period of six (6) months during any period of twelve (12)
consecutive months, to perform his duties due to partial or total disability
or incapacity resulting from a mental or physical illness or injury, as
certified by a licensed physician, the Company shall make disability payments
to Employee until the earlier of resumption of employment or the end of the
year in which Employee reaches age sixty-five (65), in an amount equal to
Employee's annual base salary immediately prior to commencement of Employee's
disability for the first year of disability, and
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<PAGE>
fifty percent (50%) of said amount in each of the years following. The
disability payments provided for herein shall be reduced to the extent of
payments received by Employee from any disability benefit program arranged
and paid for by the Company, and any fees or other payments by the Company
for services provided by Employee. Upon reaching age 65, Employee, if
disabled, shall be deemed to have retired for purposes of paragraph 2 hereof
and shall be entitled to retirement benefits equal to fifty percent (50%) of
Employee's annual base salary immediately prior to commencement of Employee's
disability in accordance with said paragraph 2.
5. OTHER INSURANCE BENEFITS. During the period of retirement or
disability payments under this Agreement, the Company shall continue to
provide Employee with health and medical insurance coverage and benefits to
the same extent as if he had continued to be an executive employee of the
Company.
6. DEATH. In the event of Employee's death while still in the employ of
the Company, the Company shall pay to Employee's designee during the first
year after death an amount equal to Employee's annual base salary immediately
prior to his death and, thereafter, fifty percent (50%) of said amount for
each of the next nine (9) years. In the event of Employee's death while
entitled to disability payments pursuant to paragraph 4 hereof, the Company
shall pay to Employee's designee an amount equal to fifty percent (50%) of
Employee's annual base salary immediately prior to the commencement of
Employee's disability during each of the next nine (9) years.
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<PAGE>
7. RESTRICTIVE COVENANT. Notwithstanding the time limits set forth in
paragraph 6 of the Employment Agreement (or comparable provisions of any
agreement superseding or extending the Employment Agreement) with respect to
Employee's obligations to maintain confidentiality and not compete with the
Company, the payment obligations of the Company under paragraphs 2, 4 and 6
hereof shall cease if the Company, after notice to Employee of its intent to do
so, obtains a judicial determination that Employee's conduct is in violation of
the provisions of the Employment Agreement respecting confidentiality and
noncompetition, or would be in the absence of the time limitation provisions
applicable to such provisions.
8. BINDING EFFECT. This Agreement will be binding on the Company and the
Employee, their heirs, legal representatives, successors and assigns.
9. GOVERNING LAW. This Agreement shall be deemed to be executed,
delivered and is intended to be performed in the State of New Jersey and in all
respects is to be governed by the laws of the State of New Jersey.
10. SEVERANCE. In the event that performance of any provision hereunder
shall in any way be in contravention of any law, rule or regulation of any
governmental body claiming to have jurisdiction, then, to the extent of such
illegality or violation, this Agreement shall be inoperative without in any
manner impairing its other provisions and obligations.
11. UNFUNDED ARRANGEMENT. The Company shall pay the benefits provided
hereunder out of its general assets in cash
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<PAGE>
when due. The Company shall not be required to establish any segregated account,
trust, escrow, reserve or other arrangement to discharge such benefits. No asset
of the Company shall be deemed segregated or otherwise set aside to discharge
the Company's obligations under this agreement. The rights and benefits of the
Employee or any beneficiary thereof shall be solely those of an unsecured
general creditor.
12. NON-ALIENATION. None of the payments, benefits or rights of the
Employee or beneficiary thereof shall be subject to any claim of any creditor of
such person and, in particular, to the fullest extent permitted by law, shall be
free from attachment, garnishment, trustee's process, or any other legal or
equitable process available to any creditor of such person. The Employee or
beneficiary thereof shall not have the right to alienate, anticipate, commute,
pledge, encumber or assign any of the benefits or payments which he may expect
to receive, contingently or otherwise, under this agreement, except the right to
designate a beneficiary or beneficiaries as hereinabove provided.
13. EMPLOYMENT OBLIGATIONS. This agreement shall not be construed as
creating any additional contract of employment between the Company and the
Employee or as giving the Employee, or any person whomsoever, any legal or
equitable rights against the Company unless such rights shall be specifically
provided for in this agreement or conferred by affirmative action of the Company
in accordance with the terms and provisions of this agreement.
-6-
<PAGE>
14. TAXES. The Company shall not be responsible for the tax consequences
under federal, state or local law of the Employee under this agreement. All
payments under this agreement shall be subject to withholding and reporting
requirements to the extent provided by applicable law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Employee has executed this Agreement, each
as of the day and year first above written.
MARSAM PHARMACEUTICALS, INC.
By /s/
-------------------------
Vice President
/s/ Marvin Samson
-------------------------
Marvin Samson
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<PAGE>
EXHIBIT 10(P)
SPLIT DOLLAR INSURANCE AGREEMENT dated March 25, 1991, by and between
MICHAEL A. SAMSON and ANDREW SAMSON, Trustees under Indenture of Trust of MARVIN
SAMSON, dated October 3, 1989, ("Owner") and MARSAM PHARMACEUTICALS INC., a
Delaware corporation ("Company").
The parties hereto in consideration of the agreements and covenants
hereinafter set forth and intending to be legally bound, agree as follows:
1. This agreement relates to a policy of insurance on the lives of Marvin
Samson and Elaine Samson (together the "Insureds") issued by Phoenix Mutual Life
Insurance Company ("the Insurer"), Policy No. 2487749 ("Policy"). Subject to the
conditions hereinafter set forth, Owner shall be the sole owner of the Policy.
2. The Company has heretofore and so long as Marvin Samson remains an
employee or director of the Company shall continue to pay the portion of the
annual premium on the Policy equal to the Company's "Cash Investment" in the
Policy, which shall be equal to: (i) the annual net premium, MINUS (ii) the
value of the death benefit to which Owner is then entitled, determined by using
the lesser of (a) the applicable one-year term premium cost computed under
REVENUE RULING 55-747, 1955-2 C.B. 228 (or any superseding ruling thereto) or
(b) the applicable premium rates charged by the Insurer for initial issue one-
year term insurance.
<PAGE>
The Company shall also pay to or on behalf of the Insureds a bonus equal to the
remaining portion of the annual premium otherwise payable by Owner.
3. In consideration of the payments made pursuant to paragraph 2 hereof,
the Company shall receive from the proceeds of the Policy, upon the death of the
second of the Insureds to die (or upon the surrender of the Policy during the
lifetime of one of the Insureds) an amount equal to the Company's "Cash
Investment" in the Policy as calculated under paragraph 2 hereof. The balance of
the proceeds, if any, shall be paid as provided in the Policy, subject to the
Collateral Assignment Agreement referred to below.
4. To secure the Cash Investment, Owner shall assign to the Company a
security interest in the Policy equal in amount to the Cash Investment and such
security shall be limited to the Company's right to receive such amount out of
the proceeds of the Policy.
5. The assignment to the Company provided for in this agreement shall be
effectuated by the execution of a Collateral Assignment Agreement substantially
in the form attached hereto as Exhibit "A."
6. Owner shall notify the Insurer of the Collateral Assignment Agreement
and shall take no action that would impair the security interest of the Company
under the Collateral Assignment Agreement. Owner shall have the right to
terminate this agreement and the Collateral Assignment Agreement at any
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<PAGE>
time upon payment to the Company of the Company's Cash Investment in the Policy.
7. Each and every right, interest or incident of ownership associated with
the Policy which is not expressly assigned to the Company by the Collateral
Assignment Agreement shall be retained by Owner, including, but not limited to,
the right to designate and change the beneficiaries of the Policy, the right to
transfer the Policy subject to the rights assigned to the Company, the right to
surrender the Policy subject to the rights assigned to the Company, and the
right to exercise any option provided in the Policy.
8. Subject to taking notice of the Collateral Assignment Agreement when it
is filed at its home office, the Insurer shall have no obligation except as set
forth in the Policy. The Insurer shall not be bound to inquire into or take
notice of any of the covenants herein contained. Upon the death of the second of
the Insureds to die (or upon surrender of the Policy prior to such death), the
Insurer shall be discharged from its obligations upon payment of the proceeds in
accordance with the provisions of the Policy and the Collateral Assignment
Agreement and without regard to this agreement or any amendment hereof.
9. For purposes of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Company is the "Named Fiduciary" and "Administrator"
within the meaning of sections 402(a) and 3(16)(A) of ERISA, respectively, and
the
-3-
<PAGE>
fiduciary for deciding claims. All claims shall be resolved under procedures
which comply with regulations promulgated under section 503 of ERISA.
10. Amendments may be made to this agreement by a writing signed by each of
the parties and attached hereto.
11. All matters respecting the validity, effect and interpretation of this
agreement shall be determined in accordance with the laws of the State of New
Jersey.
12. This agreement shall be binding upon the parties hereto and their
successors and assigns.
IN WITNESS WHEREOF, this agreement has been executed as of the date first
above written.
MARSAM PHARMACEUTICALS INC. INDENTURE OF TRUST OF MARVIN
SAMSON DATED OCTOBER 3, 1989
By: /s/ illegible
--------------------------
By /s/ Michael Samson (SEAL)
Attest: /s/ illegible -------------------
--------------------- Michael A. Samson
(Corporate Seal)
By /s/ Andrew Samson (SEAL)
--------------------
Andrew Samson
Trustees
-4-
<PAGE>
EXHIBIT A
COLLATERAL ASSIGNMENT AGREEMENT dated ________, ________, by and between
MICHAEL A. SAMSON and ANDREW SAMSON, Trustees under Indenture of Trust of MARVIN
SAMSON, dated October 3, 1989 ("Owner") and MARSAM PHARMACEUTICALS INC., a
Delaware corporation (the "Company").
This Agreement relates to Phoenix Mutual Life Insurance Company Policy No.
2487749 ("Policy") on the lives of Marvin Samson and Elaine Samson (together the
"Insureds").
The parties have entered into a Split Dollar Insurance Agreement
contemporaneously with this Agreement ("Insurance Agreement").
Pursuant to the Insurance Agreement, Owner has agreed to assign to the
Company a security interest in the Policy in order to provide for the payment to
the Company of the Cash Investment as defined in the Insurance Agreement.
The parties hereto, in consideration of the foregoing and the agreements
and covenants hereinafter set forth and intending to be legally bound hereby,
agree as follows:
1. Owner hereby assigns to the Company a security interest in the Policy
in order to secure to the Company the payment of the Cash Investment in the
Policy, consisting of the following rights:
(a) Upon the death of the second of the Insureds to die, the Company
shall have the right to receive so much of the proceeds payable under the Policy
as is equal to the Cash Investment, determined as of the date of death. The
Company may collect such portion of the proceeds directly from the Insurer.
<PAGE>
(b) In the event the Policy is surrendered by Owner prior to the
death of both Insureds, the Company shall have the right to receive so much of
the proceeds received as is equal to the Cash Investment, determined as of the
date of surrender. The Company may collect such portion of the proceeds on
surrender of the Policy directly from the Insurer.
2. The Insurer is authorized to rely solely on the written statement of
the Company and the Owner for the exercise of any rights under the Policy
assigned herein and as to the amount of the Cash Investment as of any date. The
Insurer is hereby authorized to recognize such statement without investigation
or the giving of any notice. The written acknowledgement of receipt by the
Company for any sums paid to it by the Insurer pursuant to the written statement
of the Cash Investment in the Policy referred to in the first sentence of this
paragraph shall be a full discharge and release of the Insurer with respect to
the Policy. Payment of the Cash Investment shall be made to the exclusive order
of the Company.
3. Each and every right, interest, or incident of ownership associated
with the Policy which is not expressly assigned to the Company by this
Collateral Assignment Agreement is retained by Owner, including, but not limited
to, the right to designate and change the beneficiaries of the Policy, the right
to transfer the Policy subject to the rights assigned to the Company, the right
to surrender the Policy subject to the rights assigned to the Company, and the
right to exercise any option provided in the Policy.
-2-
<PAGE>
4. Each of the undersigned declares that no proceedings in bankruptcy
are pending against them and that their property is not subject to any
assignment for the benefit of creditors.
5. All matters respecting the validity, effect and interpretation of this
Collateral Assignment Agreement shall be determined in accordance with the laws
of the State of New Jersey.
6. This Collateral Assignment Agreement shall be binding upon the parties
hereto and their successors and assigns.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the date first above written.
MARSAM PHARMACEUTICALS INC. INDENTURE OF TRUST OF MARVIN
SAMSON DATED OCTOBER 3, 1989
By: /s/ illegible
---------------------- By: /s/ Michael Samson (SEAL)
--------------------
Michael A. Samson
Attest: /s/ illegible
-----------------
(Corporate Seal)
By: /s/ Andrew Samson (SEAL)
--------------------
Andrew Samson
Trustees
