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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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MARSAM PHARMACEUTICALS INC.
(Name of Subject Company)
MARSAM PHARMACEUTICALS INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
571 728 104
(CUSIP Number of Class of Securities)
MARVIN SAMSON,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MARSAM PHARMACEUTICALS INC.
BUILDING 31, OLNEY AVENUE
CHERRY HILL, NEW JERSEY 08003
(609) 424-5600
(Name, address and telephone number of person authorized to receive
notice and communication on behalf of the person(s) filing statement).
WITH COPIES TO:
DENNIS J. BLOCK, ESQ. FREDERICK W. DREHER, ESQ.
WEIL, GOTSHAL & MANGES DUANE, MORRIS & HECKSCHER
767 FIFTH AVENUE 4200 ONE LIBERTY PLACE
NEW YORK, NY 10153 PHILADELPHIA, PA 19103-7386
(212) 310-8000 (215) 979-1000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Marsam Pharmaceuticals Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is Building 31, Olney Avenue, Cherry Hill, New Jersey 08003. The
title of the class of equity securities to which this statement relates is the
common stock, par value $0.01 per share (the "Common Stock" or the "Shares"), of
the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
The statement relates to the tender offer by Schein Pharmaceutical, Inc., a
Delaware corporation (the "Parent"), disclosed in a Tender Offer Statement on
Schedule 14D-1, dated August 4, 1995 (the "Schedule 14D-1"), to purchase all
outstanding Shares, 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 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together with the Offer to Purchase 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 Parent, SM Acquiring Co.,
Inc., a Delaware corporation and a wholly owned subsidiary of the Parent (the
"Sub"), and the Company. The Merger Agreement provides, among other things, that
as soon as practicable after the satisfaction or waiver of the conditions set
forth in the Merger Agreement, the Sub will be merged with and into the Company
(the "Merger"), and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is filed herewith as
Exhibit 1 and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and the Sub are located at 100 Campus Drive, Florham Park, New Jersey
07932.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding and
actual or potential conflict of interest between the Company or its affiliates
and: (i) the Company, its executive officers, directors or affiliates or (ii)
the Parent, its executive officers, directors or affiliates, is described in the
attached Schedule I (which information is incorporated herein by reference) or
is set forth below.
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement (the "Employment
Agreement") with Marvin Samson ("Mr. Samson"), the President and Chief Executive
Officer of the Company, dated as of July 28, 1995. The following summary is
qualified in its entirety by reference to the text of the Employment Agreement,
a copy of which is filed as Exhibit 3 hereto and is incorporated herein by
reference.
Pursuant to the Employment Agreement, the Company will employ Mr. Samson as
president, chief executive officer and chief operating officer of the Company
and, as of the Acquisition Date (as defined below), Mr. Samson will be appointed
an Executive Vice President of the Parent. The Employment Agreement will become
effective on the date of the acquisition by the Parent or a subsidiary of the
Parent 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
the extension provisions of the Employment Agreement, will terminate on the
fifth anniversary of the Acquisition Date.
The Employment Agreement will be automatically extended for additional
periods of one year, unless written notice terminating the term of employment is
given by either the Company or Mr. Samson not less than one hundred eighty (180)
days in advance of the termination date of the Employment Agreement.
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The Employment Agreement provides that Mr. Samson will, consistent with his
position as president and chief executive officer of the Company and executive
vice president of the Parent, be responsible for: the management of the Company
and its organizational structure - subject to the Board of Directors of the
Company and to the provisions of the Employment Agreement, his authority will
include, without limitation, supplier relationships and salary, perquisites and,
subject additionally to the Parent's Board of Directors, stock options for the
Parent common stock for the Company's employees; all product development
activities for the Parent's and the Company's parenteral products; and all sales
and marketing activities for the Parent's and the Company's hospital and home
care accounts.
For all services to be rendered by Mr. Samson pursuant to the Employment
Agreement, the Company will pay Mr. Samson an annual salary at a rate of not
less than $400,000 per year, plus such other compensation as may, from time to
time, be determined by the Company.
The Employment Agreement provides that if Mr. Samson terminates his
employment prior to the end of the initial five-year term, the Company shall
continue to pay him 50% of the salary provided for in the preceding paragraph,
in accordance with the Company's normal practices in effect from time to time,
and provide Mr. Samson and his eligible dependents with health and disability
insurance coverage comparable to his coverage while he was an employee or, at
the Company's option, reimburse Mr. Samson in an amount not in excess of 125% of
the cost thereof to the Company while he was 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. Mr. Samson has agreed not to compete with the Company
during the term of his employment and, under certain circumstances, following
the term of his employment, including during the period that the Company makes
the payments to Mr. Samson described in this paragraph.
The Employment Agreement further provides that during Mr. Samson's
employment under the Employment Agreement, except as otherwise consented to or
approved by Mr. Samson and the Parent:
the Board of Directors of the Company will be comprised of seven members,
three to be designated by Mr. Samson, three to be designated by the Parent
(the "Parent directors") and one, who shall be an 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 Mr. Samson, which approval shall not be unreasonably withheld (the
"Bayer director");
the consent or approval of at least one of the Parent directors shall be
required prior to the Company taking any extraordinary corporate actions,
which, for purposes of the Employment 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 Company's 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 Parent or (with the additional
consent or approval of the Bayer director) agreements between the Parent (or
any of its affiliates) and Bayer Corporation (or any of its affiliates);
after consultation with the other directors, the Parent directors shall
be entitled to authorize and approve, as actions of the Board of Directors of
the Company, corporate actions not inconsistent with the provisions of the
Employment Agreement, including, without limitation, financings; issuances of
securities; and encumbering of assets;
Mr. Samson, having been elected a director of the Parent effective upon
the Acquisition Date, shall be included in the slate of the Parent's
management nominees for re-election as a director;
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 labeling and the
like;
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the headquarters of the Company shall remain in Cherry Hill, New Jersey;
the Company shall not be required to sell products to or manufacture
products for the Parent or any affiliate of the Parent on terms less
favorable to the Company than those the Company provides to unaffiliated
customers for similar purchase quantities; and
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 Offer and the Merger, 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 the Parent'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.
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. Schedule I contains a description of the Compensation Continuation
Agreement under "Compensation Continuation Agreement" and a description of the
Split Dollar Agreement in the second footnote under "Executive Compensation" and
such descriptions are incorporated herein by reference. The Parent has agreed to
cause the Company after the Acquisition Date to perform its obligations under
the Employment Agreement.
STOCK OPTIONS
The Company maintains the 1986 Stock Option Plan and the 1993 Stock Option
Plan (collectively, the "Plans"), pursuant to which options (the "Options") to
purchase the Company's Common Stock have been granted and remain outstanding as
of the date of this Schedule 14D-9. Pursuant to the Merger Agreement, at the
consummation of the Offer, the Parent will pay each holder of a then outstanding
Option, whether or not then exercisable, in settlement of the Options, an amount
(subject to any applicable withholding tax) in cash equal to the product of (A)
the excess, if any, of $21 over the exercise price per Share of each such Option
and (B) the number of Shares relating to such Option. Upon the receipt by the
holders of the requisite amounts, the Options will be cancelled. As of July 26,
1995, there were 1,166,649 Options outstanding with a per share exercise price
of less than $21, and the holders of such Options, in the aggregate, will
receive approximately $9.6 million pursuant to the foregoing provisions of the
Merger Agreement.
CERTAIN EMPLOYEE PROVISIONS IN THE MERGER AGREEMENT
The Merger Agreement provides that for a period of at least two years
following the time the Merger becomes effective (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 to 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 has agreed 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.
THE MERGER AGREEMENT
The summary of the Merger Agreement contained in the Offer to Purchase,
which has been filed with the Securities and Exchange Commission (the
"Commission") as an exhibit to the Schedule 14D-1, a copy of which is enclosed
with this Schedule 14D-9, is incorporated herein by reference. Such summary
should be read in its entirety for a more complete description of the terms and
provisions of the Merger Agreement. A copy of the Merger Agreement has been
filed as Exhibit 1
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hereto and is incorporated herein by reference. The following is a summary of
certain portions of the Merger Agreement which relate to arrangements among the
Company, the Sub, the Parent and the Company's executive officers and directors
and certain other significant provisions.
BOARD COMPOSITION. The Merger Agreement provides that, effective upon the
purchase by the Parent of such number of Shares which represents a majority of
the outstanding Shares on a fully diluted basis, the Parent and the Company
shall, subject to the provisions of Section 14(f) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 14f-1 under the Exchange Act,
promptly use all reasonable efforts necessary to cause the persons designated
pursuant to or listed on schedule 2.5 to the Merger Agreement to comprise the
entire Board of Directors of the Company. From and after the date such persons
first comprise the Company's Board of Directors (the "Control Date"), any
termination of the Merger Agreement by the Company, any amendment of the Merger
Agreement requiring action by the Board of Directors of the Company, any
extension of time for performance of any of the obligations of the Parent or the
Sub thereunder and any waiver of compliance with any provision of the Merger
Agreement for the benefit of the Company shall require the approval of a
majority of the directors designated as "Continuing Directors" on schedule 2.5
of the Merger Agreement, if requested by a majority of the Continuing Directors.
Section 14(f) of the Exchange Act requires the Company to mail to its
stockholders an Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. A copy
of the Information Statement is attached as Schedule I hereto and is
incorporated herein by reference.
DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE. Pursuant to the Merger
Agreement, the Parent and the Surviving Corporation have agreed that all rights
to indemnification and 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
the Merger Agreement with respect to matters occurring prior to the Effective
Time will survive the Merger and will continue in full force and effect. In
addition to the rights described in the preceding sentence, and not in
limitation of those rights, the Parent also has agreed to cause the Surviving
Corporation to indemnify, defend and hold 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 the Merger Agreement). Further, the Parent has
agreed to 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 the Merger Agreement; and FURTHER PROVIDED that, if the Surviving
Corporation is unable to obtain the insurance called for by the foregoing, the
Surviving Corporation shall obtain as much comparable insurance as is available
for the Premium Amount per year. The Merger Agreement provides that the Parent
shall cause the Surviving Corporation to pay all expenses (including reasonable
attorneys' fees) that may reasonably be incurred by any Indemnified Party in
successfully enforcing the rights to
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which the Indemnified Party is entitled under the Merger 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.
NO SOLICITATION OF OFFERS. From the date of the Merger Agreement until the
termination thereof, the Company has agreed that it will not, and will not
permit any of its subsidiaries or any of its or their officers, directors,
employees, representatives, agents or affiliates, 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 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
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 the Merger Agreement prohibits 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 the Merger
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 has agreed to use reasonable efforts to keep the Parent informed of
the status of any 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 the Merger Agreement, "Acquisition Proposal" means an
inquiry, offer or proposal regarding any of the following (other than the
transactions contemplated by the Merger Agreement with the Parent or the 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.
Prior to the consummation of the Offer, if 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, 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 shall provide reasonable notice
to the Parent 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,
the termination fee described in the next succeeding paragraph.
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TERMINATION FEE. The Company has agreed to pay the Parent a fee in
immediately available funds equal to $6,000,000 upon the termination of the
Merger Agreement (i) by the Parent, if the Board of Directors of the Company
shall withdraw, modify or change its recommendation or approval in respect of
the Merger Agreement or the Offer in a manner adverse to the Parent or the Board
of Directors of the Company shall have recommended any proposal other than by
the Parent or the Sub in respect of an Acquisition Proposal or (ii) by the
Company to allow the Company to enter into an agreement in respect of an
Acquisition Proposal.
STOCKHOLDERS AGREEMENT
The following is a summary of the Stockholders Agreement, dated July 28,
1995 (the "Stockholders Agreement"), among the Parent, the Sub, and Marvin
Samson, Agvar Chemicals Inc., Agnes Varis and Karl Leichtman (jointly), and
Agnes Varis (each a "Stockholder" and collectively the "Stockholders"). Such
summary is qualified in its entirety by reference to the text of the
Stockholders Agreement, a copy of which is filed as Exhibit 2 hereto and is
incorporated herein by reference.
TENDER OF SHARES. Pursuant to the Stockholders Agreement, each Stockholder
has agreed to validly tender (and not withdraw) pursuant to and in accordance
with the Offer, not later than the tenth business day after commencement of the
Offer, the number of shares of Common Stock of the Company set forth opposite
that Stockholder's name on Schedule 1 to the Stockholders Agreement (the
"Existing Shares") beneficially owned by the Stockholder, plus any Shares issued
to the Stockholder upon the exercise of Options. The Existing Shares, in the
aggregate, constitute 2,871,132 Shares, or approximately 25.9% of the
outstanding Shares. The Stockholders will have no obligation under the
Stockholders Agreement to tender their Shares to the Parent 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) set forth in Section 12 under "The
Merger Agreement - Termination" in the Offer to Purchase. In addition, no
Stockholder will have any such obligation in the event that the Parent or the
Sub has taken any action with respect to or in connection with the Offer that
pursuant to the provisions of the Merger Agreement, the Parent or the Sub is
prohibited from taking without the prior written consent of the Company, unless
such Stockholder has given its written consent to such action.
VOTING OF SHARES. Each Stockholder has agreed that at any meeting of
stockholders of the Company or in connection with any written consent of
stockholders of the Company, that 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 will
have no obligation to so vote their shares 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 will have any such obligation 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.
STOCK OPTIONS. Each Stockholder has granted 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 to the Stockholders
Agreement (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 the Sub due to the failure
of the conditions to the Offer set forth in clause (1) or in sub-clause (C),
(D), (F) or (G) of clause (iii) set forth in Section 14 of the Offer to
Purchase, (b) the Offer is terminated, abandoned or withdrawn by the Parent or
the Sub in a circumstance referred to in clause (d) set forth in Section 12
under "The Merger Agreement -
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Termination" in the Offer to Purchase that involves a suit, action or proceeding
by a party that has made an Acquisition Proposal or (c) the Offer is consummated
but the Parent has not accepted for payment and paid for the aggregate number of
Shares set forth opposite each Stockholder's name on Schedule 1 to the
Stockholders Agreement and such non-acceptance and non-payment is not in
contravention of the Parent's or the 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 exercises the Stock Options, the Stockholders Agreement
provides that (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 to the Parent on the same terms 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) of the preceding paragraph and in sub-clause (I) of
clause (iii) set forth in Section 14 of the Offer to Purchase, 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 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 the Stockholders Agreement to the contrary notwithstanding, (i)
no Stockholder shall have any obligation with respect to the grant of the Stock
Options if the Stock Options have not been exercised in accordance with the
Stockholders Agreement 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 to tender
Shares pursuant to the Offer by reason of the last sentence of the paragraph
appearing under "Tender of Shares" above.
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 paid by the Parent for the Option Shares,
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.
NO SOLICITATION. Each Stockholder has agreed that, prior to December 31,
1995, such Stockholder shall not, 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,
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. The sole and exclusive remedy for any nonperformance or
breach by any Stockholder or Stockholders of the no solicitation provisions of
the Stockholders Agreement shall be an injunction or injunctions to prevent the
breach of such provisions and/or to enforce specifically the terms of such
provisions.
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RESTRICTIONS ON TRANSFER, ETC. Except as provided in the Stockholders
Agreement, prior to the earliest of (a) December 31, 1995, (b) the termination,
abandonment, withdrawal or consummation of the Offer under certain circumstances
specified in the Stockholders 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 the Stockholders 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 the Stockholders Agreement untrue in any material respect or have the effect
of preventing or disabling that Stockholder from performing that Stockholder's
obligations under the Stockholders Agreement.
BOLAR AGREEMENT
Pursuant to an agreement dated as of December 31, 1985 among Marvin Samson,
Agvar Chemicals Inc., 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
receives 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 fails 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 and the Merger. The Bolar
Agreement expires in accordance with its terms on December 31, 1995.
CONFIDENTIALITY AGREEMENT
The Parent and the Company entered into the confidentiality agreement, dated
May 15, 1995 (the "Confidentiality Agreement"), a copy of which is filed as
Exhibit 4 hereto and incorporated herein by reference. Pursuant to the
Confidentiality Agreement, the Parent agreed, among other things, that it would
keep confidential certain information ("Evaluation Material") furnished to it by
the Company and to use the Evaluation Material solely for the purpose of
evaluating a business transaction between the Parent and the Company.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors has unanimously determined that the consideration to
be paid for each Share in the Offer and the Merger is fair to the stockholders
of the Company and that the Offer and the Merger are otherwise in the best
interests of the Company and its stockholders, has approved and adopted the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and recommends that all holders of Shares accept the Offer and
tender their Shares pursuant to the Offer.
A letter to the Company's stockholders communicating the Board's
recommendation and a press release announcing the Merger Agreement and related
transactions are filed herewith as Exhibits 5 and 6, respectively, and are
incorporated herein by reference.
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(B) BACKGROUND REASONS FOR THE BOARD'S RECOMMENDATION.
BACKGROUND. On August 2, 1994, Marvin Samson, President and Chief Executive
Officer of the Company, and Jerry Wojta, President of Roxane Laboratories, Inc.,
a wholly owned subsidiary of Boehringer Ingelheim GmbH ("BI"), met at the
request of Mr. Wojta to discuss on a preliminary basis a possible strategic
alliance between the Company and BI.
In September 1994, the Company and BI executed a confidentiality agreement
pursuant to which each company agreed to keep confidential non-public
information furnished to it by the other company. Following the execution of the
confidentiality agreement, the Company and BI began to exchange information
regarding their respective businesses and the terms and conditions of a possible
strategic alliance. From the Fall of 1994 through the Spring of 1995, executive
officers and directors of the Company had preliminary discussions with
representatives of BI and its financial advisor, Arnhold and S. Bleichroeder,
Inc. ("ASB"), concerning their interest in a strategic alliance and continued to
exchange information about the Company's products, financial projections and
strategic plans. On April 5, 1995, BI advised the Company that BI wished to
commence formal discussions regarding a possible transaction with the Company.
On April 12, 1995, Marvin Samson met with representatives of Bear, Stearns &
Co. Inc. ("Bear Stearns") to discuss the Company's strategic options and the
retention of Bear Stearns as the Company's financial advisor in connection with
any acquisition transaction or strategic alliance that the Company might
determine to pursue with any third party. On April 18, 1995, the Company
executed an engagement letter with Bear Stearns, pursuant to which, among other
things, Bear Stearns agreed to serve as the Company's financial advisor and, if
requested by the Company, to render an opinion as to the fairness, from a
financial point of view, of the consideration to be received by the holders of
the Shares in any transaction that might eventuate.
On April 19, 1995, Marvin Samson and Agnes Varis, a director and the
beneficial owner of approximately 14% of the outstanding Shares, met with
representatives of Bear Stearns, BI and ASB. At that meeting, BI orally
expressed its interest in pursuing the possible acquisition of the Company in a
transaction in which stockholders of the Company would receive approximately
$17.00 per Share in cash. BI's expression of interest was understood by the
Company to be subject to, among other things, the satisfactory completion by BI
of a due diligence investigation of the Company, receipt of necessary approvals
of the respective boards of directors and stockholders of BI and the Company and
the preparation, negotiation and execution of mutually satisfactory definitive
documentation. Following the meeting, representatives of the Company and BI had
several telephone discussions regarding the consideration that would be paid to
the Company's stockholders in the event the Company and BI were to conclude an
agreement with respect to BI's acquisition of the Company.
On May 2, 1995, Marvin Samson, Agnes Varis and Dr. Allen Misher, a director
of the Company, met with representatives of Bear Stearns, BI and ASB to discuss
BI's interest in acquiring the Company, possible acquisition structures and the
potential range of the consideration BI might be willing to pay to the Company's
stockholders for their Shares. This meeting was followed, on May 8, 1995, by a
telephone conversation between Marvin Samson and Jerry Wojta, in which Mr. Wojta
indicated BI had an interest in pursuing discussions regarding the acquisition
of the Company at a price of $18.00 per Share in cash.
In recent years, the Company and the Parent have engaged in ordinary course
business transactions involving sales of the Company's products to the Parent.
From time to time, Martin Sperber, the Chairman and Chief Executive Officer of
the Parent, and Marvin Samson have had general discussions regarding their two
companies. On May 8, 1995, at the Parent's request, Marvin Samson held a meeting
with Mr. Sperber to discuss the Parent's potential interest in acquiring the
Company. Mr. Samson and Mr. Sperber had a telephone conversation on May 12, 1995
to further discuss the Parent's interest in pursuing such a transaction.
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<PAGE>
On May 9, 1995, Mr. Samson held a telephone conference with the Company's
Board of Directors to review recent developments concerning the indications of
interest that the Company had received from BI, the Parent and other third
parties.
The Company and the Parent executed the Confidentiality Agreement, dated May
15, 1995. On May 17, 1995, Marvin Samson, Agnes Varis and representatives of
Bear Stearns met with Martin Sperber, Richard L. Goldberg, a director of the
Parent and a partner in the law firm serving as the Parent's legal counsel, and
Harold Tanner of Tanner & Co., the Parent's financial advisor, to discuss the
Parent's interest in the Company. At this meeting, the Parent orally indicated
it was prepared to offer $19.50 per Share in cash, was prepared to discuss
structural issues and wished to commence a due diligence review of the Company
as promptly as practicable. On May 18, 1995, the Parent furnished a due
diligence request list to the Company.
On May 19, 1995, Werner Gerstenberg and Sheldon Berkle of BI called Marvin
Samson to advise him that BI was interested in acquiring the Company at a cash
price of $19.00 per Share and to request that BI be permitted to commence a due
diligence investigation of the Company. The Company granted BI's request and
BI's due diligence investigation was conducted at the Company's offices and at
the offices of the Company's legal counsel from May 21, 1995 through May 27,
1995.
On May 19, 1995, Mr. Samson again held a telephone conference with the
Company's Board of Directors to discuss the status of the various indications of
interest received by the Company.
On May 25, 1995, the Company's Board of Directors held a regularly scheduled
meeting. During the meeting, Mr. Samson reported that he had been advised by BI
that its due diligence review of the Company had been substantially completed.
Mr. Samson also expressed his concern about the competitive risks that would be
necessarily involved in granting all of the Parent's due diligence requests,
especially in light of the fact that the Company had no assurances that the
Parent had arranged committed financing in an amount necessary to acquire the
Company.
On May 30, 1995, the Company, as a result of the status of its discussions
with BI and the Parent and market activity regarding the Shares, issued a press
release stating that it had received indications of interest from several
parties relating to an acquisition of the Company at a price in the $19.00 range
and that the Company had retained Bear Stearns to assist the Company in its
review of the various proposals.
On May 31, 1995, Martin Sperber sent a letter to Marvin Samson reaffirming
the Parent's interest in pursuing the acquisition of the Company at a price of
$19.50 per Share. In his letter, Mr. Sperber also stated that financing was not
a condition for the acquisition and requested that the Parent be permitted to
commence its due diligence review as promptly as practicable. Mr. Sperber also
noted in his letter that the Parent would be prepared to offer a higher price if
the Company could show that greater values existed.
Prior to and following the issuance of the Company's press release on May
30, 1995, the Company and representatives of Bear Stearns engaged in discussions
and/or met with several third parties (and their representatives) in addition to
BI and the Parent to determine whether they had an interest in acquiring the
Company on terms that might be attractive to the Company's Board of Directors.
These third parties included Baxter Healthcare Corp., Ivax Corporation, Marion
Merrell Dow, Inc., Mylan Pharmaceuticals, Inc., Teva Pharmaceutical Industries
Ltd. and Watson Laboratories, Inc. Certain of these third parties were furnished
with confidential information. A number of these third parties indicated an
interest in pursuing an acquisition that would involve the receipt of stock of
the third party by the Company's stockholders in payment for their Shares,
including a written expression of interest from Mylan at $20.50 per share in
Mylan stock. At the May 25, 1995 meeting of the Company's Board of Directors,
the directors discussed their lack of support for a stock-for-stock transaction
with the third parties that had expressed such an interest and their general
desire to obtain cash for the Company's stockholders if the Company were to be
acquired. None of these third parties at any
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<PAGE>
time prior or subsequent to the issuance of the Company's May 30 press release
indicated an interest in pursuing an acquisition of the Company at a price in
excess of $21.00 per share and none of the contacts with third parties other
than BI and the Parent led to substantive negotiations.
Following the Company's May 30, 1995 press release, at the Company's
request, Bear Stearns advised all interested parties, including BI and the
Parent, that the Company generally favored a cash transaction, that the
proposals theretofore received by the Company should be improved, that timing
was important, and that any proposal should have committed financing and be in
writing and include the party's due diligence requests.
On June 1, 1995, the Company received a letter from the Parent indicating
that, assuming that the due diligence materials would justify a higher price, it
was interested in an acquisition at a price of $21.00 per Share or perhaps
higher. On June 1, 1995, representatives of the Parent and of the Company had an
extensive telephone conversation to respond to the Parent's questions regarding
the Company's historical financial statements, outstanding litigation involving
the Company and the Company's financial forecasts previously delivered to the
Parent. The Company declined to respond to the Parent's questions involving the
Company's new products under development until the Company received confirmation
that the Parent had arranged committed financing in amounts sufficient for an
acquisition of the Company.
On June 3, 1995, the Company's Board of Directors held a special meeting at
which representatives of Bear Stearns and the Company's legal counsel were
present to discuss the proposals of BI and the Parent and the other indications
of interest received from third parties. Counsel reviewed for the Board of
Directors its comments on a draft merger agreement submitted by BI. The Board
also reviewed the status of discussions with the Parent and the Company's
requests that the Parent provide evidence to the Company of the Parent's ability
to finance an acquisition of the Company prior to granting the Parent access to
proprietary information relating to the Company's products in development.
On June 7, 1995, a representative of Tanner & Co. delivered to the Company
and its advisors a copy of an executed commitment letter received by the Parent
from Chemical Bank and Chemical Securities Inc. relating to the financing of the
Parent's proposed acquisition of the Company. On the same day, representatives
of the Parent and the Company also held a telephone conference with a
representative of Bayer Corporation ("Bayer"), a substantial shareholder of the
Parent, during which the Company's representatives were advised that Bayer would
be willing to provide the Parent with any necessary "bridge" financing in
connection with the Parent's acquisition of the Company.
On June 8, 1995, the Parent's financial advisor delivered to the Company's
counsel drafts of the Merger Agreement and Stockholders Agreement.
Between June 3, 1995 and June 21, 1995, the Company, its counsel and
representatives of Bear Stearns had numerous discussions with representatives of
the parties that had indicated an interest in the Company and the circumstances
under which the Company's Board of Directors might be willing to support an
acquisition proposal.
On June 11, 1995, at the request of Martin Sperber, Marvin Samson furnished
the Parent with a list of matters related to the Company's operations in the
event the Company were to be acquired by the Parent. On June 19, 1995, Marvin
Samson and Agnes Varis met with Martin Sperber and Dariush Ashrafi, the Senior
Vice President and Chief Financial Officer of the Parent, to discuss the
Company's requests regarding post-acquisition operations of the Company.
On June 21, 1995, the Company's Board of Directors held a special meeting to
discuss the draft merger agreements submitted by BI and the Parent as well as
the status of discussions with BI and the Parent and other interested parties.
Mr. Samson reported that BI's senior management was meeting with representatives
of BI's stockholders in an effort to finalize BI's proposal to acquire the
Company.
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<PAGE>
The Board, following its review of information regarding financing previously
supplied by the Parent, also decided to allow the Parent to move forward with
its due diligence investigation and to advise the Parent of the Company's
comments on the draft merger agreement submitted by the Parent.
On June 27, 1995, the Company held a special meeting of its Board of
Directors at which representatives of Bear Stearns and counsel to the Company
were present. Mr. Samson advised the Board of Directors that in a telephone
conversation that morning with a representative of BI he had been advised that
BI had determined not to proceed with its proposal to acquire the Company. The
Board reviewed the remaining pending indications of interest and determined to
proceed in an orderly and thorough fashion to meet with all interested parties
and provide them with an opportunity to conclude their due diligence review of
the Company.
Between June 27, 1995 and July 25, 1995, the Company continued its
discussions with the parties that had expressed an interest in acquiring the
Company.
Starting on July 18, 1995, representatives of the Company and the Parent and
their respective counsel and financial advisors negotiated the terms of the
Merger Agreement and related matters. During these negotiations, representatives
of the Parent stated that its proposal was conditioned upon Marvin Samson, Agnes
Varis and the other Stockholders agreeing to tender their Shares pursuant to the
Parent's proposed tender offer, granting the Parent an option to purchase
substantially all of their Shares if the Offer were to terminate without the
Parent purchasing any Shares for certain specified reasons and agreeing to vote
their Shares in favor of the Merger. Representatives of the Parent also stated
that their proposal was conditioned upon Marvin Samson entering into an
employment agreement with the Company on mutually satisfactory terms for an
initial term of five years. On July 19, 1995, a draft of the Employment
Agreement was furnished by the Parent and following such time, the terms of the
Stockholders Agreement and the Employment Agreement were negotiated by the
parties thereto and their respective counsel.
Starting in the morning of July 28, 1995, the Company's Board of Directors
met to consider the Parent's offer of $21.00 per Share. The terms of the
proposed transaction and the related Merger Agreement, Stockholders Agreement
and Employment Agreement were presented to and reviewed by the Company's Board
of Directors. Representatives of Bear Stearns and legal counsel made
presentations to the Board of Directors. Bear Stearns delivered its opinion as
to the fairness, from a financial point of view, of the $21.00 per Share cash
consideration offered by the Parent to the public stockholders of the Company.
After discussion, the Company's Board of Directors unanimously decided to
proceed with the sale of the Company and to accept the Parent's offer for the
reasons described below, and it approved the Merger Agreement and the
transactions contemplated thereby and unanimously recommended that stockholders
accept the Offer and tender their Shares pursuant thereto. The Board of
Directors also unanimously (with Marvin Samson and Agnes Varis abstaining) voted
to waive the restrictions imposed by Section 203 of the Delaware General
Corporation Law in connection with the transactions contemplated by the
Stockholders Agreement for the reasons described below, and, with Marvin Samson
abstaining, voted to approve the terms of the Employment Agreement.
The Company and the Parent entered into the Merger Agreement on the night of
July 28, 1995 and, on July 29, 1995, the Company and the Parent issued a press
release announcing that they had entered into the Merger Agreement.
REASONS FOR THE TRANSACTION; FACTORS CONSIDERED BY THE BOARD. In approving
the Merger Agreement and the transactions contemplated thereby and recommending
that all holders of Shares tender their Shares pursuant to the Offer, the Board
of Directors considered a number of factors, including:
1. the financial and other terms and conditions of the Offer and the
Merger Agreement;
2. the presentation of Bear Stearns at the July 28, 1995 Board of
Directors' meeting and the opinion of Bear Stearns (the "Opinion") to the
effect that, as of the date of its Opinion and
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<PAGE>
based upon and subject to certain matters stated therein, the $21 per Share
cash consideration to be received by the holders of Shares pursuant to the
Offer and the Merger is fair, from a financial point of view, to the public
stockholders of the Company. The full text of the Opinion, which sets forth
the assumptions made, matters considered and limitations on the review
undertaken by Bear Stearns, is attached hereto as Exhibit 7 and is
incorporated herein by reference. Stockholders are urged to read the Opinion
carefully in its entirety;
3. the fact that the structure of the acquisition of the Company by the
Parent as provided for in the Merger Agreement involves a cash tender offer
for all outstanding Shares to be commenced within five business days of the
public announcement of the Merger Agreement to be followed as promptly as
practicable by a merger for the same consideration, thereby enabling the
Company's stockholders to obtain cash for their Shares at the earliest
possible time;
4. the fact that the Merger Agreement, which prohibits the Company, its
subsidiaries and their respective officers, directors, employees,
representatives, agents or affiliates from initiating, soliciting or
knowingly encouraging any potential Acquisition Proposal (as defined in the
Merger Agreement) does permit the Company to furnish non-public information
to, or to enter into, maintain or continue discussions and negotiations
with, any person or entity that (a) has made inquiries or proposals prior to
the date of the Merger Agreement regarding an Acquisition Proposal or (b)
makes an unsolicited inquiry, offer or proposal relating to an Acquisition
Proposal after the date of the Merger Agreement, if the Board of Directors,
after consultation with and based upon the advice of counsel, determines
that it is necessary to do so in the exercise of its fiduciary duties;
5. the fact that in the event that the Board decided to accept an
Acquisition Proposal by a third party, the Board may terminate the Merger
Agreement and pay the Parent a termination fee of $6,000,000 million (or
approximately $.54 per outstanding Share). The Board, after considering,
among other things, the advice of Bear Stearns, did not believe that such
termination provision would be a significant deterrent to a higher offer by
a third party interested in acquiring the Company;
6. the fact that the obligations of the Parent and the Sub to
consummate the Offer and the Merger pursuant to the terms of the Merger
Agreement are not conditioned upon financing;
7. the fact that on May 30, 1995, the Company issued a press release
that stated that the Company had received indications of interest from
several parties regarding an acquisition of the Company in the $19 per Share
range; and the fact that neither prior nor subsequent to such press release
did any other party indicate a willingness to pursue an acquisition of the
Company for a cash price in excess of the $21 per Share price offered by the
Parent;
8. the fact that Marvin Samson, a founder of the Company and the
President and Chief Executive Officer of the Company and the beneficial
owner of approximately 14% of the outstanding Shares and Agnes Varis, a
founder and a director of the Company and also the beneficial owner of
approximately 14% of the outstanding Shares, were willing to enter into the
Stockholders Agreement pursuant to which they agreed to tender substantially
all of their Shares pursuant to the Offer and vote their Shares in favor of
the Merger; it being noted by the Board of Directors of the Company that the
Stockholders will be treated the same as all other stockholders in the Offer
and the Merger and that if the Offer were terminated and the Stock Options
granted by the Stockholders to the Parent were exercised, the Parent has
agreed to make an offer to all of the other stockholders of the Company to
purchase their Shares on the same terms;
9. the fact that the terms of Merger Agreement and the Stockholders
Agreement should not unduly discourage other third parties from making bona
fide proposals subsequent to signing the Merger Agreement and, if any such
proposal were made, the Company, in the exercise of its fiduciary duties,
could determine to provide information to and engage in negotiations with
any other third party;
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10. the historical market price of, and recent trading activity in, the
Shares, particularly the fact that the Offer and the Merger will enable the
stockholders of the Company to realize a premium of 42.4% over the closing
price of the Shares on the last trading day prior to the public announcement
on May 30, 1995 that the Company had received indications of interest
relating to the possible acquisition of the Company; information with regard
to the financial condition, results of operations, competitive position,
business and prospects of the Company, as reflected in the Company's
projections, current economic and market conditions (including current
conditions in the industry in which the Company is engaged) and the going
concern value of the Company; the Board did not consider the liquidation of
the Company as a viable course of action, and, therefore, no appraisal or
liquidation values were sought for purposes of evaluating the Offer and the
Merger;
11. the possible alternatives to the Offer and the Merger, including,
without limitation, continuing to operate the Company as an independent
entity and the risks associated therewith;
12. the familiarity of the Board of Directors with the business, results
of operations, properties and financial condition of the Company and the
nature of the industry in which it operates;
13. the compatibility of the business and operating strategies of the
Parent and the Company; and
14. the regulatory approvals required to consummate the Merger,
including, among others, antitrust approvals, and the prospects for
receiving such approvals.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed their position and recommendation as being based on the
totality of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Bear Stearns was retained to assist the Company in considering and reviewing
alternatives to enhance stockholder value, including a possible sale of the
Company. Bear Stearns will receive upon the purchase of Shares by the Parent
pursuant to the Offer total compensation equal to 1% of the value of the Offer
and the Merger, or approximately $2.4 million (the "Transaction Fee"). Bear
Stearns is being paid a fee of $300,000 for its Opinion, which amount will be
credited against the Transaction Fee. The Company incurred the obligation to pay
$100,000 of the Opinion fee on the first public reference to the Opinion and the
balance will be due on the closing of the Offer. The Company also has agreed to
reimburse Bear Stearns for its out-of-pocket expenses, including fees of its
legal counsel and other advisors who may be retained with the Company's consent,
and to indemnify Bear Stearns (and its officers, directors, employees,
controlling persons and agents) against certain liabilities arising out of or in
connection with Bear Stearns' engagement. The terms of the Company's engagement
of Bear Stearns are set forth in a letter agreement dated April 18, 1995.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares beneficially owned by them (other than Shares issuable upon
exercise of stock options, Shares that may be donated to charitable
organizations and Shares, if any, which if tendered could cause such persons to
incur liability under the provisions of Section 16(b) of the Exchange Act).
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ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or divided
policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8 ADDITIONAL INFORMATION TO BE FURNISHED.
CERTAIN LITIGATION. On July 31, 1995, a self-styled class action complaint
was filed by a purported stockholder of the Company in the Delaware Chancery
Court on behalf of all holders of the Shares. The Company, Marvin Samson, Judith
U. Arnoff, Agnes Varis, Barry Waxman, Allen Misher, Gus Blass (together, the
"Directors") and the Parent were named as defendants. In the suit, entitled
HARBOR FINANCE PARTNERS v. MARVIN SAMSON, ET. AL., Civil Action No. 14447, the
plaintiff has alleged, among other things, that in connection with the
Directors' approval of the Merger Agreement, the Directors breached their
fiduciary duties and failed to attempt to maximize shareholder value. The suit
seeks, among other things, (i) a declaratory judgment that the defendants have
breached their fiduciary duties, or aided and abetted breaches of such duties,
(ii) an order preliminarily and permanently enjoining the defendants from
proceeding with or consummating the transaction, (iii) in the event the
transaction is consummated, rescission thereof, (iv) an order directing
defendants to account for all profits realized, and, pending such accounting,
imposition of a constructive trust, (v) an order permitting a stockholders'
committee consisting of class members and their representatives to participate
in any process undertaken in connection with the sale of the Company, and (vi)
damages, costs and disbursements of the action. The Company believes that the
allegations are without merit and defendants intend to vigorously defend the
action.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated July 28, 1995, among Marsam Pharmaceuticals Inc., Schein
Pharmaceutical, Inc. and SM. Acquiring Co., Inc.
Exhibit 2 Stockholders Agreement, dated July 28, 1995, among Schein Pharmaceutical, Inc., SM. Acquiring Co.,
Inc. and certain stockholders named therein.
Exhibit 3 Employment Agreement, dated as of July 28, 1995, between Marsam Pharmaceuticals Inc. and Marvin
Samson.
Exhibit 4 Confidentiality Agreement, dated May 15, 1995 between Marsam Pharmaceuticals Inc. and Schein
Holdings, Inc.
Exhibit 5 Letter to Stockholders of Marsam Pharmaceuticals Inc., dated August 4, 1995.
Exhibit 6 Press Release, dated July 29, 1995, issued by Marsam Pharmaceuticals Inc.
Exhibit 7 Opinion of Bear, Stearns & Co. Inc. dated July 28. 1995.*
<FN>
- ------------------------
* Attached hereto as Annex A.
</TABLE>
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SIGNATURE
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.
Dated: August 4, 1995
By /s/ Marvin Samson
--------------------------------------
Title: President and Chief Executive
Officer
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SCHEDULE I
MARSAM PHARMACEUTICALS INC.
Building 31, Olney Avenue
Cherry Hill, NJ 08003
------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
The Information Statement is being mailed on or about August 4, 1995 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9"). You are receiving this Information Statement in connection with the
possible election of persons designated by the Parent to a majority of the seats
on the Board of Directors of the Company. The Merger Agreement requires the
Company to take all action necessary to cause the Parent Designees (as defined
below) to be elected to the Board of Directors under the circumstances described
therein. This Information Statement is required by Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder. See "General Information Regarding the Company".
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Parent commenced the Offer on August
4, 1995. The Offer is scheduled to expire at 12:00 Midnight on September 1,
1995, unless the Offer is extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning the Parent, the Sub and the
Parent Designees has been furnished to the Company by the Parent, and the
Company assumes no responsibility for the accuracy or completeness of such
information. Certain capitalized terms used but not defined in this Information
Statement have the meanings ascribed to them in the Schedule 14D-9.
GENERAL INFORMATION REGARDING THE COMPANY
The Shares are the only class of voting securities of the Company. Each
Share entitles its record holder to one vote. As of July 26, 1995, there were
11,084,137 Shares outstanding and 1,166,649 Shares reserved for issuance upon
the exercise of certain options outstanding.
ELECTION OF DIRECTORS
The Merger Agreement provides that, promptly upon the purchase by the Parent
of such number of Shares that represents a majority of the outstanding Shares on
a fully diluted basis, the Company, the Parent 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 necessary to cause the persons
designated pursuant to or listed on schedule 2.5 of the Merger Agreement to
comprise the entire Board of Directors of the Company. Schedule 2.5 of the
Merger Agreement provides for a seven-person Board of Directors, of which three
individuals are to be designated by the Parent and one individual is to be an
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 of
Marvin Samson, not to be unreasonably withheld). Such four individuals
hereinafter are referred to as the "Parent Designees." The other three
individuals listed on schedule 2.5 are Marvin Samson, Agnes Varis and Dr. Allen
Misher (collectively the "Continuing Directors"), each of whom currently serves
as a director of the Company.
It is expected that the Parent Designees may assume office at any time
following the purchase by the Parent of a majority of the outstanding Shares on
a fully diluted basis pursuant to the Offer, which purchase cannot be earlier
than September 1, 1995, and that, upon assuming office, the Parent Designees
together with the Continuing Directors will thereafter constitute the entire
Board of Directors of the Company.
Biographical information concerning each of the Parent Designees is
presented below.
PARENT DESIGNEES
The Parent has informed the Company that the Parent Designees shall be the
persons set forth in the following table. The following table sets forth the
name, age, present principal occupation or
<PAGE>
employment and five-year employment history for each of the persons who the
Parent designated pursuant to Schedule 2.5 of the Merger Agreement as the Parent
Designees. The business address of each such 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-December 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.
The Parent has advised the Company that, to the best knowledge of the
Parent, none of the Parent Designees currently is a director of or holds any
position with the Company, and except as disclosed in the Offer to Purchase,
none of the Parent Designees, other than Martin Sperber who currently owns 3,125
Shares (which he advised the Company he intends to sell in the Offer),
beneficially owns any securities (or rights to acquire any securities) of the
Company or has been involved in any transactions with the Company or any of its
directors, executive officers or affiliates that are required to be disclosed
pursuant to the rules of the Commission, except as may be disclosed in the Offer
to Purchase. The Parent has also informed the Company that certain Parent
Designees and/or their respective associates may also be directors or officers
of other companies and organizations that have engaged in transactions with the
Company or its subsidiaries in the ordinary course of business since January 1,
1994, and that the Purchaser believes that the interest of such persons in such
transactions is not of material significance.
The Parent has advised the Company that each of the persons listed in the
table above has consented to act as a director, and that none of such persons
has during the last five years been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and 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 findings any violation of such laws.
THE CURRENT MEMBERS OF THE BOARD AND
EXECUTIVE OFFICERS OF THE COMPANY
Currently, the Company's Board of Directors is divided into three classes
serving staggered three-year terms, the term of one class of directors to expire
each year. The following table sets forth the name, age and business address of
each current director, the year in which such director first became a director
of the Company, the principal occupation of such director during the past five
years and, as of
I-2
<PAGE>
August 1, 1995, any other directorships held by such director in any company
subject to the reporting requirements of the Exchange Act or in any company
registered as an investment company under the Investment Company Act of 1940, as
amended.
<TABLE>
<CAPTION>
HAS BEEN A
DIRECTOR TERM
NAME AGE SINCE EXPIRES POSITION(S) WITH THE COMPANY
- --------------------- --- ----------- ----------- ------------------------------------------------
<S> <C> <C> <C> <C>
CLASS II DIRECTOR
Agnes Varis 65 1985 1998 Director
Barry Waxman 56 1990 1998 Director
CLASS III DIRECTOR
Marvin Samson 54 1985 1996 President, Treasurer and Director
Allen Misher 62 1992 1996 Director
CLASS I DIRECTOR
Gus Blass, II 72 1992 1997 Director
Judith U. Arnoff 49 1992 1997 Vice President, Secretary and Director
</TABLE>
The executive officers of the Company as of August 1, 1995 are as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE
- --------------------- --------------------------------------------------------------------- ---
<S> <C> <C>
Marvin Samson President, Chief Executive Officer, Treasurer and Director 54
Judith U. Arnoff Vice President, Secretary and Director 49
Richard A. Baron Vice President, Finance and Chief Financial Officer 39
</TABLE>
Ms. Varis has served, for many years, as President of Agvar Chemicals Inc.,
a privately-owned supplier of bulk pharmaceutical active ingredients. She is
also a director of Copley Pharmaceutical, Inc.
Mr. Waxman has been a private investor since February 1991. Previously, he
was an executive officer of Finard & Company, a real estate development and
management company, from June 1987. Prior to this time, he actively engaged in
the practice of law for many years. Mr. Waxman is Mr. Samson's brother-in-law.
Mr. Samson is a founder of the Company and has served as President and Chief
Executive Officer and a Director of the Company since its organization in early
1985 and as its Treasurer since November 1986. He is also a director of
Community National Bank of New Jersey.
Dr. Misher has been President Emeritus of the Philadelphia College of
Pharmacy and Science since January, 1995, previous to which he served as its
President since 1984. He is also a director of U.S. Healthcare, Inc., U.S.
Bioscience, Inc. and Cortech, Inc.
Mr. Blass has been, for more than the past five years, a general partner of
Capital Properties, Ltd., a real estate investment company. He is also a
director of Worthen Bank and Trust Company.
Mrs. Arnoff has served as Vice President of the Company since 1985, as its
Secretary since November 1986 and as a Director since 1992. She served as Chief
Financial Officer of the Company from November 1986 until September 1994.
Mr. Baron has served as Vice President and Chief Financial Officer of the
Company since September 1994. Prior to September 1994, Mr. Baron served as a
Director in the Financial Advisory Services consulting group at Coopers &
Lybrand.
Except as noted above, there are no family relationships among any of the
Company's executive officers or directors. There are no arrangements or
understandings between any executive officer and any other person pursuant to
which such person was selected as an officer (although Mr. Samson is party to an
employment agreement with the Company providing for his employment as the
President and Chief Executive Officer of the Company).
I-3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of the close of business on August 3, 1995
certain information with respect to the holdings of each director and executive
officer of the Company and all directors and officers as a group. Each of the
persons listed below has sole voting and investment power with respect to such
Shares, unless otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER OR BENEFICIAL OWNERSHIP PERCENT OF
PERSONS IN GROUP OF COMMON STOCK CLASS
- -------------------------------------------------------------------------------- -------------------- -------------
<S> <C> <C>
Marvin Samson................................................................... 1,582,941(1) 14.3%
Agnes Varis..................................................................... 1,532,879(2) 13.9%
Gus Blass, II................................................................... 143,450(3) 1.3%
Judith U. Arnoff................................................................ 114,550(4) 1.0%
Allen Misher.................................................................... 14,438(5) *
Barry Waxman.................................................................... 8,438(6) *
Richard A. Baron................................................................ 6,250(7) --
All directors and officers as a group (7 persons)............................... 3,402,946(8) 30.7%
<FN>
- ------------------------
* Less than 1%.
(1) Includes options to purchase 32,500 Shares which are exercisable at present
or become exercisable within 60 days.
(2) Includes 1,422,566 Shares owned by Agvar Chemicals Inc. of which Ms. Varis
is the sole stockholder, President and a director. Ms. Varis may be deemed
to have sole voting and investment power with respect to the Shares held of
record by Agvar Chemicals Inc. Includes options to purchase 12,188 Shares
which are exercisable at present or become exercisable within 60 days.
(3) Includes 14,825 Shares owned by Mr. Blass' wife, as to which he disclaims
beneficial ownership, 75,000 Shares held of record by a partnership of
which Mr. Blass is a general partner and Shares voting and investment power
with respect to those Shares, and options to purchase 7,500 Shares which
are exercisable at present or become exercisable within 60 days and also
includes 92,500 Shares held jointly by Ms. Varis and her husband.
(4) Includes options to purchase 32,500 Shares which are exercisable at present
or become exercisable within 60 days.
(5) Includes options to purchase 4,687 Shares which are exercisable at present
or become exercisable within 60 days.
(6) Includes options to purchase 8,438 Shares which are exercisable at present
or become exercisable within 60 days. Does not include 600 Shares in a
trust of which Mr. Waxman's wife is trustee for the benefit of an adult
child, as to which Mr. Waxman disclaims beneficial ownership.
(7) Includes options to purchase 6,250 Shares which are exercisable within 60
days.
(8) Includes options to purchase 104,063 Shares which are exercisable at
present or become exercisable within 60 days.
</TABLE>
I-4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the Company's last three years, the cash
compensation paid by the Company, as well as certain other compensation paid or
accrued for those years, to the Company's executive officers.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
OTHER ANNUAL
NAME AND FISCAL COMPENSA-
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) TION ($)(1)
- ------------------------------------ ----- --------- --------- ------------
<S> <C> <C> <C> <C>
Marvin Samson ...................... 1994 316,214 -- --
President, Treasurer and Director 1993 264,322 -- --
1992 249,637 -- --
Judith U. Arnoff ................... 1994 180,779 -- --
Vice President, Secretary and 1993 167,038 -- --
Director 1992 149,846 -- --
Richard A. Baron ................... 1994 44,550 (3) -- --
Vice President and Chief Financial 1993 -- -- --
Officer 1992 -- -- --
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------
AWARDS
------------------------- PAYOUTS
RESTRICTED SECURITIES ---------- ALL OTHER
NAME AND STOCK UNDERLYING LTIP COMPENSA-
PRINCIPAL POSITION AWARD(S) ($) OPTIONS ($) PAYOUTS ($) TION ($)(2)
- ------------------------------------ ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Marvin Samson ...................... -- -- -- 25,308
President, Treasurer and Director -- 20,000 -- 26,597
-- 40,000 -- 25,145
Judith U. Arnoff ................... -- -- -- 250
Vice President, Secretary and -- 20,000 -- --
Director -- 40,000 -- --
Richard A. Baron ................... -- 25,000 -- --
Vice President and Chief Financial -- -- -- --
Officer -- -- -- --
<FN>
- ----------------------------------
(1) The Company provides certain personal benefits to its executive officers
which did not exceed the lesser of $50,000 or 10% of the cash compensation
received by such individuals.
(2) The amounts reflect the Company's matching contributions under its 401(k)
Employee Retirement Plan. In the case of Mr. Samson, the amount is
principally the premium paid by the Company pursuant to an agreement
between the Company and a trust created by Mr. Samson, under which the
trust has purchased a split dollar life insurance policy on the lives of
Mr. Samson and his wife, Elaine Samson, having death benefits aggregating
$5,000,000, which are payable to the beneficiaries designated in Mr.
Samson's trust. Under the agreement, the Company pays the annual premiums
on the policy, minus a sum equal to the lesser of the applicable one-year
term premium cost computed under Internal Revenue Service Revenue Ruling
55-747 or the cost of comparable one-year term life insurance in the
amount of the policy. The Company has a security interest in the death
benefit of the policy to the extent of the sum of all premium payments
made by the Company. This arrangement is designed so that, if the
assumptions made as to mortality experience, policy dividends and other
factors are realized, upon the later of Mr. or Mrs. Samson's death or the
surrender of the policy, the Company will recover all insurance premium
payments made by the Company pursuant to such agreement.
(3) Mr. Baron's employment by the Company commenced August 10, 1994.
</TABLE>
I-5
<PAGE>
STOCK OPTION GRANTS
The following table sets forth information concerning the grant of stock
options under the Company's 1993 Stock Option Plan to the Company's three
executive officers during 1994:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZATION VALUE AT
- --------------------------------------------------------------------------- ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTION EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR ($/SH.) DATE 5%($) 10%($)
- --------------------- ----------- ------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Marvin Samson -- -- -- -- -- --
Judith U. Arnoff -- -- -- -- -- --
Richard A. Baron 25,000 17.6% $ 11.00 8/9/04 69,178 175,312
</TABLE>
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information related to options exercised
during 1994 by the Company's executive officers, and the number and value of
options held by each of them at December 31, 1994:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE- MONEY OPTIONS AT
SHARES OPTIONS AT FY-END(#) FY-END($)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED(#) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marvin Samson 5,625 1,406 27,813 35,938 24,063 24,063
Judith U. Arnoff 4,500 1,125 27,813 35,938 24,063 24,063
Richard A. Baron -- -- -- 25,000 -- 0
</TABLE>
I-6
<PAGE>
OWNERSHIP OF VOTING SECURITIES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of the close of business on August 3,
1995, except as otherwise indicated below, certain information with respect to
the holdings of each Stockholder who was known to the Company to be the
beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of more than
5% of the Company's Common Stock. Each of the persons listed below has sole
voting and investment power with respect to such Shares, unless otherwise
indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME AND ADDRESS OF BENEFICIAL OWNER OF COMMON STOCK PERCENT OF CLASS
- -------------------------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Marvin Samson 1,582,941(1) 14.3%
Building 31, Olney Avenue
Cherry Hill, New Jersey 08003
Agvar Chemicals Inc. 1,532,879(2) 13.8%
96 Route 23
Little Falls, New Jersey 07424
Wellington Management Company 1,092,070(3) 9.9%
75 State Street
Boston, MA 02109
<FN>
- ------------------------
(1) Includes options to purchase 32,500 Shares which are exercisable at present
or become exercisable within 60 days.
(2) Agnes Varis, a director of the Company, is the sole stockholder, President
and a director of Agvar Chemicals Inc., and may therefore be deemed to have
sole investment and voting power with respect to the Shares held of record
by Agvar Chemicals Inc., which includes 98,125 Shares owned by Ms. Varis
and options granted to Ms. Varis to purchase 12,188 Shares which are
exercisable at present or become exercisable within 60 days, and also
includes 92,500 Shares held jointly by Ms. Varis and her husband.
(3) Based on its report for the year ended December 31, 1994 on Schedule 13G
under the Exchange Act, Wellington Management Company or its wholly-owned
subsidiary ("WMC") has shared dispositive power as to all of the Shares and
shared voting power as to 250,470 of the Shares. The Shares are owned by
various investment advisory clients of WMC.
</TABLE>
I-7
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
During 1994, the Board of Directors had an Audit Committee and a
Compensation Committee, but not a Nominating Committee. The members of the Audit
Committee are Dr. Misher, Ms. Varis and Mr. Waxman. The Audit Committee, which
met once during 1994, is charged with reviewing the audited financial statements
of the Company and making recommendations to the full Board of Directors on
matters concerning the Company's audits and the selection of independent public
accountants for the Company.
The members of the Compensation Committee are Mr. Blass, Dr. Misher and Ms.
Varis. The Compensation Committee, which met twice during 1994, is charged with
reviewing and determining the compensation of executive officers and
administering the Company's stock option plan.
MEETINGS OF THE BOARD OF DIRECTORS
During the Company's last fiscal year, its Board of Directors held five
meetings.
COMPENSATION OF DIRECTORS
All directors who are not also employees of the Company are entitled to
receive fees of $3,000 per annum and $1,000 for each board meeting attended,
plus reimbursement for expenses relating to attendance at board and committee
meetings.
Under the Company's 1993 Stock Option Plan (the "Plan"), non-management
Directors each are granted annually options to purchase 7,500 Shares of Common
Stock of the Company, each such option to terminate ten years after the date of
grant, or ninety days after the earlier termination of service to the Company by
the non-management Director. No other option grant may be made under the Plan to
non-management Directors. These provisions, which are intended to permit no
discretion with regard to the timing, price and number of options which may be
granted to the non-management Directors who administer the Plan, have been
included in order for the Plan to meet the "disinterested administration"
requirements which exempt options granted under the Plan from the "short swing"
profit provisions of Section 16(b) of the Securities Exchange Act of 1934.
EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Marvin Samson in
December 1986. The agreement with Mr. Samson, as amended, extends through
December 31, 1996 and provides for an annual base salary, effective for fiscal
years commencing on or after January 1, 1987, of not less than $150,000, as
determined by the Board of Directors of the Company.
COMPENSATION CONTINUATION AGREEMENT
The Company entered into a Compensation Continuation Agreement with Marvin
Samson in October 1991, to take effect upon his retirement (as defined in the
agreement), disability (as defined in the agreement), or death. The agreement
provides for payment to Mr. Samson or his designee, upon retirement, disability
or death, of a sum equal to Mr. Samson's annual base salary (currently $400,000)
immediately prior to retirement, disability or death for the first year, and
thereafter payment of fifty percent (50%) of such amount for a period of nine
years. Payment under this agreement is dependent upon Mr. Samson's compliance
with the terms of the covenant against competition and other provisions included
in the employment agreement referred to above.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors is comprised
of three non-management directors of the Company, who have responsibility for
compensation policy and for administering the Company's 1993 Stock Option Plan
(the "Plan").
At present, executive compensation consists of salaries and stock options
under the Plan. It is the view of the non-management directors that salaries of
executive officers generally should be reviewed annually to properly reflect the
experience, scope of responsibility and performance of the executives and to be
sure that the salaries are at levels which are reasonable and appropriate to
retain high
I-8
<PAGE>
quality executive officers. Mr. Samson's salary was adjusted by the Compensation
Committee effective in September of each of the last two years. Mrs. Arnoff's
salary has been adjusted effective in July of each of the last three years.
The philosophy of the Compensation Committee is that over the long term
executive compensation should be significantly related to the Company's
performance in terms of earnings, increases in the Company's value as reflected
by its stock price and possibly other criteria of Company performance. The
Committee is evaluating a performance-based bonus plan for executive officers
and others, which may be implemented with respect to 1995.
The Compensation Committee believes that compensation through stock options,
which directly aligns the interests of executives with those of stockholders,
should be a meaningful part of the Company's executive compensation. The
Company's Plan provides for the grant of non-qualified stock options at exercise
prices equal to the fair market value on the date of grant. Substantial options
have been granted to executive officers. The options granted are exercisable for
ten years absent earlier termination of employment. Outstanding options held by
executive officers provide for deferred vesting of options granted, 25% of the
options granted being first exercisable one year from the date of grant and an
additional 25% of each option grant becoming exercisable on each of the three
following anniversary dates. The Plan provides option recipients with a
significant interest in long-term growth in the price of the Company's Common
Stock. It should be noted that Mr. Samson is one of the principal stockholders
of the Company.
This report is submitted by the following persons who are the members of the
Compensation Committee:
Agnes Varis
Gus Blass, II
Allen Misher
CERTAIN TRANSACTIONS; OTHER MATTERS
In the future, the Company may purchase certain products and raw materials
from Agvar Chemicals Inc. ("Agvar") or companies for which Agvar acts as agent.
Agnes Varis, a director of the Company, is the sole stockholder, President and a
director of Agvar. Through December 31, 1994, the Company's purchases from Agvar
have not been material.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than 10% of the Common
Stock of the Company to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and to furnish the Company with copies of
these reports. Based on the Company's review of the copies of these reports
received by it, the Company believes that all filings required to be made by the
reporting persons for 1994 were made on a timely basis, except for the late
filing of a Form 3 Report in connection with the election of Mr. Richard A.
Baron as an executive officer of the Company.
I-9
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Shares over
the past five fiscal years with the cumulative total return on shares of
companies in the NASDAQ Index and the NASDAQ Pharmaceutical Index. Cumulative
total return is measured assuming an initial investment of $100, the
reinvestment of dividends and fiscal years ending December 31.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL
RETURN AMONG THE COMPANY, THE NASDAQ INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CRISP PHARMACEUTICAL MARSAM
<S> <C> <C> <C>
12/31/89 100.000 100.000 100.000
12/31/90 85.088 119.947 93.177
114.609 145.733 9.83250
0.85088 1.19947 0.93177
12/31/91 136.550 318.781 138.593
183.926 387.312 14.62500
1.36550 3.18781 1.38593
12/31/92 158.897 265.530 113.717
214.026 322.614 12.00000
1.58897 2.65530 1.13717
12/31/93 181.296 236.634 203.743
244.196 287.506 21.50000
1.81296 2.36634 2.03743
12/31/94 177.271 178.396 94.764
238.775 216.748 10.00000
1.77271 1.78396 0.94764
</TABLE>
<TABLE>
<CAPTION>
1988 1990 1991 1992 1993 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Closing prices for Marsam* 5.66667 9.83250 14.62500 12.00000 21.50000 10.00000
<FN>
* Takes into account 3 for 2 splits in 1989 and 1991
</TABLE>
I-10
<PAGE>
BEAR STEARNS Annex A
BEAR, STEARNS & CO. INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10104
(212) 272-2000
July 28, 1995
Board of Directors
Marsam Pharmaceuticals Inc.
41 Olney Avenue, Building 31
Cherry Hill, NJ 08034
Attention: Marvin Samson, Chief Executive Officer
We understand that Marsam Pharmaceuticals Inc. ("Marsam") has received an
offer from Schein Pharmaceutical, Inc. ("Schein") to acquire all of the
outstanding shares of the common stock of Marsam (the "Shares"). You have
provided us with the Agreement and Plan of Merger in substantially final form
(the "Merger Agreement") among Marsam, Schein and SM Acquiring Co., Inc.
("SMA"), a wholly owned subsidiary of Schein. As more fully described in the
Merger Agreement, (i) Schein would promptly commence a tender offer to purchase
all Shares for $21.00 per share in cash and (ii) as promptly after the purchase
of shares pursuant to the tender offer as practicable, SMA would merge with
Marsam and each outstanding Share not previously tendered would be converted
into the right to receive $21.00 in cash (collectively, the "Transaction").
You have asked us to render our opinion as to whether the consideration to
be paid pursuant to the Transaction is fair, from a financial point of view, to
the public shareholders of Marsam.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Merger Agreement;
2. reviewed Marsam's Annual Reports to Shareholders and Annual
Reports on Form 10-K for the fiscal years ended December 31, 1991
through 1994, and its Quarterly Report on Form 10-Q for the
period ended March 31, 1995;
3. reviewed certain operating and financial information, including
projections, provided to us by management relating to its
business and prospects;
4. met with certain members of Marsam's senior management to discuss
its operations, historical financial statements and future
prospects;
<PAGE>
5. visited Marsam's facilities in Cherry Hill, New Jersey;
6. reviewed the historical prices and trading volume of the common
shares of Marsam;
7. reviewed publicly available financial data and stock market
performance data of companies which we deemed generally
comparable to Marsam;
8. reviewed the terms of recent acquisitions of companies which we
deemed generally comparable to Marsam; and
9. conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy
and completeness of the financial and other information provided to us by
Marsam. With respect to Marsam's projected financial results, we have assumed
that they have been reasonably prepared on a bases reflecting the best currently
available estimates and judgments of the management of Marsam as to its expected
future performance. We have not assumed any responsibility for the information
or projections provided to us and we have further relied upon the assurances of
the management of Marsam that it is unaware of any facts that would make the
information or projections provided to us incomplete or misleading. In arriving
at our opinion, we have not performed or obtained any independent appraisal of
the assets of Marsam. Our opinion is necessarily based on economic, market and
other conditions, and the information made available to us, as of the date
hereof.
Based on the foregoing, it is our opinion that the consideration to be paid
pursuant to the Transaction is fair, from a financial point of view, to the
public shareholders of Marsam.
We have acted as financial advisor to Marsam in connection with the
Transaction and will receive a fee for such services, payment of a significant
portion of which is contingent upon the consummation of the Transaction.
Very truly yours,
BEAR, STEARNS & CO. INC.
By:
--------------------------
Managing Director
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated July 28, 1995, among Marsam Pharmaceuticals Inc., Schein
Pharmaceutical, Inc. and SM. Acquiring Co., Inc.
Exhibit 2 Stockholders Agreement, dated July 28, 1995, among Schein Pharmaceutical, Inc., SM. Acquiring Co.,
Inc. and certain stockholders named therein.
Exhibit 3 Employment Agreement, dated as of July 28, 1995, between Marsam Pharmaceuticals Inc. and Marvin
Samson.
Exhibit 4 Confidentiality Agreement, dated May 15, 1995 between Marsam Pharmaceuticals Inc. and Schein
Holdings, Inc.
Exhibit 5 Letter to Stockholders of Marsam Pharmaceuticals Inc., dated August 4, 1995.*
Exhibit 6 Press Release, dated July 29, 1995, issued by Marsam Pharmaceuticals Inc.
Exhibit 7 Opinion of Bear, Stearns & Co. Inc. dated July 28. 1995.*
<FN>
- ------------------------
* Included in copies of the Schedule 14D-9 mailed to stockholders.
</TABLE>
<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
2
<PAGE>
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
3
<PAGE>
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
4
<PAGE>
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.
5
<PAGE>
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
6
<PAGE>
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
7
<PAGE>
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
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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
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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.
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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
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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;
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(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.
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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.
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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.
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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
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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:
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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
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(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
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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
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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").
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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
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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
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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
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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:
7
<PAGE>
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
8
<PAGE>
(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:
-----------------------------
-----------------------------
-----------------------------
9
<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
10
<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
<PAGE>
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
<PAGE>
(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>
Exhibit 4
Schein Pharmaceutical, Inc.
100 Campus Drive
Florham Park, NJ 07932
Tel. 201-593-5500
Fax 201-593-5590
May 15, 1995
Mr. Marvin Samson
President
Marsam Pharmaceuticals, Inc.
Building 31, Olney Avenue
Cherry Hill, NJ 08003
Dear Mr. Samson:
CONFIDENTIALITY AGREEMENT
In connection with Schein Pharmaceutical, Inc. ("Schein")'s consideration of a
possible transaction with Marsam Pharmaceuticals, Inc. (the "Marsam"), each of
Marsam and Schein will be providing to the other certain information concerning
its businesses, assets, liabilities and operations. As a condition to the
receiving party being furnished such information, it agrees to treat any
information concerning the disclosing party (whether prepared by the disclosing
party, its advisors or otherwise) that is furnished by or on behalf of the
disclosing party (collectively, the "Evaluation Material") in accordance with
this letter and to take or refrain from taking certain other actions set forth
in the letter. The term "Evaluation Material" does not include information that
(i) is already in the receiving party's possession, provided such information is
not known by the receiving party to be subject to another confidentiality
agreement with or other obligation of secrecy to the disclosing party or others,
or (ii) is or becomes generally available to the public, other than as a result
of a disclosure by the receiving party or its directors, officers, employees,
agents or advisors, or (iii) is or becomes available to the receiving party on a
non-confidential basis from a source other than the disclosing party or its
advisors, provided that source is not known by the receiving party to be bound
by a confidentiality agreement with or other obligation of secrecy to the
disclosing party or others.
The receiving party agrees and warrants that the Evaluation Material will be
used solely for the purpose of evaluating a
<PAGE>
Marsam Pharmaceuticals, Inc.
May 15, 1995
Page 2
possible transaction with the disclosing party and such information will be kept
confidential by the receiving party and its advisors. However, (i) any such
information may be disclosed to the receiving party's directors, officers and
employees and representatives of its advisors and lenders who need to know such
information for the purpose of evaluating any such possible acquisition (it
being understood that such directors, officers, employees and representatives
shall be informed by the receiving party of the confidential nature of such
information and shall be directed by the receiving party to treat such
information confidentially) and (ii) any disclosure of such information may be
made to which the disclosing party expressly consents in writing.
In the event that the receiving party receives a request to disclose all or any
part of the information contained in the disclosing party's Evaluation Material
under the terms of a valid and effective subpoena or order issued by a court of
competent jurisdiction in accordance with the applicable laws and regulations of
such jurisdiction or by a governmental or other regulatory body, the receiving
party agrees to (i) immediately notify the disclosing party of the existence,
terms and circumstances surrounding such a request, (ii) consult with the
disclosing party on the advisability of taking legally available steps to resist
or narrow such request, and (iii) if disclosure of such information is required,
exercise all reasonable efforts to obtain an order or other reliable assurance
that confidential treatment will be accorded to such portion of the disclosed
information which the disclosing party so designates.
In addition, without the prior written consent of the other party, neither
Marsam nor Schein shall, and neither Marsam nor Schein shall permit its
respective directors, officers, employees and representatives to, disclose to
any person either the fact that discussions or negotiations are taking place
concerning a possible transaction between Schein and Marsam or any terms,
conditions or other facts with respect to any such possible transaction,
including its status. Notwithstanding the foregoing provisions of this
paragraph, either Marsam or Schein may make any of the disclosures referred to
in this paragraph if Marsam or Schein, as the case may be, has received an
unqualified opinion of independent counsel, who shall not be an employee of
Marsam or Schein, as the case may be, that such disclosure is legally required
under the then existing circumstances pursuant to any of the United States
federal or other applicable securities laws, and such opinion shall be promptly
confirmed in writing in a letter addressed to the other party.
<PAGE>
Marsam Pharmaceuticals, Inc.
May 15, 1995
Page 3
Although each of Marsam and Schein will endeavor to include in its Evaluation
Material information known to it that it believes to be relevant for the purpose
of the other party's investigation, each of Marsam and Schein understands that
neither the other nor any of its representatives or advisors have made or make
any representation or warranty as to the accuracy or completeness of Evaluation
Material. Each of Marsam and Schein agrees that, except as provided in any
subsequent agreement that might be entered into, neither Schein nor Marsam, as
the case may be, nor its respective representatives or advisors will have any
liability to Schein or Marsam, as the case may be, or any of its representatives
or advisors resulting from the use of the other party's Evaluation Material.
If we do not proceed with a transaction that is the subject to this letter, each
of Schein and Marsam shall promptly deliver to the other all Evaluation Material
of the other (whether prepared by the disclosing party, its advisors or
otherwise) and shall not retain any copies, extracts or other reproductions in
whole or in part of such material other than that contained in any documents or
records which are retained for archival purposes only. Subject to the
foregoing, documents memoranda, notes and other writings and materials prepared
by the receiving party or its advisors based on the information in the
Evaluation Material shall be destroyed, on request, and such destruction shall
be certified in writing to the disclosing party by an authorized officer
supervising the destruction.
Very truly yours,
Confirmed and agreed to this
16th day of May, 1995:
SCHEIN PHARMACEUTICAL, INC. MARSAM PHARMACEUTICALS, INC.
By: /s/ Paul Feuerman By: /s/ Marvin Samson
--------------------------- ---------------------------
Paul Feuerman
Vice President and
General Counsel
<PAGE>
EXHIBIT 5
MARSAM PHARMACEUTICALS INC.
MARSAM PHARMACEUTICALS INC.
August 4, 1995
Dear Stockholder:
I am pleased to inform you that on July 28, 1995, Marsam Pharmaceuticals
Inc. ("Marsam") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Schein Pharmaceutical, Inc. (the "Parent") and SM Acquiring
Co., Inc., a wholly owned subsidiary of the Parent (the "Sub"). Pursuant to the
Merger Agreement, the Parent is today commencing a tender offer (the "Offer") to
purchase all outstanding shares of Marsam's Common Stock for $21.00 per share in
cash. The Merger Agreement provides that each share of Marsam Common Stock not
acquired by the Parent pursuant to the Offer will be exchanged for $21.00 per
share in cash upon the merger (the "Merger") of the Sub into Marsam, which will
occur as soon as practicable following the consummation of the Offer.
Your Board of Directors has unanimously approved the Merger Agreement, the
Offer and the Merger and determined that the Offer and Merger are fair to, and
in the best interests of, Marsam and its stockholders. Accordingly, the Board of
Directors recommends that stockholders accept the Offer and tender their shares.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including, among other things, the opinion of Bear, Stearns &
Co. Inc. ("Bear Stearns"), the Company's financial advisor, that the cash
consideration of $21.00 per share to be received by the Marsam stockholders in
the Offer and the Merger is fair to the public stockholders from a financial
point of view.
Additional information with respect to the transaction is contained in the
enclosed Schedule 14D-9, including a copy of the full text of the opinion of
Bear Stearns. Also enclosed is the Parent's Offer to Purchase and related
materials, including a Letter of Transmittal to be used for tendering your
shares. These documents set forth the terms and conditions of the Offer and
provide instructions as to how to tender your shares. We urge you to read the
enclosed material and consider this information carefully.
Sincerely,
Marvin Samson
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Building 31, Olney Ave. P.O. Box 1022 Cherry Hill, New Jersey 08034, (609)
424-5600
Telex: 5106012909 Marsam Pharma UQ
Facsimile: 609-751-8784
<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>
BEAR STEARNS
BEAR, STEARNS & CO. INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10104
(212) 272-2000
July 28, 1995
Board of Directors
Marsam Pharmaceuticals Inc.
41 Olney Avenue, Building 31
Cherry Hill, NJ 08034
Attention: Marvin Samson, Chief Executive Officer
We understand that Marsam Pharmaceuticals Inc. ("Marsam") has received an
offer from Schein Pharmaceutical, Inc. ("Schein") to acquire all of the
outstanding shares of the common stock of Marsam (the "Shares"). You have
provided us with the Agreement and Plan of Merger in substantially final form
(the "Merger Agreement") among Marsam, Schein and SM Acquiring Co., Inc.
("SMA"), a wholly owned subsidiary of Schein. As more fully described in the
Merger Agreement, (i) Schein would promptly commence a tender offer to purchase
all Shares for $21.00 per share in cash and (ii) as promptly after the purchase
of shares pursuant to the tender offer as practicable, SMA would merge with
Marsam and each outstanding Share not previously tendered would be converted
into the right to receive $21.00 in cash (collectively, the "Transaction").
You have asked us to render our opinion as to whether the consideration to
be paid pursuant to the Transaction is fair, from a financial point of view, to
the public shareholders of Marsam.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Merger Agreement;
2. reviewed Marsam's Annual Reports to Shareholders and Annual
Reports on Form 10-K for the fiscal years ended December 31, 1991
through 1994, and its Quarterly Report on Form 10-Q for the
period ended March 31, 1995;
3. reviewed certain operating and financial information, including
projections, provided to us by management relating to its
business and prospects;
4. met with certain members of Marsam's senior management to discuss
its operations, historical financial statements and future
prospects;
<PAGE>
5. visited Marsam's facilities in Cherry Hill, New Jersey;
6. reviewed the historical prices and trading volume of the common
shares of Marsam;
7. reviewed publicly available financial data and stock market
performance data of companies which we deemed generally
comparable to Marsam;
8. reviewed the terms of recent acquisitions of companies which we
deemed generally comparable to Marsam; and
9. conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy
and completeness of the financial and other information provided to us by
Marsam. With respect to Marsam's projected financial results, we have assumed
that they have been reasonably prepared on a bases reflecting the best currently
available estimates and judgments of the management of Marsam as to its expected
future performance. We have not assumed any responsibility for the information
or projections provided to us and we have further relied upon the assurances of
the management of Marsam that it is unaware of any facts that would make the
information or projections provided to us incomplete or misleading. In arriving
at our opinion, we have not performed or obtained any independent appraisal of
the assets of Marsam. Our opinion is necessarily based on economic, market and
other conditions, and the information made available to us, as of the date
hereof.
Based on the foregoing, it is our opinion that the consideration to be paid
pursuant to the Transaction is fair, from a financial point of view, to the
public shareholders of Marsam.
We have acted as financial advisor to Marsam in connection with the
Transaction and will receive a fee for such services, payment of a significant
portion of which is contingent upon the consummation of the Transaction.
Very truly yours,
BEAR, STEARNS & CO. INC.
By:
--------------------------
Managing Director
