<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 8, 2000
REGISTRATION NO. 333-43104
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--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CEPHALON, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 23-2484489
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
145 BRANDYWINE PARKWAY
WEST CHESTER, PA 19380
(610) 344-0200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------
JOHN E. OSBORN, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CEPHALON, INC.
145 BRANDYWINE PARKWAY
WEST CHESTER, PA 19380
(610) 344-0200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
<TABLE>
<S> <C>
JOHN F. BALES, ESQ. JAMES C. T. LINFIELD, ESQ.
MORGAN, LEWIS & BOCKIUS LLP COOLEY GODWARD LLP
1701 MARKET STREET 2595 CANYON BLVD., SUITE 250
PHILADELPHIA, PA 19103 BOULDER, CO 80302
(215) 963-5000 (303) 546-4000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable following the effectiveness of this
registration statement.
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If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
[ANESTA LOGO]
SPECIAL MEETING OF ANESTA STOCKHOLDERS
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The board of directors of Anesta Corp. has unanimously approved a merger
with Cephalon, Inc.
We cannot complete the merger unless the holders of Anesta common stock
approve the Agreement and Plan of Merger, dated as of July 14, 2000, among
Cephalon, C Merger Sub, Inc., a wholly-owned subsidiary of Cephalon, and Anesta.
Under the merger agreement, C Merger Sub will be merged with and into Anesta and
Anesta will become a wholly-owned subsidiary of Cephalon.
If the merger is completed, holders of Anesta common stock will receive
0.4765 of a share of Cephalon common stock for each share of Anesta common stock
they own. Cash will be paid in lieu of fractional shares. This is a fixed
exchange ratio that will not be adjusted for changes in the stock price of
either company before the merger is completed. The Cephalon common stock is
listed on the Nasdaq National Market under the symbol "CEPH." The Anesta common
stock is listed on the Nasdaq National Market under the symbol "NSTA."
Anesta has scheduled a special meeting of its stockholders to consider and
vote upon a proposal to approve and adopt the merger agreement. The date, time
and place of the special meeting are as follows:
October 10, 2000
10:00 a.m., M.D.T.
Anesta Corp.
4745 Wiley Post Way
Salt Lake City, Utah 84116
This proxy statement/prospectus provides you with information about
Cephalon, Anesta and the proposed merger. In addition, you may obtain other
information about Cephalon and Anesta from documents filed with the Securities
and Exchange Commission. We encourage you to read the entire merger agreement
and this proxy statement/prospectus carefully, AND WE ESPECIALLY ENCOURAGE YOU
TO READ THE SECTION ON "RISK FACTORS" BEGINNING ON PAGE 13.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us. If you sign, date and mail your proxy card without indicating
how you wish to vote, your proxy will be counted as a vote in favor of the
proposal to approve the merger agreement. If you fail to return your proxy card,
the effect will be a vote against the proposal to approve the merger agreement.
[Stanley Signature]
Theodore H. Stanley, M.D.
Secretary
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE CEPHALON COMMON STOCK TO BE ISSUED
IN THE MERGER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated September 8, 2000, and is first
being mailed to stockholders of Anesta on or about September 11, 2000.
<PAGE> 3
This proxy statement/prospectus constitutes the proxy statement of Anesta
in connection with the solicitation of proxies by the Anesta board of directors
for use at the special meeting of Anesta stockholders and at any adjournments or
postponements of the special meeting. This proxy statement/prospectus also
constitutes the prospectus of Cephalon for use in connection with the offer and
issuance of shares of Cephalon common stock, $0.01 par value per share, to
Anesta stockholders pursuant to the merger.
This proxy statement/prospectus incorporates important business and
financial information about Cephalon and Anesta that is not included in or
delivered with this document. This information is available without charge to
Anesta stockholders upon written or oral request. Stockholders should contact:
CEPHALON, INC., 145 Brandywine Parkway, West Chester, Pennsylvania 19380,
Attention: Investor Relations, Phone Number: (610) 344-0200 or ANESTA CORP.,
4745 Wiley Post Way, Salt Lake City, Utah 84116, Attention: Investor Relations,
Phone Number: (801) 595-1405.
TO OBTAIN TIMELY DELIVERY OF REQUESTED DOCUMENTS BEFORE THE SPECIAL MEETING
OF ANESTA STOCKHOLDERS, YOU MUST REQUEST THEM NO LATER THAN OCTOBER 3, 2000,
WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING OF ANESTA
STOCKHOLDERS.
Also see "Where You Can Find More Information" in this proxy
statement/prospectus beginning on page 58.
<PAGE> 4
ANESTA CORP.
4745 WILEY POST WAY
SALT LAKE CITY, UTAH 84116
(801) 595-1405
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 10, 2000
TO THE STOCKHOLDERS OF ANESTA CORP.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Anesta
Corp., a Delaware corporation, will be held on October 10, 2000 at 10:00 a.m.,
local time, at the principal executive offices of Anesta located at 4745 Wiley
Post Way, Salt Lake City, Utah 84116, for the following purposes:
- To consider and vote on a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of July 14, 2000, among Anesta, Cephalon, Inc.,
and C Merger Sub, Inc., a wholly-owned subsidiary of Cephalon.
- To transact such other business as may be properly brought before the
special meeting and any adjournments or postponements thereof.
The proposed merger and other related matters are more fully described in
the attached proxy statement/ prospectus.
The Anesta board of directors has fixed the close of business on September
5, 2000 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the special meeting and any adjournments or
postponements thereof. At the close of business on the record date, Anesta had
outstanding and entitled to vote 13,451,716 shares of common stock at the
special meeting.
THE ANESTA BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY IT ARE IN THE BEST INTERESTS OF ANESTA AND ITS
STOCKHOLDERS. ACCORDINGLY, THE ANESTA BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT ANESTA STOCKHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT.
Even if you plan to attend the special meeting in person, we request that
you sign and return the enclosed proxy to ensure that your shares will be
represented at the special meeting if you are unable to attend. If you sign,
date and mail your proxy card without indicating how you wish to vote, your
proxy will be counted as a vote in favor of the proposal to approve the merger
agreement. If you fail to return your proxy card, the effect will be a vote
against the proposal to approve the merger agreement. If you do attend the
special meeting and wish to vote in person, you may withdraw your proxy by
delivering a written notice dated later than the date on your proxy card to the
secretary of Anesta and then vote in person.
YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY
OF THE OUTSTANDING SHARES OF ANESTA COMMON STOCK IS REQUIRED TO APPROVE THE
MERGER AGREEMENT.
By Order of the Board of Directors,
[Stanley Signature]
Theodore H. Stanley, M.D.
Secretary
Salt Lake City, Utah
September 8, 2000
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 3
SELECTED CONSOLIDATED FINANCIAL DATA........................ 8
Cephalon Selected Consolidated Financial Data............. 8
Anesta Selected Financial Data............................ 9
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA......... 10
SUMMARY UNAUDITED COMPARATIVE PER SHARE DATA................ 12
RISK FACTORS................................................ 13
FORWARD LOOKING INFORMATION................................. 14
THE SPECIAL MEETING OF ANESTA STOCKHOLDERS.................. 15
Date, Time and Place...................................... 15
Purpose of the Special Meeting............................ 15
Recommendation of the Anesta Board of Directors........... 15
Record Date and Voting Power.............................. 15
Voting and Revocation of Proxies.......................... 15
Quorum; Required Vote..................................... 15
Solicitation of Proxies................................... 16
No Appraisal Rights....................................... 16
Other Matters............................................. 16
THE MERGER.................................................. 17
General Description of the Merger......................... 17
Background................................................ 17
Reasons for the Merger.................................... 20
Opinion of Anesta's Financial Advisor..................... 22
Interests of Anesta's Officers and Directors in the
Merger................................................. 29
Material Federal Income Tax Consequences.................. 31
Anticipated Accounting Treatment.......................... 33
Regulatory Approvals...................................... 33
Restrictions on Resale by Affiliates...................... 34
CERTAIN TERMS OF THE MERGER AGREEMENT....................... 34
General................................................... 34
Closing Matters........................................... 34
Conversion of Shares; Treatment of Stock Options.......... 35
Exchange of Stock Certificates............................ 35
Representations and Warranties............................ 35
Covenants................................................. 37
Conditions to Obligations to Effect the Merger............ 39
Termination; Termination Fees and Expenses................ 40
Amendment and Waiver...................................... 41
THE COMPANIES............................................... 42
Cephalon.................................................. 42
C Merger Sub.............................................. 42
Anesta.................................................... 42
UNAUDITED PRO FORMA FINANCIAL INFORMATION................... 44
MARKET PRICE DATA AND DIVIDEND POLICIES..................... 53
MANAGEMENT AND OTHER INFORMATION............................ 54
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMPARISON OF THE RIGHTS OF THE HOLDERS OF CEPHALON COMMON
STOCK AND ANESTA COMMON STOCK............................. 54
Stockholder Action by Consent............................. 54
Special Stockholders' Meetings............................ 54
Advance Notice of Director Nominations and Other
Stockholder Proposals.................................. 55
Number and Election of Directors.......................... 55
Amendment of Bylaws....................................... 55
Removal of Directors...................................... 56
Vacancies................................................. 56
Preferred Stock........................................... 56
Rights Plan............................................... 57
INDEPENDENT ACCOUNTANTS..................................... 57
LEGAL MATTERS............................................... 57
EXPERTS..................................................... 57
WHERE YOU CAN FIND MORE INFORMATION......................... 58
Cephalon Filings.......................................... 58
Anesta Filings............................................ 58
ANNEX A -- Agreement and Plan of Merger..................... A-1
ANNEX B -- U.S. Bancorp Piper Jaffray Opinion............... B-1
</TABLE>
ii
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY DOES ANESTA WANT TO MERGE WITH CEPHALON?
A. The merger will provide a strategic and complementary fit with both the
existing and envisioned future businesses of Cephalon and Anesta.
For more detailed reasons for the merger, see pages 20 through 22.
Q: DOES THE ANESTA BOARD OF DIRECTORS RECOMMEND APPROVAL OF THE MERGER
AGREEMENT?
A. Yes. After careful consideration, the Anesta board of directors
unanimously recommends that the stockholders vote in favor of the merger
agreement and the merger. Additional information pertaining to the
recommendation of the board of directors can be found under "The Merger --
Reasons for the Merger."
Q: WHAT WILL I RECEIVE IN THE MERGER?
A. The merger will result in the exchange of outstanding shares of Anesta
common stock in the ratio of 0.4765 of a share of Cephalon common stock
for each share of Anesta common stock. You will not receive any fractional
share. Instead, you will receive cash in an amount equal to the average
closing price for a share of Cephalon common stock for the ten day trading
period ending two days before the merger multiplied by the appropriate
fraction.
Q: WILL CEPHALON STOCKHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A. No. Cephalon stockholders will continue to hold the Cephalon shares they
own at the time of the merger.
Q: WHAT WILL HAPPEN TO ANESTA AS A RESULT OF THE MERGER?
A. If the merger is completed, Anesta will become a wholly-owned subsidiary
of Cephalon, and the Anesta common stock will cease to be traded on the
Nasdaq National Market.
Q: WHAT HAPPENS IF THE MERGER IS NOT COMPLETED?
A. If the merger is not completed, both companies will continue to operate as
independent companies. Anesta may be required to pay a termination fee and
certain expenses to Cephalon under the merger agreement if the merger is
not completed for certain reasons. Cephalon will also be required to pay
certain expenses to Anesta if the merger is not completed for certain
reasons.
Q: WHERE CAN I GET INFORMATION REGARDING CEPHALON, ANESTA AND THE MERGER?
A. We urge you to read and consider the information contained in this proxy
statement/prospectus, including its appendices. You should also review the
documents referenced under "Where You Can Find More Information."
Q: WHO MAY VOTE AT THE SPECIAL MEETING?
A. All Anesta stockholders of record as of the close of business on
September 5, 2000 may vote at the special meeting. You are entitled to one
vote per share of Anesta common stock that you own on the record date.
Q: WHAT AM I BEING ASKED TO VOTE UPON IN CONNECTION WITH THE MERGER?
A. You are being asked to vote for the approval
and adoption of the merger agreement.
Q: WHAT DO I NEED TO DO NOW?
A. After reviewing this document, indicate on your proxy card how you want
to vote, sign it and mail it in the enclosed postage prepaid return
envelope as soon as possible so that the proxyholder may vote your shares
at the special meeting.
Q: WHEN IS THE SPECIAL MEETING?
A. The special meeting will take place on October 10, 2000.
Q: HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A. If you sign and send in your proxy card and do not indicate how you want
to vote, we will count your proxy as a vote in favor of the proposals
submitted at the special meeting.
Q: WHAT WILL BE THE EFFECT IF I DO NOT VOTE ON THE MERGER PROPOSAL?
A. If you abstain from voting or do not vote your shares by proxy or in
person, it will have the same effect as a vote against adoption of the
merger agreement.
1
<PAGE> 8
Q: CAN I VOTE MY SHARES IN PERSON?
A. If you hold your shares as the record holder and not in "street name,"
you may attend the special meeting and vote your shares in person, rather
than signing and mailing your proxy card.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A. Your broker will vote your shares on the merger proposal only if you
instruct your broker how to vote. Your broker will send you directions on
how you can instruct your broker to vote. If you do not instruct your
broker, your shares will not be voted, which will have the same effect as
a vote against the adoption of the merger agreement.
Q: CAN I REVOKE MY PROXY AND CHANGE MY VOTE?
A. Yes. If you hold your shares as the record holder, you may change your
vote in one of three ways at any time before your proxy is voted at the
special meeting. First, you may send a written notice stating that you
would like to revoke your proxy. Second, you may complete and submit a
new, later dated proxy. Third, you may attend the special meeting and vote
in person. If you choose either of the first two methods, you must submit
your notice of revocation or your new proxy to the Secretary of Anesta.
If you hold your shares in "street name" and have instructed your broker
to vote your shares, you must follow directions received from your broker
to change those instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. After we complete the merger, Cephalon will send you written
instructions on how to exchange your stock certificates.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A. We currently expect to complete the merger during the fourth quarter of
2000 if we obtain the required stockholder approval at the special meeting
and satisfy certain additional conditions. However, subject to certain
exceptions, either Anesta or Cephalon can terminate the merger agreement
if the merger is not completed by December 31, 2000.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A. The exchange of shares in the merger will be tax-free to you for U.S.
federal income tax purposes, except for taxes payable on any gain
recognized as a result of receiving cash in lieu of a fractional share of
Cephalon common stock. A summary of the material federal income tax
consequences of the merger is included in the section "The
Merger--Material Federal Income Tax Consequences" on page 31.
Q: AM I ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER?
A. No. You do not have appraisal rights in connection with the merger.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A. If you have more questions about the merger or if you need additional
copies of this proxy statement/prospectus or the enclosed proxy, you
should contact:
Anesta Corp.
4745 Wiley Post Way
Salt Lake City, UT 84116
Attention: Roger Evans
Telephone Number: (801) 595-1405
2
<PAGE> 9
SUMMARY
This summary highlights selected information from this document and may not
contain all the information that is important to you. To understand the merger
fully, you should read carefully this entire document and the documents to which
we refer. See "Where You Can Find More Information" on page 58. The merger
agreement is attached as Annex A to this proxy statement/prospectus. We
encourage you to read the merger agreement as it is the legal document that
governs the merger. We have included page references in parentheses to direct
you to a more detailed description of the topics presented in this summary.
THE COMPANIES (PAGE 42)
Cephalon, Inc.
145 Brandywine Parkway, West Chester, Pennsylvania 19380 (610) 344-0200
Cephalon, Inc., with its principal offices located in West Chester,
Pennsylvania, is a biopharmaceutical company dedicated to the discovery,
development and marketing of products to treat neurological disorders and
cancer. Cephalon markets Provigil(R) (modafinil) Tablets [C-IV] for treating
excessive daytime sleepiness associated with narcolepsy and is conducting
clinical studies concerning the use of Provigil in other areas. Cephalon's other
research programs seek to discover and develop treatments for neurological
disorders and cancer, including Parkinson's disease, Alzheimer's disease and
prostate cancer. Cephalon also enters into collaborative commercial arrangements
under which it markets the products of third parties, including an arrangement
with Abbott Laboratories to market Gabitril(R) for the treatment of partial
seizures associated with epilepsy. Cephalon was incorporated in Delaware in
1987.
C Merger Sub, Inc.
145 Brandywine Parkway, West Chester, Pennsylvania 19380 (610) 344-0200
C Merger Sub is a wholly-owned subsidiary of Cephalon formed in Delaware
for the purpose of effecting the merger.
Anesta Corp.
4745 Wiley Post Way, Salt Lake City, Utah 84116 (801) 595-1405
Anesta is a leader in the development of new pharmaceutical products using
its proprietary oral transmucosal system (OTS(TM)) for drug delivery. Anesta was
incorporated in 1985 under the laws of Utah to commercialize specific licensed
technologies from the University of Utah, and reincorporated in 1993 under the
laws of Delaware. Anesta's lead product is Actiq(R) (oral transmucosal fentanyl
citrate), which was approved by the U.S. Food and Drug Administration, or FDA,
for marketing in November 1998 and launched in the U.S. in March 1999. Actiq is
indicated only for the management of breakthrough cancer pain in patients with
malignancies who are already receiving and who are tolerant to opioid therapy
for their underlying persistent cancer pain.
THE MERGER (PAGE 17)
Under the merger agreement, a wholly-owned subsidiary of Cephalon will
merge with and into Anesta. After this merger, Anesta will be a wholly-owned
subsidiary of Cephalon and Anesta stockholders will become Cephalon
stockholders. Stockholders of Anesta will receive common stock of Cephalon in
the merger in exchange for their Anesta common stock.
MERGER CONSIDERATION; FIXED EXCHANGE RATIO (PAGE 35)
In the merger, you will receive 0.4765 of a share of Cephalon common stock
in exchange for each share of Anesta common stock you own. The actual number of
shares you will receive in the merger will be 0.4765 multiplied by the number of
shares of Anesta common stock that you own at the effective time of the merger,
except that you will receive cash for any fractional share. For example, if you
own 100 shares of
3
<PAGE> 10
Anesta common stock, you will receive 47 shares of Cephalon common stock, and a
check for the market value of the 0.65 fractional share.
This exchange ratio is fixed. Regardless of fluctuations in the market
prices of Cephalon's or Anesta's common stock, the exchange ratio will not
change between now and the date that the merger is completed.
REASONS FOR THE MERGER (PAGE 20)
Cephalon (Page 20). The Cephalon board of directors approved the merger
based on a number of factors, including the following:
- the belief that through the acquisition of Anesta's Actiq marketing
rights, Cephalon will shorten its path to profitability;
- the enhanced product development opportunities for Cephalon through the
addition of Anesta's OTS system for drug delivery; and
- the potential to realize synergies in research and development,
technology and commercialization and through the elimination of
redundancies.
Anesta (Page 21). The Anesta board of directors believes that the merger
could result in a number of benefits to Anesta and its stockholders, including,
among other benefits, the following:
- the creation of a combined company with greater resources, a more
diversified product portfolio and greater management, sales, services and
marketing capabilities;
- the potential to expand the market presence of Actiq and leverage the
marketing of the combined companies products to some of the same patient
profiles;
- the belief that the combined company would have better access to capital;
and
- the advantages of combining Anesta's manufacturing capabilities with
Cephalon's products.
RECOMMENDATION TO ANESTA STOCKHOLDERS
The Anesta board of directors believes that the merger is advisable and
unanimously recommends that you vote "FOR" approval of the merger agreement.
OPINION OF ANESTA'S FINANCIAL ADVISOR (PAGE 22)
In deciding to approve the merger, one of the factors that the Anesta board
of directors considered was the opinion of its financial advisor, U.S. Bancorp
Piper Jaffray, Inc., that, as of July 14, 2000 and subject to the considerations
set forth in the opinion, the exchange ratio pursuant to the merger agreement
was fair, from a financial point of view, to the holders of Anesta common stock.
U.S. Bancorp Piper Jaffray's opinion was provided for the information and
assistance of the Anesta board of directors in connection with its consideration
of the transaction contemplated by the merger agreement and does not constitute
a recommendation as to how any holder of Anesta common stock should vote with
respect to the merger agreement. The full text of the U.S. Bancorp Piper Jaffray
opinion (which sets forth assumptions made, matters considered and limitations
on the review undertaken by U.S. Bancorp Piper Jaffray in connection with the
opinion) is attached as Annex B to this proxy statement/prospectus. WE URGE YOU
TO READ THE ENTIRE OPINION CAREFULLY.
INTERESTS OF ANESTA OFFICERS AND DIRECTORS IN THE MERGER (PAGE 29)
When considering the recommendation by the Anesta board of directors, you
should be aware that a number of Anesta's officers and directors have interests
in the merger that are different from other Anesta stockholders. The Anesta
board of directors took into account these interests prior to making its
decision to approve the merger agreement.
4
<PAGE> 11
THE SPECIAL MEETING OF ANESTA STOCKHOLDERS (PAGE 15)
Time, Date and Place. The special meeting of the stockholders of Anesta
will be held on October 10, 2000, at the principal executive offices of Anesta
located at 4745 Wiley Post Way, Salt Lake City, Utah 84116, at 10:00 a.m. local
time, to consider and vote on the proposal to approve the merger agreement.
Record Date and Voting Power for Anesta. You are entitled to vote at the
special meeting if you owned shares of Anesta common stock at the close of
business on September 5, 2000, which is the record date for the special meeting.
You will have one vote at the special meeting for each share of Anesta common
stock you owned at the close of business on the record date. There are
13,451,716 shares of Anesta common stock entitled to be voted at the special
meeting.
Anesta Required Vote. The approval of the merger agreement requires the
affirmative vote of a majority of the shares of Anesta common stock outstanding
at the close of business on the record date.
Share Ownership of Management. At the close of business on the record date,
the directors and executive officers of Anesta own approximately 8.91% of the
shares entitled to vote at the special meeting.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 12)
Cephalon and Anesta common stock are both listed on the Nasdaq National
Market under the symbols "CEPH" and "NSTA," respectively. On July 14, 2000, the
last full trading day prior to the public announcement of the proposed merger,
Cephalon common stock closed at $66.00 per share and Anesta common stock closed
at $22.125 per share. On September 5, 2000, Cephalon common stock closed at
$48.50 per share and Anesta common stock closed at $22.875 per share.
The stock prices of both Cephalon and Anesta can fluctuate broadly even
over short periods of time. It is impossible to predict the actual price of
Cephalon or Anesta common stock prior to the effective time of the merger or at
any other time.
TAX MATTERS (PAGE 31)
We expect that, for U.S. federal tax purposes, your exchange of Anesta
common shares for Cephalon common shares in the merger generally will not cause
you to recognize any gain or loss. You will, however, recognize gain or loss in
connection with any cash received for any fractional share. Your tax basis in
the total number of shares of Cephalon common stock that you receive in the
merger will equal your current tax basis in the total number of shares of Anesta
common stock that you own (reduced by the basis allocable to any fractional
share interest for which you receive cash).
TAX MATTERS CAN BE COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN
TAX ADVISOR TO FULLY UNDERSTAND THE TAX CONSEQUENCES OF THE MERGER TO YOU.
ANTICIPATED ACCOUNTING TREATMENT (PAGE 33)
The merger is expected to be accounted for as a "pooling of interests"
transaction for financial accounting purposes. This means that Cephalon will
restate its financial statements for prior periods at the effective time of the
merger to include the assets, liabilities, stockholders' equity and results of
operation of Anesta as if Cephalon and Anesta had been combined for accounting
and financial reporting purposes since the beginning of the periods presented.
5
<PAGE> 12
CONDITIONS TO THE MERGER (PAGE 39)
The completion of the merger depends on the satisfaction or waiver of a
number of conditions, including the following:
- approval of the merger agreement and the related transactions by the
Anesta stockholders;
- expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
- absence of any court order, law or governmental action prohibiting the
merger;
- listing on the Nasdaq National Market of the Cephalon stock to be issued
to Anesta stockholders in the merger;
- receipt of an opinion of counsel to Anesta that the merger will qualify
as a tax-free reorganization;
- receipt of letters from the independent public accountants of Cephalon
and Anesta, dated as of the closing date, that the independent public
accountants concur with the opinion of management that the merger will
qualify for pooling of interests accounting treatment;
- accuracy of representations and warranties of each party except for
inaccuracies that would not have a material adverse effect; and
- no change or event occurs that has a material adverse effect on the other
party.
TERMINATION OF THE MERGER AGREEMENT (PAGE 40)
The boards of directors of Cephalon and Anesta can mutually consent to
terminate the merger agreement at any time prior to consummation of the merger.
The merger agreement can also be terminated by either company under the
following circumstances, among others:
- the merger is not consummated by December 31, 2000;
- approval of Anesta's stockholders is not obtained;
- a governmental authority permanently prohibits the merger;
- the other party breaches any of its representations or warranties under
the merger agreement and this breach would result in a material adverse
effect; and
- the other party breaches in any material respect any of its obligations
under the merger agreement.
Cephalon may terminate the merger agreement if:
- the Anesta board of directors does not recommend the merger to Anesta
stockholders or withdraws or modifies its approval or recommendation of
the merger agreement in any material manner; and
- the Anesta board of directors recommends to Anesta stockholders any
acquisition proposal (as defined in the merger agreement) other than by
Cephalon.
Anesta may terminate the merger agreement if it determines in good faith
that an acquisition proposal is a superior proposal and Anesta has complied with
its obligations under the merger agreement regarding no solicitation.
TERMINATION FEE (PAGE 40)
The merger agreement requires Anesta to pay Cephalon a termination fee
equal to $15 million plus up to $1 million in documented out-of-pocket expenses
if the merger agreement is terminated under certain circumstances. The merger
agreement requires Cephalon to pay Anesta up to $1 million in documented
out-of-pocket expenses if the merger agreement is terminated under certain
circumstances.
6
<PAGE> 13
LIMITATION ON CONSIDERING OTHER ACQUISITION PROPOSALS (PAGE 37)
Anesta has agreed not to consider a business combination or other similar
transaction with another party while the merger is pending unless the other
party has made an unsolicited proposal to the Anesta board of directors for a
superior transaction. If an unsolicited proposal is made, Anesta has agreed to
negotiate in good faith with Cephalon for five business days to make such
changes to the terms and conditions of the merger agreement as would enable
Anesta to proceed with the transaction as contemplated.
NO APPRAISAL RIGHTS (PAGE 16)
Under Delaware law, Anesta stockholders will not be entitled to appraisal
rights in connection with the merger.
REGULATORY APPROVALS (PAGE 33)
U.S. antitrust laws prohibit us from completing the merger until we have
furnished certain information and materials to the Antitrust Division of the
U.S. Department of Justice and the U.S. Federal Trade Commission and a required
waiting period has expired. On August 2, 2000, Cephalon and Anesta each filed
the required notification and report forms with the Antitrust Division and the
Federal Trade Commission. On August 24, 2000, the required waiting period was
terminated. However, the Antitrust Division and Federal Trade Commission
continue to have the authority to challenge the merger on antitrust grounds
before or after we complete the merger. Consent may also be required under
applicable foreign antitrust law or regulation. We expect that the merger will
not violate any foreign antitrust laws and that all the foreign antitrust
regulatory authorities whose approval we must seek will approve the merger.
7
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA
CEPHALON SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data have been derived from
the consolidated financial statements of Cephalon, Inc. as of and for each of
the five years in the period ended December 31, 1999 which have been audited by
Arthur Andersen LLP, independent public accountants. The information as of and
for the six months ended June 30, 2000 and 1999, has been derived from the
unaudited consolidated financial statements of Cephalon, Inc. This data should
be read in conjunction with Cephalon's consolidated financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operation" that are contained in reports
filed with the Securities and Exchange Commission and incorporated by reference
into this document.
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales -- Provigil......................... $ 28,750 $ 7,252 $ 25,370 $ 728 $ -- $ -- $ --
Other revenues.................................... 9,256 7,727 19,549 14,927 23,140 21,366 46,999
-------- -------- -------- -------- -------- -------- --------
38,006 14,979 44,919 15,655 23,140 21,366 46,999
-------- -------- -------- -------- -------- -------- --------
Costs and Expenses:
Cost of product sales -- Provigil................. 5,074 839 3,250 -- -- -- --
Research and development.......................... 27,377 20,152 46,420 43,649 51,587 62,096 73,994
Selling, general and administrative............... 28,716 23,780 50,992 30,947 36,744 28,605 15,762
-------- -------- -------- -------- -------- -------- --------
61,167 44,771 100,662 74,596 88,331 90,701 89,756
-------- -------- -------- -------- -------- -------- --------
Interest (expense) income, net...................... 6,761 (1,650) (3,014) 3,534 4,772 6,205 9,754
Gain on sale of assets.............................. -- -- -- -- -- 9,845 --
-------- -------- -------- -------- -------- -------- --------
Loss before extraordinary charge.................... (16,400) (31,442) (58,757) (55,407) (60,419) (53,285) (33,003)
Extraordinary charge for early extinguishment of
debt.............................................. -- -- (11,187) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Loss................................................ (16,400) (31,442) (69,944) (55,407) (60,419) (53,285) (33,003)
Dividends on preferred stock........................ (4,531) -- (3,398) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Loss applicable to common shares.................... $(20,931) $(31,442) $(73,342) $(55,407) $(60,419) $(53,285) $(33,003)
======== ======== ======== ======== ======== ======== ========
Basic and diluted loss per common share:
Loss before extraordinary charge.................. $ (.63) $ (1.09) $ (2.10) $ (1.95) $ (2.36) $ (2.19) $ (1.63)
Extraordinary charge.............................. -- -- (.38) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
$ (.63) $ (1.09) $ (2.48) $ (1.95) $ (2.36) $ (2.19) $ (1.63)
======== ======== ======== ======== ======== ======== ========
Weighted average number of shares outstanding....... 33,164 28,880 29,584 28,413 25,638 24,319 20,262
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2000 1999 1998 1997 1996 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments.......... $150,387 $ 201,562 $ 67,346 $ 119,471 $ 146,848 $ 178,067
Total assets.................................... 203,687 234,053 94,673 151,208 177,891 221,330
Long-term debt.................................. 13,486 14,034 15,096 27,587 16,974 21,668
Accumulated deficit............................. (368,066) (347,135) (273,793) (218,386) (157,967) (104,682)
Stockholders' equity............................ 160,673 158,357 57,602 100,338 137,326 180,205
</TABLE>
8
<PAGE> 15
ANESTA SELECTED FINANCIAL DATA
The following selected financial data have been derived from the financial
statements of Anesta as of and for each of the five years in the period ended
December 31, 1999 which have been audited by PricewaterhouseCoopers LLP,
independent public accountants. The information as of and for the six months
ended June 30, 2000 and 1999, has been derived from the unaudited financial
statements of Anesta. This data should be read in conjunction with Anesta's
financial statements, including the notes thereto, and "Management's Discussion
and Analysis of Financial Condition and Results of Operation" that are contained
in reports filed with the Securities and Exchange Commission and incorporated by
reference into this document.
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales..................................... $ 3,993 $ 1,128 $ 2,232 $ 193 $ 184 $ 92 $ 61
Royalty revenues.................................. 26 30 62 6 5 3 102
Contract research/license agreements.............. 652 621 4,221 476 -- 1,503 1,514
-------- -------- -------- -------- -------- -------- --------
Total revenue............................... 4,671 1,779 6,515 675 189 1,598 1,677
Operating costs and expenses:
Cost of goods sold................................ 1,023 371 671 54 52 27 19
Royalties......................................... 124 32 34 3 3 3 3
Research and development.......................... 4,940 4,713 9,840 8,627 7,889 8,304 5,228
Depreciation and amortization..................... 605 148 310 296 269 237 158
Marketing, general and administrative............. 9,198 4,004 9,020 8,586 6,368 3,537 2,219
-------- -------- -------- -------- -------- -------- --------
Loss from operations................................ (11,219) (7,489) (13,360) (16,891) (14,392) (10,510) (5,950)
Non operating income, net........................... 1,585 2,049 3,892 1,190 1,845 1,820 1,250
Provision for income taxes.......................... (31) (15) (20) (16) (2) -- --
-------- -------- -------- -------- -------- -------- --------
Loss before cumulative effect of change in
accounting........................................ (9,665) (5,455) (9,488) (15,717) (12,549) (8,690) (4,700)
Cumulative effect of change in accounting........... -- -- -- -- -- -- (1,041)
-------- -------- -------- -------- -------- -------- --------
Net loss............................................ $ (9,665) $ (5,455) $ (9,488) $(15,717) $(12,549) $ (8,690) $ (5,741)
======== ======== ======== ======== ======== ======== ========
Basic and diluted loss per common share:
Loss before cumulative effect of change in
accounting...................................... $ (0.72) $ (0.41) $ (0.72) $ (1.59) $ (1.32) $ (1.02) $ (0.65)
Cumulative effect of change in accounting......... -- -- -- -- -- -- (0.15)
-------- -------- -------- -------- -------- -------- --------
Net loss per common share........................... $ (0.72) $ (0.41) $ (0.72) $ (1.59) $ (1.32) $ (1.02) $ (0.80)
======== ======== ======== ======== ======== ======== ========
Weighted average shares outstanding................. 13,373 13,171 13,227 9,898 9,500 8,499 7,177
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2000 1999 1998 1997 1996 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents, certificate of deposit
and marketable debt securities................ $ 39,670 $ 72,818 $ 82,335 $ 29,676 $ 41,359 $ 21,844
Total assets.................................... 70,936 78,209 85,129 32,712 43,959 24,242
Long-term obligations, including current
portion....................................... 2,000 2,000 1,750 2,000 1,350 1,516
Accumulated deficit............................. (67,832) (58,167) (48,679) (32,962) (20,413) (11,719)
Stockholders' equity............................ 63,676 72,426 80,019 29,198 41,115 21,677
</TABLE>
9
<PAGE> 16
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth certain summary pro forma combined financial
data for Cephalon and Anesta. The pro forma amounts included in the table below
assume the consummation of the merger and are based on the "pooling of
interests" method of accounting. The information has not been audited. The
following table should be read in conjunction with the historical financial
statements of Cephalon and Anesta and the pro forma financial data included
herein under the caption "Pro Forma Combined Financial Information."
The pro forma amounts below are presented for informational purposes only
and are not necessarily indicative of the results of operations of the combined
company that would have actually occurred had the merger been consummated as of
January 1, 1997 or of the financial condition of the combined company had the
merger been consummated as of December 31, 1999 or June 30, 2000 or of the
future results of operations or financial condition of the combined company. The
pro forma information does not reflect any synergies anticipated as a result of
the merger, in particular the elimination of costs associated with Anesta's
status as a public company and other administrative savings. We cannot be sure
that such synergies will be realized.
Cephalon and Anesta estimate that they will incur direct transaction costs
of approximately $9.0 million associated with the merger, which will be charged
to operations in the quarter in which the merger is consummated. Merger and
integration expenses are not reflected in these summary unaudited pro forma
combined consolidated financial statements.
10
<PAGE> 17
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
-------------------- ------------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1999 1998 1997
--------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales.................... $ 32,743 $ 8,380 $ 27,602 $ 921 $ 184
License and contract............. 9,934 8,378 23,832 15,409 23,145
-------- -------- -------- -------- --------
42,677 16,758 51,434 16,330 23,329
-------- -------- -------- -------- --------
Operating expenses:
Cost of product sales............ 6,097 1,210 3,921 54 52
Research and development......... 32,542 24,987 56,483 52,461 59,651
Selling, general and
administrative................ 38,418 27,842 60,133 39,647 43,209
-------- -------- -------- -------- --------
77,057 54,039 120,537 92,162 102,912
-------- -------- -------- -------- --------
Loss from operations............. (34,380) (37,281) (69,103) (75,832) (79,583)
Other income....................... 8,346 399 878 4,724 6,617
-------- -------- -------- -------- --------
Loss before provision for income
taxes......................... (26,034) (36,882) (68,225) (71,108) (72,966)
Provision for income taxes......... (31) (15) (20) (16) (2)
-------- -------- -------- -------- --------
Loss before extraordinary charge... (26,065) (36,897) (68,245) (71,124) (72,968)
-------- -------- -------- -------- --------
Extraordinary charge for early
extinguishment of debt........... -- -- (11,187) -- --
-------- -------- -------- -------- --------
Net loss......................... (26,065) (36,897) (79,432) (71,124) (72,968)
-------- -------- -------- -------- --------
Dividends on preferred stock....... (4,531) -- (3,398) -- --
-------- -------- -------- -------- --------
Net loss applicable to common
shares........................ $(30,596) $(36,897) $(82,830) $(71,124) $(72,968)
======== ======== ======== ======== ========
Basic and diluted loss per common
share:
Loss per common share before
extraordinary charge.......... $ (0.77) $ (1.05) $ (2.00) $ (2.15) $ (2.42)
Extraordinary charge............. -- -- (0.31) -- --
-------- -------- -------- -------- --------
$ (0.77) $ (1.05) $ (2.31) $ (2.15) $ (2.42)
======== ======== ======== ======== ========
Weighted average number of shares
outstanding...................... 39,536 35,156 35,887 33,129 30,165
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments...................... $ 190,057 $ 272,340
Total assets................................................ 274,624 312,262
Long-term debt.............................................. 15,153 15,701
Accumulated deficit......................................... (444,898) (414,302)
Stockholders' equity........................................ 215,349 221,783
</TABLE>
11
<PAGE> 18
SUMMARY UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth per share data of:
- Cephalon on a historical basis;
- Anesta on a historical basis;
- Cephalon and Anesta combined on a pro forma basis; and
- Cephalon and Anesta combined on a pro forma basis stated on an equivalent
Anesta basis.
This table should be read in conjunction with the historical financial
statements and notes thereto for Cephalon and Anesta incorporated by reference
into this document and the Unaudited Pro Forma Combined Financial Information
beginning on page 44. The pro forma combined per share information is not
necessarily indicative of the combined financial position or combined results of
operations that would have been reported had the companies been combined for all
periods presented, nor do they represent a forecast of the combined financial
position or results of operations for any future period. Pro forma combined and
equivalent pro forma per share data reflect the combined results of Cephalon and
Anesta presented as though they were one company for all periods shown.
The Anesta equivalent per share pro forma information shows the effect of
the merger from the perspective of an owner of Anesta common stock. We
calculated the Anesta equivalent information by multiplying the Cephalon and
Anesta combined pro forma per share amounts by the 0.4765 merger exchange ratio.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------------- --------------------------
2000 1999 1999 1998 1997
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
LOSS PER SHARE FROM CONTINUING OPERATIONS:
Cephalon historical basis......................... $(0.63) $(1.09) $(2.48) $(1.95) $(2.36)
Anesta historical basis........................... (0.72) (0.41) (0.72) (1.59) (1.32)
Cephalon and Anesta combined on a pro forma
basis........................................... (0.77) (1.05) (2.31) (2.15) (2.42)
Cephalon and Anesta combined on a pro forma basis
per Anesta equivalent common share.............. (0.37) (0.50) (1.10) (1.02) (1.15)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
<S> <C> <C>
BOOK VALUE PER SHARE:
Cephalon historical basis................................... $4.62 $4.86
Anesta historical basis..................................... 4.75 5.44
Cephalon and Anesta combined on a pro forma basis........... 5.23 5.70
Cephalon and Anesta combined on a pro forma basis per Anesta
equivalent common share................................... 2.49 2.72
</TABLE>
12
<PAGE> 19
RISK FACTORS
You should consider the following matters in conjunction with the other
information included or incorporated by reference in this document in deciding
whether to vote in favor of the merger proposal. Additionally, you should
consider factors relating to Cephalon and the operation of its business
generally that are included in Cephalon's filings with the Securities and
Exchange Commission and have been incorporated by reference into this document,
including the risk factors set forth under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the annual
report on Form 10-K of Cephalon for the year ended December 31, 1999 and in the
quarterly reports on Form 10-Q filed subsequent to December 31, 1999.
THE EXCHANGE RATIO FOR CEPHALON COMMON STOCK TO BE RECEIVED IN THE MERGER IS
FIXED AND WILL NOT BE ADJUSTED IN THE EVENT OF ANY CHANGE IN STOCK PRICE.
Upon completion of the merger, each share of Anesta common stock will be
exchanged for 0.4765 shares of Cephalon common stock. This conversion number is
fixed and will not be adjusted as a result of any change in the price of
Cephalon common stock. Any change in the price of Cephalon common stock will
affect the value of the consideration that Anesta stockholders receive in the
merger. Because the merger will be completed only after all the conditions to
the merger are satisfied or waived, there is no way to be sure that the price of
Cephalon common stock on the date of the Anesta stockholder meeting will be the
same as its price at the time the merger is completed. The price of Cephalon
common stock can be volatile and the price at the time that the merger is
completed may be lower than its price on the date of this document or the date
of the Anesta stockholders meeting. For example, on July 14, 2000, the date of
the announcement of the merger, the closing price of Cephalon's common stock was
$66.00 per share. However, between the period July 17, 2000 to September 5,
2000, the closing price of Cephalon common stock was as high as $71.25 and as
low as $39.25. You are encouraged to obtain current market quotations for
Cephalon common stock.
"NO SOLICITATION" RESTRICTIONS IN THE MERGER AGREEMENT AND THE TERMINATION FEE
MAY DISCOURAGE OTHER COMPANIES FROM TRYING TO ACQUIRE ANESTA.
While the merger agreement is in effect, subject to specified exceptions,
Anesta is prohibited from entering into or soliciting, initiating or encouraging
any inquiries or proposals that may lead to a proposal or offer for a merger or
other business combination transaction with any person other than Cephalon. In
addition, in the merger agreement, Anesta agreed to pay a termination fee to
Cephalon in specified circumstances, including circumstances where a third party
acquires or seeks to acquire Anesta. These provisions could discourage other
companies from trying to acquire Anesta even though those other companies might
be willing to offer greater value to Anesta stockholders than Cephalon has
offered in the merger agreement. The payment of the termination fee could also
have a material adverse effect on Anesta's financial condition.
SHARES OF CEPHALON COMMON STOCK ARE SUBJECT TO DIFFERENT MARKET RISKS THAN
SHARES OF ANESTA COMMON STOCK.
Upon completion of the merger, holders of shares of common stock of Anesta
will become holders of shares of common stock of Cephalon. The business,
strategy, financial condition, results of operations and common stock of
Cephalon differ in material respects from those of Anesta. Accordingly, holders
of shares of common stock of Cephalon are subject to different market risks than
holders of shares of Anesta common stock. For a description of and other
information about the common stock of Cephalon and the differences between the
common stock of Cephalon and the common stock of Anesta, see "Summary Unaudited
Comparative Per Share Data" on page 12, "Market Price Data and Dividend
Policies" on page 53, "Comparison of the Rights of Holders of Cephalon Common
Stock and Anesta Common Stock" on page 54 and the registration statement of
Cephalon on Form 8-A, as amended, that we have incorporated by reference and
described under "Where You Can Find More Information" on page 58. For a
description of the business, strategy, financial condition and results of
operations of Cephalon, see "The Companies -- Cephalon" on
13
<PAGE> 20
page 42 and the discussions in the reports on Forms 10-K, 10-Q and 8-K that we
have incorporated by reference and described under "Where You Can Find More
Information" on page 58.
CEPHALON AND ANESTA MAY NOT REALIZE THE POTENTIAL BENEFITS OF THE MERGER.
While we expect that the merger will allow both companies to expand their
drug development and marketing activities and give rise to other synergies as
described in "Cephalon's Reasons for the Merger" beginning on page 20 and
"Anesta's Reasons for the Merger" on page 20, these benefits may not be
realized. Cephalon and Anesta are developing, but have not yet finalized, plans
for obtaining operating synergies after the merger. The implementation of these
plans will present challenges involving the coordination of the operations,
technologies and personnel of the two companies and may unduly divert the
attention of management and cause unanticipated liabilities and costs. The
geographically dispersed operations of the two companies may increase these
challenges.
DIRECTORS AND OFFICERS OF ANESTA HAVE CONFLICTS OF INTEREST THAT MAY HAVE
INFLUENCED THEIR OPINIONS WITH RESPECT TO THE MERGER.
You should be aware of potential conflicts of interest, and the benefits
available to directors and officers of Anesta when considering the Anesta
board's recommendation of the merger. The directors and officers of Anesta have
interests in the merger that are in addition to, or different from, their
interests as Anesta stockholders. The Anesta board was aware of these conflicts
of interest when it approved the merger. These interests relate to:
- Rights to accelerated stock option vesting and receipt of certain
benefits under severance agreements; and
- Rights to directors' and officers' insurance coverage and to
indemnification with respect to acts and omissions in their capacities as
directors and officers of Anesta.
See "Interests of Anesta's Officers and Directors in the Merger" on page 29.
FORWARD-LOOKING INFORMATION
This document and the documents incorporated by reference contain
forward-looking statements with respect to the merger and the financial
condition, results of operations, plans, objectives, future performance and
business of Cephalon and Anesta. In some cases, you can identify forward-looking
statements by terminology, such as "may," "will," "should," "would," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue" or the negative of these terms or other comparable terminology. Any
expectations based on these forward-looking statements are subject to risks and
uncertainties and other important factors, including those discussed in the
"Risk Factors" section of this proxy statement/prospectus and the documents
incorporated by reference. These and many other factors could affect future
financial and operating results of Cephalon, Anesta or the combined company, and
could cause actual results to differ materially from expectations based on
forward-looking statements made in this document or elsewhere by or on behalf of
Cephalon, Anesta or the combined company.
Anesta stockholders are cautioned not to place undue reliance on these
forward looking statements, which speak only as of the date of this document or,
in the case of documents incorporated by reference, the dates of those
documents.
All subsequent written and oral forward-looking statements attributable to
Cephalon or Anesta or any person acting on their behalf are expressly qualified
in their entirety by the cautionary statements contained or referred to in this
section. Neither Cephalon or Anesta undertakes any obligation to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the occurrence of
unanticipated events.
14
<PAGE> 21
THE SPECIAL MEETING OF ANESTA STOCKHOLDERS
DATE, TIME AND PLACE
The special meeting of Anesta stockholders will be held on October 10,
2000, at the principal executive offices of Anesta located at 4745 Wiley Post
Way, Salt Lake City, Utah 84116, commencing at 10:00 a.m. local time. We are
sending this proxy statement/prospectus to you in connection with the
solicitation of proxies by the Anesta board of directors for use at the Anesta
special meeting and any adjournments or postponements of the special meeting.
PURPOSE OF THE SPECIAL MEETING
The purpose of the special meeting is to consider and vote upon a proposal
to approve the merger agreement.
RECOMMENDATION OF THE ANESTA BOARD OF DIRECTORS
The Anesta board of directors has concluded that the proposal to approve
the merger agreement is advisable and in the best interests of Anesta and its
stockholders and has unanimously approved the merger agreement. Accordingly, the
Anesta board of directors unanimously recommends that all Anesta stockholders
vote "FOR" the approval of the merger agreement.
RECORD DATE AND VOTING POWER
Only holders of record of Anesta common stock at the close of business on
September 5, 2000, are entitled to notice of, and to vote at, the special
meeting. There were approximately 3,000 holders of record of Anesta common stock
at the close of business on the record date, with 13,451,716 shares of Anesta
common stock issued and outstanding. Each share of Anesta common stock entitles
the holder thereof to one vote on each matter submitted for stockholder
approval.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the
special meeting and at any adjournments or postponements of the special meeting
in accordance with the instructions contained in the proxy. However, if the
special meeting is adjourned to a date after November 4, 2000, a new record date
will be set by the board of directors of Anesta and a new notice of the special
meeting will be sent to persons who hold shares of Anesta's common stock as of
the new record date.
If a holder of Anesta common stock executes and returns a proxy and does
not specify otherwise, the shares represented by the proxy will be voted "for"
approval of the merger agreement in accordance with the recommendation of the
Anesta board of directors. An Anesta stockholder who has executed and returned a
proxy may revoke it at any time before it is voted at the special meeting by:
(a) executing and returning to Anesta's Secretary a proxy bearing a later date,
or (b) filing or transmitting to Anesta's Secretary another instrument or
transmission revoking the proxy. Attendance at the special meeting will not, by
itself, constitute a revocation of the proxy. In order to change his or her
vote, an Anesta stockholder may either submit a duly executed proxy bearing a
later date or attend the meeting and vote in person after revoking any proxy
that was previously submitted. If you hold your shares in "street name" and have
instructed your broker to vote your shares, you must follow directions received
from your broker to change those instructions.
QUORUM; REQUIRED VOTE
The presence, in person or by proxy, at the special meeting of the holders
of a majority of the shares of Anesta common stock outstanding as of the close
of business on the record date is necessary to constitute a quorum at the
meeting. For this purpose, abstentions and broker non-votes will count toward
establishment of a quorum.
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<PAGE> 22
The affirmative vote of the holders of a majority of the shares of Anesta
common stock outstanding as of the record date is required to approve the merger
agreement. In determining whether the proposal to approve the merger agreement
has received the requisite number of affirmative votes, abstentions and broker
non-votes will have the same effect as a vote against the proposal to approve
the merger agreement.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees and
agents of Anesta may solicit proxies from Anesta stockholders by personal
interview, telephone, telegram or otherwise. Anesta will bear the costs of the
solicitation of proxies from its stockholders, except that Cephalon and Anesta
will each pay one-half of the cost of printing this proxy statement/prospectus.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries who are record holders of Anesta common stock for the
forwarding of solicitation materials to the beneficial owners of Anesta common
stock. Anesta will reimburse these brokers, custodians, nominees and fiduciaries
for the reasonable out-of-pocket expenses they incur in connection with
forwarding solicitation materials.
NO APPRAISAL RIGHTS
Under Delaware law, a stockholder of a corporation participating in certain
major corporate transactions may, under varying circumstances, be entitled to
appraisal rights pursuant to which such stockholder may receive cash in the
amount of the fair market value of the stockholder's shares in lieu of the
consideration the stockholder would otherwise receive in the transaction.
Delaware law provides, however, that appraisal rights are not available
with respect to a merger by a corporation (such as Anesta) whose shares are
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. if stockholders
of such corporation receive only shares of the surviving corporation or shares
of any other corporation (such as Cephalon) which are designated as a national
market system security, plus cash in lieu of fractional shares. In addition,
Delaware law provides that appraisal rights are not available to stockholders of
a corporation surviving a merger (such as Cephalon) if, among other conditions,
no vote of the stockholders of the surviving corporation is required to approve
the merger because the merger agreement does not amend the existing certificate
of incorporation, each share of the surviving corporation outstanding prior to
the merger is an identical outstanding or treasury share after the merger, and
the number of shares to be issued in the merger does not exceed 20% of the
shares of the surviving corporation outstanding immediately prior to the merger.
As a result, neither the Cephalon stockholders nor the Anesta stockholders have
appraisal rights in connection with the merger.
OTHER MATTERS
We currently are not aware of any other business to be acted upon at either
special meeting. If, however, other matters are properly brought before either
special meeting, or any adjourned or postponed special meeting, your proxies
will have discretion to vote or act on those matters according to their best
judgment, including to adjourn the special meeting.
Adjournments or postponements of the special meeting may be made for the
purpose of, among other things, soliciting additional proxies. Any adjournment
may be made from time to time by approval of the holders of common shares
representing a majority of the votes present in person or by proxy at the
special meeting, whether or not a quorum exists, without further notice other
than by an announcement made at the special meeting unless a new record date is
set.
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<PAGE> 23
THE MERGER
GENERAL DESCRIPTION OF THE MERGER
At the effective time, C Merger Sub will be merged with and into Anesta.
Anesta will be the surviving corporation and will continue to exist under
Delaware law as a wholly-owned subsidiary of Cephalon. In the merger, Anesta
common stock outstanding at the effective time will automatically be converted
into Cephalon common stock in the ratio of 0.4765 of a share of Cephalon common
stock for each Anesta share, with cash paid for any fractional share.
Based on the number of shares of Cephalon common stock and Anesta common
stock outstanding as of the record date, 6,409,742 shares of Cephalon common
stock will be issuable pursuant to the merger agreement, representing
approximately 15.51% of the total Cephalon common stock to be outstanding after
such issuance. This assumes that no Anesta or Cephalon stock options are
exercised between the record date and the effective time.
BACKGROUND
The terms and conditions of the merger agreement and the merger are the
result of arm's length negotiations between representatives of Cephalon and
representatives of Anesta. Set forth below is a summary of the background of
these negotiations.
During 1999 and into early 2000, the management of Anesta conducted an
extensive review of strategies to expand its operations through a variety of
possible transactions or agreements, including product or technology
acquisitions. In the course of this review, Anesta was approached by a number of
outside sources, including investment banking institutions and independent
individuals that suggested a variety of possible transactions. During this
period, Anesta conducted preliminary discussions with a potential merger
candidate which did not result in any proposals by either party.
On December 17, 1999, Anesta conducted a regularly scheduled board meeting
in Salt Lake City, Utah. The board directed the senior management of Anesta to
develop and present to Abbott Laboratories comprehensive proposals for Abbott to
increase the U.S. sales and marketing resources for Actiq. Anesta's management
initiated these discussions with Abbott in January 2000. In the course of the
negotiations with Abbott, Anesta's management expressed its desire to reacquire
the U.S. sales and marketing rights for Actiq.
On March 13, 2000, Anesta publicly announced this reacquisition to become
effective April 2, 2000. As a result of this announcement, a number of companies
initiated contact and held discussions with Anesta regarding the possibility of
co-promoting or co-marketing Actiq. In conjunction with the Abbott transaction,
Anesta evaluated a variety of strategies for marketing and selling Actiq,
including building an internal sales organization, using a third party contract
sales organization to build a sales organization, co-marketing or co-promoting
Actiq with another company with an existing sales force with expertise in
oncology and/or pain management, and combinations of these strategies.
On April 12, 2000, the management of Anesta completed a comprehensive OTFC
(Actiq) Partnering Status Report, including an identification of possible U.S.
partners for Actiq based upon discussions between the management of Anesta and
certain companies combined with internal analyses of companies with an oncology
and/or a pain management sales focus. This report was prepared as part of a
broader presentation which was made at the April 19 board of directors meeting,
which included management's evaluation of different scenarios for Anesta to
rapidly build an Actiq field sales force and increase market penetration of
Actiq following the Anesta reacquisition from Abbott of U.S. sales and marketing
rights for Actiq.
On April 13, 2000, Frank Baldino, Jr., Ph.D., the Chairman and CEO of
Cephalon and Thomas King, the President and CEO of Anesta, met for the first
time in New York City to discuss the possibility of co-promoting or co-marketing
Actiq. Because the two companies had not had any previous relationship or
discussions, Mr. King and Dr. Baldino only discussed publicly available
information and general background on the respective companies. No specific
discussions were conducted at this meeting and no plan was established for
further communication between the companies.
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<PAGE> 24
On April 19, 2000, Anesta held a regularly scheduled board meeting in Salt
Lake City, Utah. Mr. King updated the board on various discussions regarding the
possibility of co-promoting or co-marketing Actiq that had taken place and level
of interest in continuing any discussions. Ten companies, including Cephalon,
were identified as having had varying degrees of contact with Anesta. Anesta's
board directed the senior management team to continue their discussions with
these (and other) companies which had expressed an interest in Actiq.
Following the April 19, 2000 board meeting, Anesta continued to have
discussions with various companies. The discussions primarily related to a
possible U.S. co-promotion or co-marketing arrangement for Actiq. Also,
effective in mid-April, Anesta signed a one-year agreement with a contract sales
organization to build and maintain a U.S. field sales organization to sell Actiq
directly to oncologists and cancer pain management specialists.
In early May 2000, representatives of U.S. Bancorp Piper Jaffray informed
Anesta that they had been told that Cephalon was interested in a possible
relationship with Anesta. On May 12, 2000 both companies executed a standard,
mutual confidentiality agreement, although no non-public information was
exchanged at that time.
On May 15, 2000, Mr. King received a follow-up letter from J. Kevin Buchi,
Senior Vice President and Chief Financial Officer of Cephalon, outlining
Cephalon's interest in further exploring a possible relationship with Anesta.
On May 20, 2000, Mr. King responded in writing to Mr. Buchi's letter and
the companies' respective management teams initiated arrangements for a meeting
at Anesta's offices in Salt Lake City, Utah in late May.
On May 31, 2000, certain members of management of Cephalon and Anesta met
at Anesta's offices in Salt Lake City, Utah. The meeting was attended on behalf
of Anesta by William Moeller, the Chairman of Anesta's board of directors, Mr.
King, Roger Evans, Anesta's Vice President, Finance and Administration and Jeff
Williams, Anesta's Vice President, Office of Development and on behalf of
Cephalon by Robert P. Roche, Jr., Cephalon's Senior Vice President of Sales and
Marketing and Mr. Buchi. The meeting involved discussions concerning each
company's current and pipeline products. Anesta also presented a description of
the rights it had reacquired from Abbott and the manufacturing status for
producing Actiq in the U.S.
On June 5, 2000, Cephalon and Anesta executed another non-disclosure
agreement which contemplated a possible negotiated merger between the companies,
including a standstill agreement which prohibited each company from purchasing
the securities of the other company without permission of the target company's
board.
On June 5 and 6, 2000, Mr. King visited the Cephalon headquarters in West
Chester, Pennsylvania for the first time. Mr. King met with various members of
the Cephalon senior management team (including Dr. Baldino, Mr. Buchi, Mr.
Roche, John E. Osborn, Senior Vice President and General Counsel, Dr. Earl W.
Henry, Cephalon's Senior Vice President of Clinical Research and Regulatory
Affairs, Dr. Jeffry Vaught, Cephalon's Senior Vice President and President,
Research and Development, and Dr. Peter E. Grebow, Cephalon's Senior Vice
President of Worldwide Business Development). Representatives of U.S. Bancorp
Piper Jaffray and BancBoston Robertson Stephens were present during certain
meetings. The members of the Cephalon senior management team presented status
updates of the various programs and projects which were ongoing in their
respective functional areas. During these meetings, Mr. King, Dr. Baldino and
Mr. Buchi conducted their first discussions concerning the possibility of a
merger between the two companies and the potential strategic value of a combined
company.
On June 7, 2000, Mr. King informed the Anesta board of Cephalon's interest
in a potential merger during a telephonic board meeting called specifically for
this purpose. The board discussed extensively the possible benefits and risks of
a merger between the two companies. The Anesta board authorized senior
management to continue discussions with Cephalon and to expand its due diligence
review of Cephalon. A series of additional meetings were tentatively scheduled
between Cephalon and Anesta for late June 2000.
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<PAGE> 25
Beginning on June 7, 2000 and continuing through July 14, 2000, the
companies exchanged various due diligence materials as part of the ongoing due
diligence process.
On June 20, 2000, representatives of Arthur Andersen LLP, Cephalon's
independent accountants, visited representatives of PricewaterhouseCoopers LLP,
Anesta's independent accountants, in PricewaterhouseCoopers' Salt Lake City,
Utah offices to conduct accounting and financial due diligence.
On June 21, 2000, Anesta conducted its regularly scheduled board meeting
and annual stockholder meeting. Mr. King presented Anesta's board with a
comprehensive update of the ongoing discussions and negotiations with Cephalon,
along with a status report of ongoing discussions with other companies. A
representative of U.S. Bancorp Piper Jaffray discussed with the board the
financial aspects of two companies, including Cephalon, that were believed to
have the most significant interest in a strategic transaction with Anesta at
that time. The discussion included background and overview information on each
company and potential valuation methodologies. Representatives of Cooley Godward
LLP, counsel to Anesta, discussed with the board their fiduciary duties in
connection with their evaluation and consideration of the proposals. Anesta's
board authorized the Anesta management team to conduct exclusive negotiations
and due diligence activities regarding a potential merger with Cephalon, subject
to reaching a certain minimum exchange ratio for Anesta's outstanding common
stock. Anesta's board also authorized management to execute an engagement letter
with U.S. Bancorp Piper Jaffray.
From June 21 through 23, 2000, members of the management teams of each
company conducted additional due diligence and meetings at the Anesta offices in
Salt Lake City, Utah. As a result of the exchange ratio being agreed upon by the
two companies, an exclusive negotiating period agreement, which had a duration
until July 21, 2000, was signed by the two companies at the close of the
meetings on June 22, 2000.
On June 26 and 27, 2000, Mr. King, Mr. Evans, Martha Arnold, Anesta's
Senior Vice President, Carl Accetura, Anesta's Vice President of Manufacturing
Operations, and Davis Templeton, Anesta's Vice President of Sales and Field
Operations, visited the Cephalon headquarters and met with Mr. Buchi, Dr.
Baldino, Dr. Grebow, Mr. Roche, Dr. Henry, Dr. Vaught, Robert J. Urban, Senior
Director, Technical Operations and Jon R. Wallace, Cephalon's Vice President,
Quality Assurance, to continue the due diligence process.
On June 28, 2000, Morgan, Lewis & Bockius LLP, counsel to Cephalon,
circulated the first draft of a merger agreement to Cephalon, Anesta and
Anesta's representatives. Negotiations regarding the merger agreement between
the companies and the related documents continued periodically until July 14,
2000.
On June 30, 2000, Anesta signed an engagement letter with U. S. Bancorp
Piper Jaffray to serve as the financial advisor to Anesta for the potential
business combination.
On July 5 and 6, 2000, Mr. King, Dennis Coleman, Ph.D., Anesta's Vice
President of Research and Development, Paul Litka, M.D., Anesta's Vice President
of Clinical Drug Development, Kim Rogers, Ph.D., Anesta's Director, Office of
Development, and a representative of Kirton & McConkie, P.C. visited the
Cephalon headquarters and met with Drs. Vaught and Henry and Messrs. Buchi,
Osborn, Carl Savini, Cephalon's Senior Vice President of Human Resources, and
Robert T. Hrubiec, JD, Ph.D., Cephalon's Director, Intellectual Property and
Chief Patent Counsel, in order to conduct additional due diligence with respect
to the companies.
On July 10, 2000, Messrs. King and Evans of Anesta, along with
representatives of Cooley Godward and U.S. Bancorp Piper Jaffray, met with
Messrs. Buchi and Osborn, along with representatives of Morgan, Lewis and
BancBoston Robertson Stephens, in the Morgan, Lewis offices in Philadelphia,
Pennsylvania to conduct additional negotiations regarding the terms of the
merger agreement.
On July 11, 2000, Mr. King met with Messrs. Buchi and Savini at Cephalon's
offices in order to conduct additional due diligence activities.
On July 14, 2000, the Anesta board of directors met in Denver, Colorado to
discuss the proposed merger. At the meeting, representatives of U.S. Bancorp
Piper Jaffray presented their financial analyses with
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<PAGE> 26
respect to the proposed merger. At the conclusion of the financial review and
their presentation, U.S. Bancorp Piper Jaffray provided the Anesta board of
directors with its oral opinion (subsequently confirmed in writing) that as of
that date and based upon certain assumptions and qualifications, the exchange
ratio in the merger agreement was fair to the holders of Anesta common stock
from a financial point of view. The Anesta board of directors and
representatives of Cooley Godward discussed the terms of the merger agreement
and related agreements, as well as the results of Anesta's due diligence
efforts. After discussion, the Anesta board of directors unanimously approved
the merger agreement and the transactions contemplated thereby and authorized
the senior management of Anesta to finalize and execute the merger agreement.
On July 14, 2000, upon completion of all negotiations and finalization of
all agreements, the two companies executed and delivered the merger agreement
and related agreements.
On July 17, 2000, Cephalon and Anesta issued a joint press release
announcing the transaction.
On August 31, 2000, Anesta received an unsolicited letter from a third
party that described terms under which the third party might seek to acquire all
of the common stock of Anesta in exchange for shares of common stock of the
third party. On September 4, 2000, the Anesta board of directors met to discuss
the terms of the letter, after which Anesta held preliminary discussions with
the third party. Before substantive discussions occurred, the third party sent
written notice on September 7, 2000 to Anesta that it was withdrawing its letter
from further consideration.
REASONS FOR THE MERGER
The following discussion of the parties' reasons for the merger contains a
number of forward-looking statements that reflect the current views of Cephalon
and/or Anesta with respect to future events that may have an effect on their
future financial performance. Forward-looking statements are subject to risks
and uncertainties. Actual results and outcomes may differ materially from the
results and outcomes discussed in the forward-looking statements. Cautionary
statements that identify important factors that could cause or contribute to
differences in results and outcomes include those discussed in "Forward Looking
Information" and "Risk Factors."
Cephalon's Reasons for the Merger.
The Cephalon board of directors believes that the merger will accelerate
Cephalon's revenue and earnings growth in the future and shorten its path to
profitability by acquiring marketing rights to Actiq, a product for the
treatment of breakthrough pain associated with cancer. The merger will also add
Anesta's novel drug delivery platform to Cephalon's expertise in neuroscience
and research programs in oncology and will present a significant opportunity for
the development of new products in both oncology and neurology. Cephalon's
technology platform is focused, in part, on creating innovative drug therapies
to treat many forms of cancer. The merger will complement Cephalon's commercial
integration in oncology and give it access to an important medical specialty not
presently served by Cephalon's sales force. Cephalon also expects to realize
synergies through technology transfers, a strengthened sales and marketing
presence and the elimination of redundancies.
The foregoing discussion of information and factors considered by the
Cephalon board of directors is not intended to be exhaustive but is believed to
include all material factors considered by the Cephalon board of directors. In
view of the wide variety of factors considered by the Cephalon board of
directors, the Cephalon board of directors did not find it practicable to
quantify or otherwise assign relative weight to the specific factors considered.
In addition, the Cephalon board did not reach any specific conclusion on each
factor considered, or any aspect of any particular factor, but conducted an
overall analysis of these factors. Individual members of the Cephalon board may
have given different weight to different factors. However, after taking into
account all of the factors set forth above, the Cephalon board of directors
unanimously agreed that the merger agreement and the merger were fair to, and in
the best interests of, Cephalon and its stockholders and that Cephalon should
proceed with the merger.
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<PAGE> 27
Anesta's Reasons for the Merger.
The Anesta board of directors unanimously approved the terms and provisions
of the merger agreement and the transactions contemplated thereby, including the
merger, at a special meeting held on July 14, 2000. In evaluating the merger,
and arriving at its approval, the Anesta board of directors considered a number
of factors, including the factors listed below.
- The Anesta board of directors' belief that the merger would result in the
creation of a combined company with significantly greater resources, a
more diversified approved product and product development portfolio, and
greater management, sales, service and marketing capabilities than those
of Anesta alone, and would enable the combined company to compete more
effectively with competitors having greater resources and broader product
offerings than Anesta alone.
- The Anesta board of directors' belief that the merger would provide
Anesta with the potential to expand the market presence of Actiq through
Cephalon's sales and marketing experience and resources and its
determination that, on its own, Anesta's more limited resources would
limit its ability to expand the sales force and the support functions
committed to selling Actiq without being able to spread the cost across a
broader product line. Additionally, the Cephalon development portfolio
includes products which would be sold to the same customer group as Actiq
is sold.
- The Anesta board of directors' belief that the merger would provide
increased access to capital needed for future growth and expanded product
development.
- The Anesta board of directors' belief that the combined company's greater
financial resources and stability and market presence would allow it to
enter into collaborative relationships with third parties more easily
than Anesta could alone both for expanded relationships with the Anesta
OTS technology platform and for possible additional compounds to be
incorporated into the OTS technology platform.
- The complementary nature of the product offerings of Anesta and Cephalon,
which the Anesta board of directors believed would improve the combined
company's competitive position by offering a more diversified product
line than either company could offer alone, and potential future
synergies to be created by combining Anesta's unique drug delivery
technology and internal scientific/formulation expertise with drugs
currently being developed by Cephalon.
- The possibility of using Anesta's manufacturing capabilities to
manufacture Cephalon's products.
- The Anesta board of directors' view that the combined company's greater
financial stability and improved long-term prospects would enable it to
attract and retain talented employees more easily than Anesta could
alone.
- The Anesta board of directors' belief that cost and operating
efficiencies could be achieved through the integration of operations of
Anesta and Cephalon.
- The intent that the transaction qualify as a tax-free reorganization so
that no taxable gain or loss would be recognized by the Anesta
stockholders on the exchange of their shares of Anesta common stock for
Cephalon common stock.
- Current market conditions, historical market prices and trading
information with respect to the Cephalon common stock, including the
increased liquidity provided through the greater trading volume of
Cephalon common stock.
- Other long-term alternatives for Anesta, including the possibility of
raising additional capital through the sale of Anesta securities,
pursuing other transaction structures or the potential of being acquired
by another company.
- The Anesta board of directors' belief, based on its assessment of the
negotiations, that a higher exchange ratio or better terms could not be
achieved through continued negotiations with Cephalon.
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<PAGE> 28
- The Anesta board of directors' belief that the results of financial
analyses performed by management and U.S. Bancorp Piper Jaffray were
consistent with the consideration to be received by Anesta stockholders
and the relative valuations of Cephalon and Anesta in the merger.
- The opinion of U.S. Bancorp Piper Jaffray to the effect that, as of the
date of such opinion and subject to the considerations set forth in the
opinion, the exchange ratio pursuant to the merger agreement was fair,
from a financial point of view, to the holders of Anesta common stock.
This discussion of factors considered by the Anesta Board of Directors is
not necessarily complete, but it is believed to include all material factors
considered by the Anesta Board of Directors. In view of the complexity and
variety of factors considered in connection with its evaluation of the merger,
Anesta's Board of Directors did not find it practical to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. In addition, individual members of Anesta's board of
directors may have given different weights to different factors.
The Anesta board of directors also considered certain risks relating to the
merger, including:
- the risk that the benefits sought in the merger would not be fully
achieved;
- the risk that the merger would not be consummated;
- the risk that the value of the Cephalon common stock will not appreciate
or that it will decline;
- the effect of the public announcement of the merger on Anesta's sales,
operating results and ability to enter into arrangements with third
parties; and
- other risks described above under "Risk Factors" on page 13.
The Anesta board of directors believed that these risks were outweighed by the
potential benefits to be gained by the merger.
OPINION OF ANESTA'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated June 30, 2000, Anesta retained U.S.
Bancorp Piper Jaffray to act as its exclusive financial advisor and, if
requested, to render to Anesta's board of directors an opinion as to the
fairness, from a financial point of view, of the proposed exchange ratio in the
merger.
U.S. Bancorp Piper Jaffray delivered to the board of directors of Anesta on
July 14, 2000, its oral opinion (subsequently confirmed in writing as of the
same date) that, as of that date and based upon and subject to the assumptions,
factors and limitations set forth in the written opinion and described below,
the proposed exchange ratio was fair, from a financial point of view, to Anesta
stockholders. The full text of the written opinion of U.S. Bancorp Piper
Jaffray, which sets forth the assumptions made, matters considered and
limitations on review undertaken in connection with the opinion, is attached to
this proxy statement/ prospectus and is incorporated into this proxy
statement/prospectus by this reference. THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. WE URGE THE STOCKHOLDERS
OF ANESTA TO READ THE OPINION IN ITS ENTIRETY.
While U.S. Bancorp Piper Jaffray rendered its opinion and provided certain
analyses to the board of directors of Anesta, U.S. Bancorp Piper Jaffray was not
requested to and did not make any recommendation to the board of directors as to
the specific form or amount of the consideration to be received by Anesta
stockholders in the proposed merger, which was determined through negotiations
between Cephalon and Anesta. U.S. Bancorp Piper Jaffray's written opinion, which
was directed to Anesta's board of directors, addresses only the fairness, from a
financial point of view, of the proposed exchange ratio in the merger as of the
date of such opinion, does not address the value of a share of Cephalon common
stock or Anesta common stock, and does not address Anesta's underlying business
decision to participate in the merger. U.S. Bancorp Piper Jaffray's opinion does
not constitute a recommendation to any Anesta stockholder as to how a
stockholder should vote with respect to the merger.
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<PAGE> 29
In arriving at its opinion, U.S. Bancorp Piper Jaffray reviewed:
- a draft of the merger agreement dated July 11, 2000;
- publicly available financial, operating and business information related
to Cephalon and Anesta;
- publicly available market and securities data of Cephalon, Anesta and
selected public companies;
- equity research analyst reports relating to Cephalon and Anesta;
- to the extent publicly available, financial information relating to
selected business combinations; and
- internal financial information of Anesta prepared for financial planning
purposes and furnished by Anesta management.
In addition, U.S. Bancorp Piper Jaffray held discussions with members of
the respective senior managements of Cephalon and Anesta concerning the
financial condition, current operating results and business outlook of Cephalon,
Anesta and the combined company following the merger. U.S. Bancorp Piper Jaffray
also undertook such additional reviews, analyses and inquiries as it deemed
necessary and appropriate.
In delivering its opinion to the board of directors of Anesta, U.S. Bancorp
Piper Jaffray prepared and delivered to the board of directors written materials
containing various analyses and other information material to the opinion. The
following is a summary of the analyses contained in the materials. Some of the
summaries of financial analyses include information presented in tabular format.
In order to fully understand the financial analyses, the tables must be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses. Considering the data set forth
in the tables without considering the full narrative description of the
financial analyses, including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of the financial
analyses.
Implied Value of Consideration.
Giving effect to the proposed exchange ratio of 0.4765 and the closing
price of Cephalon common stock on the Nasdaq National Market on July 12, 2000,
of $74.75, U.S. Bancorp Piper Jaffray calculated an implied value of $35.62 for
each share of Anesta common stock. Given the number of Anesta common shares
outstanding as of May 10, 2000, and corresponding common share equivalents
outstanding, U.S. Bancorp Piper Jaffray calculated the aggregate implied equity
value of the stock consideration payable in the merger for Anesta common stock
to be approximately $515.3 million.
U.S. Bancorp Piper Jaffray also presented the implied equity values of
Anesta common stock that would result from a $50.00 to $70.00 range of Cephalon
common stock prices. U.S. Bancorp Piper Jaffray calculated that such closing
prices would imply the following equity values:
<TABLE>
<CAPTION>
IMPLIED AGGREGATE IMPLIED PER SHARE
CEPHALON EQUITY VALUE FOR EQUITY VALUE
CLOSING STOCK PRICE ANESTA FOR ANESTA
------------------- ----------------- -----------------
<S> <C> <C>
$50 $344.7 $23.83
$55 $379.2 $26.21
$60 $413.6 $28.59
$65 $448.1 $30.97
$70 $482.6 $33.36
</TABLE>
U.S. Bancorp Piper Jaffray also calculated that given the proposed exchange
ratio in the merger holders of Anesta common stock and options would receive
approximately 13.5% of the common stock and common stock equivalents in the
combined entity.
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Anesta Market Analysis.
U.S. Bancorp Piper Jaffray reviewed the closing prices of Anesta common
stock on the Nasdaq National Market for the 52 week period ending July 12, 2000.
U.S. Bancorp Piper Jaffray presented the closing price information contained in
the following table:
<TABLE>
<S> <C>
Closing Price as of July 12, 2000........................... $25.38
30 day average.............................................. $20.80
60 day average.............................................. $18.14
90 day average.............................................. $17.43
52-week high................................................ $26.75
52-week low................................................. $ 8.06
</TABLE>
Selected Company Analysis.
U.S. Bancorp Piper Jaffray compared financial information relating to
Anesta to corresponding data from 10 publicly traded companies in the
biotechnology industry that U.S. Bancorp Piper Jaffray believed had technologies
and/or product development stages similar to that of Anesta. These companies
were:
- Algos Pharmaceutical Corp.;
- Coulter Pharmaceutical Inc.;
- Gliatech Inc.;
- Guilford Pharmaceuticals Inc.;
- Kos Pharmaceuticals Inc.;
- MGI Pharma Inc.;
- PathoGenesis Corp.;
- Progenics Pharmaceuticals Inc.;
- SangStat Medical Corp.; and
- Texas Biotechnology Corp.
This analysis produced an average and median market capitalization for the
selected companies of $402.6 and $432.7 million.
Premiums Paid Analysis.
U.S. Bancorp Piper Jaffray reviewed the implied premiums paid in 18
selected business combination transactions announced since January 1, 1998. U.S.
Bancorp Piper Jaffray selected these transactions by searching SEC filings,
press releases, press reports, databases and other sources and by applying the
following criteria:
- Completed or pending transactions;
- Change-in-control transactions; and
- Biotechnology transactions ranging from $150 million to $1,000 million.
The transactions reviewed were (listed as acquiror/target, and showing the
date of announcement):
- Guilford Pharmaceuticals, Inc/Gliatech, Inc (May 30, 2000)
- Elan Corp PLC/The Liposome Company, Inc. (March 6, 2000)
- King Pharmaceuticals, Inc./Medco Research, Inc. (December 1, 1999)
24
<PAGE> 31
- Baxter International, Inc./North American Vaccine, Inc. (November 18,
1999)
- Celltech Group PLC/Medeva PLC (November 14, 1999)
- Millennium Pharmaceuticals, Inc./LeukoSite, Inc. (October 14, 1999)
- MedImmune, Inc./U.S. Bioscience, Inc. (September 22, 1999)
- Teva Pharmaceutical Industries Ltd./Copley Pharmaceutical, Inc. (August
10, 1999)
- Biovail Corporation International/Fuisz Technologies, Ltd. (July 26,
1999)
- Pharmacia & Upjohn, Inc./SUGEN (June 15, 1999)
- Celltech Group PLC/Chiroscience Group PLC (June 15, 1999)
- Gilead Sciences, Inc./NeXstar Pharmaceuticals, Inc. (March 1, 1999)
- Watson Pharmaceuticals, Inc./TheraTech Inc. (October 25, 1998)
- ALZA Corporation/SEQUUS Pharmaceuticals, Inc. (October 5, 1998)
- Nycomed Amersham PLC/Molecular Dynamics, Inc. (August 10, 1998)
- Mylan Laboratories, Inc./Penederm Incorporated (June 24, 1998)
- Elan Corporation PLC/Neurex Corporation (April 29, 1998)
- Baxter International, Inc./Somatogen, Inc. (February 24, 1998)
The table below shows a comparison of the implied premiums paid in the
selected transactions to the implied premium that would be paid to Anesta
stockholders based on the implied value payable in the merger. The premium
calculations for Anesta stock are based upon an assumed announcement date of
July 12, 2000.
<TABLE>
<CAPTION>
COMPARATIVE
PREMIUM CEPHALON/
---------------- ANESTA
AVERAGE MEDIAN MERGER
------- ------ ---------
<S> <C> <C> <C>
1 day preceding announcement............................. 34.1% 33.2% 51.6%
1 week preceding announcement............................ 43.2% 39.7% 50.8%
4 weeks preceding announcement........................... 58.0% 45.1% 97.9%
</TABLE>
Discounted Cash Flow Analysis.
U.S. Bancorp Piper Jaffray performed a discounted cash flow analysis for
Anesta. In this analysis, U.S. Bancorp Piper Jaffray calculated the present
value of the projected future cash flows of Anesta, using financial planning
data prepared by Anesta management. U.S. Bancorp Piper Jaffray estimated a range
of theoretical values for Anesta based on the net present value of its implied
annual cash flows and a terminal value for Anesta in 2004 calculated based upon
a multiple of operating income. U.S. Bancorp Piper Jaffray applied a range of
discount rates of 25% to 35% and a range of terminal value multiples of 25x to
30x forecasted 2004 operating income. This analysis yielded the following
results:
Implied Aggregate Equity Value of Anesta:
<TABLE>
<S> <C>
Low......................................................... $196.2 million
Mid......................................................... $243.7 million
High........................................................ $305.2 million
</TABLE>
Selected Transaction Analysis.
U.S. Bancorp Piper Jaffray compared the ratio of equity value paid,
adjusted for cash and debt (referred to as the "enterprise value"), to last
twelve months ("LTM") revenue in 15 selected business combination
25
<PAGE> 32
transactions. U.S. Bancorp Piper Jaffray selected the transactions by searching
SEC filings, press releases, press reports, databases and other sources and by
applying the following criteria:
- transactions that were announced or completed between January 1, 1998 and
July 12, 2000;
- transactions in which the acquiring company purchased at least 50% of the
target with cash and/or stock;
- target companies with similar SIC codes as Anesta; and
- value of transactions ranging from $150 million to $1,000 million.
The transactions selected were (listed as acquiror/target, and showing the
date of announcement):
- Elan Corp. PLC/Neurex Corp. (April 29, 1998)
- Mylan Laboratories Inc./Penederm Inc. (June 24, 1998)
- ALZA Corp./SEQUUS Pharmaceuticals Inc. (October 5, 1998)
- Watson Pharmaceuticals Inc./TheraTech Inc. (October 25, 1998)
- Tennenbaum & Co. LLC/Whittaker Corp. (December 19, 1998)
- Gilead Sciences Inc./NeXstar Pharmaceuticals Inc. (March 1, 1999)
- Pharmacia & Upjohn Inc./SUGEN Inc. (July 26, 1999)
- Biovail Corp International/Fuisz Technologies Ltd (July 26, 1999)
- Teva Pharmaceutical Industries Limited/Copley Pharmaceutical Inc. (August
10, 1999)
- MedImmune, Inc./US Bioscience Inc. (September 22, 1999)
- Millennium Pharmaceuticals Inc./LeukoSite Inc. (October 14, 1999)
- Baxter International Inc./North American Vaccine Inc. (November 18, 1999)
- King Pharmaceuticals Inc./Medco Research Inc. (December 1, 1999)
- Elan Corp. PLC/Liposome Co. Inc. (March 6, 2000)
- Guilford Pharmaceuticals Inc./Gliatech Inc. (May 30, 2000)
The average and median LTM revenue multiples for the selected transactions
calculated by U.S. Bancorp Piper Jaffray were 22.3x and 7.7x, respectively with
ranges of 179.1x as a high and 1.8x as a low. U.S. Bancorp Piper Jaffray noted
that the multiple for Anesta based on the implied value payable in the merger
and Anesta's LTM revenue was 67.5x.
Pro Forma Contribution Analysis.
U.S. Bancorp Piper Jaffray analyzed the expected contributions of each of
Cephalon and Anesta to revenue, operating income and pre-tax income of the
combined company for the years ending December 31, 2001, 2002 and 2003 based on
internal financial planning data of Anesta furnished by Anesta management and
research analyst estimates for Cephalon. The analysis indicated that during
these periods Anesta would contribute to the combined entity approximately the
following percentages of such amounts:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
% CONTRIBUTION BY ANESTA DECEMBER 31, 2001 DECEMBER 31, 2002 DECEMBER 31, 2003
------------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue............................. 25.4% 22.1% 18.1%
Operating Income.................... 51.0% 21.9% 14.3%
Pre-Tax Income...................... 75.0% 25.4% 19.2%
</TABLE>
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<PAGE> 33
U.S. Bancorp Piper Jaffray noted that holders of Anesta common stock and
common stock equivalents will receive approximately 13.5% of the common stock
and common stock equivalents of the combined company.
Comparable Run Rate Analysis.
U.S. Bancorp Piper Jaffray analyzed the current quarter of product sales
for a selected group of seven companies and annualized the most recent quarter
of sales from each. U.S. Bancorp Piper Jaffray selected these transactions by
applying the following criteria:
- Companies with a recently approved product with annualized sales derived
from the most recent quarter ranging from $10 to $100 million; and
- Companies with similar SIC codes as Anesta.
The selected companies were:
- Celgene Corp.
- Cephalon, Inc.
- Gliatech, Inc.
- IDEC Pharmaceuticals Corp.
- Kos Pharmaceuticals, Inc.
- MGI Pharma, Inc.
- PathoGenesis Corp.
U.S. Bancorp Piper Jaffray compared each company's annualized run rate
sales to its technology value to determine a multiple of annualized run rate
sales. The average and median run rate multiple for the selected companies was
35.3x and 23.7x, respectively. U.S. Bancorp Piper Jaffray noted that the implied
run rate multiple for Anesta based on the implied value payable in the merger
was 38.7x.
Historical Exchange Ratio Analysis.
U.S. Bancorp Piper Jaffray analyzed the exchange ratio for this transaction
against the "implied" exchange ratio based on average historical stock prices
for Cephalon and Anesta. U.S. Bancorp Piper Jaffray examined the exchange ratios
implied by the 1 year, 6 month, 3 month and 1 month average stock prices for
Cephalon and Anesta. This analysis produced the following implied historical
exchange ratios:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE RATIO
----------------------
<S> <C>
1 year average.............................................. 0.413
6 month average............................................. 0.341
3 month average............................................. 0.312
1 month average............................................. 0.334
</TABLE>
In reaching its conclusion as to the fairness of the exchange ratio and in
its presentation to the board of directors of Anesta, U.S. Bancorp Piper Jaffray
did not rely on any single analysis or factor described above, assign relative
weights to the analyses or factors considered by it, or make any conclusion as
to how the results of any given analysis, taken alone, supported its opinion.
The preparation of a fairness opinion is a complex process and not necessarily
susceptible to partial analysis or summary description. U.S. Bancorp Piper
Jaffray believes that its analyses must be considered as a whole and that
selection of portions of its analyses and of the factors considered by it,
without considering all of the factors and analyses, would create a misleading
view of the processes underlying the opinion.
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<PAGE> 34
The analyses of U.S. Bancorp Piper Jaffray are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than suggested by the analyses. Analyses relating to the value of
companies do not purport to be appraisals or valuations or necessarily reflect
the price at which companies may actually be sold. No company or transaction
used in any analysis for purposes of comparison is identical to Cephalon, Anesta
or the merger. Accordingly, an analysis of the results of the comparisons is not
mathematical; rather, it involves complex considerations and judgments about
differences in the companies to which Cephalon and Anesta were compared and
other factors that could affect the public trading value of the companies.
For purposes of its opinion, U.S. Bancorp Piper Jaffray relied upon and
assumed the accuracy, completeness and fairness of the financial statements and
other information provided to it by Cephalon and Anesta or otherwise made
available to or reviewed by it and did not assume responsibility for the
independent verification of that information. U.S. Bancorp Piper Jaffray was
informed by Anesta management that the information prepared by Anesta management
for financial planning purposes was not prepared with the expectation of public
disclosure. U.S. Bancorp Piper Jaffray relied upon the assurances of the
management of Cephalon and Anesta that the information provided to it by
Cephalon and Anesta was prepared on a reasonable basis, that the financial
planning data and other business outlook information of Anesta provided to it
reflects the best currently available estimates of Anesta's management, and that
neither management was aware of any information or facts that would make the
information provided to U.S. Bancorp Piper Jaffray incomplete or misleading.
For purposes of its opinion, U.S. Bancorp Piper Jaffray assumed that the
final form of the merger agreement would be substantially similar to the last
draft reviewed by it, without modification of material terms or conditions, and
that the merger would be consummated in accordance with the terms described in
the agreement, without waiver by Anesta of any of the conditions to its
obligations thereunder. U.S. Bancorp Piper Jaffray also assumed that the merger
will constitute a reorganization for federal income tax purposes and will be
treated as a pooling of interests for accounting purposes. U.S. Bancorp Piper
Jaffray also assumed that, in the course of obtaining the necessary regulatory
approvals and consents for the merger, no restrictions will be imposed that
would have a material adverse effect on the contemplated benefits of the merger
to Anesta and its stockholders.
In arriving at its opinion, U.S. Bancorp Piper Jaffray did not perform any
appraisals or valuations of any specific assets or liabilities of Cephalon or
Anesta, and was not furnished with any such appraisals or valuations. U.S.
Bancorp Piper Jaffray expressed no opinion as to the liquidation value of any
entity. U.S. Bancorp Piper Jaffray expressed no opinion as to the price at which
shares of Cephalon or Anesta common stock have traded or at which the shares of
Cephalon or Anesta may trade at any future time. The opinion necessarily was
based on information available to U.S. Bancorp Piper Jaffray and the facts and
circumstances as they existed and were subject to evaluation on the date of the
opinion. Events occurring after that date could materially affect the
assumptions used in preparing the opinion. U.S. Bancorp Piper Jaffray has not
undertaken to and is not obligated to affirm or revise its opinion or otherwise
comment on any events occurring after the date it was given. U.S. Bancorp Piper
Jaffray's analyses are based upon numerous factors and events beyond the control
of the parties or their respective advisors.
U.S. Bancorp Piper Jaffray, as a customary part of its investment banking
business, is engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, underwritings and secondary
distributions of securities, private placements and valuations for estate,
corporate and other purposes. The board of directors of Anesta selected U.S.
Bancorp Piper Jaffray because of its expertise, reputation and familiarity with
the biotechnology industry in general and with Anesta in particular. In the
ordinary course of its business, U.S. Bancorp Piper Jaffray and its affiliates
may actively trade securities of Cephalon or Anesta for their own accounts or
the accounts of their customers and, accordingly, may at any time hold a long or
short position in those securities.
Under the terms of the engagement letter dated June 30, 2000, Anesta has
agreed to pay U.S. Bancorp Piper Jaffray a fee equal to 1.0% of the aggregate
consideration paid to Anesta stockholders or optionholders in connection with
the merger for its financial advisory services, payable upon consummation of the
merger.
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<PAGE> 35
Anesta also has agreed to pay U.S. Bancorp Piper Jaffray $550,000 for rendering
its opinion and a retainer fee, which fees are not contingent upon consummation
of the merger and will be credited against payment of the fee for financial
advisory services. The contingent nature of the financial advisory fee may have
created a potential conflict of interest in that Anesta would be unlikely to
consummate the merger unless it had received the opinion of U.S. Bancorp Piper
Jaffray. Whether or not the transaction is consummated, Anesta also has agreed
to pay the reasonable out-of-pocket expenses of U.S. Bancorp Piper Jaffray and
to indemnify U.S. Bancorp Piper Jaffray against certain liabilities. These
liabilities include liabilities under the federal securities laws in connection
with the engagement of U.S. Bancorp Piper Jaffray by Anesta's board of
directors.
INTERESTS OF ANESTA'S OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of the Anesta board of directors with
respect to approving the merger agreement, Anesta stockholders should be aware
that certain members of the board of directors and management of Anesta have
interests in the merger that are in addition to the interests of stockholders of
Anesta generally. The Anesta board of directors was aware of these interests and
considered them, among other matters, in approving the merger agreement.
Indemnification and Insurance.
The merger agreement provides for the survival after the merger of all
indemnification rights of the directors and officers of Anesta for acts and
omissions occurring before the merger, as their rights existed as of July 14,
2000, in the Anesta bylaws and in indemnification agreements with Anesta.
Cephalon has agreed to guarantee that the surviving company observes its
commitments under these indemnification agreements. In addition, for a period of
six years after the closing of the merger, the surviving corporation will
maintain in effect the existing policy of directors' and officers' liability
insurance policy maintained by Anesta or substitute for the current policy, a
policy or policies with comparable coverage. If the annual premiums of such
insurance coverage exceed 150% of the last annual premium paid for the insurance
prior to July 14, 2000, the surviving corporation may reduce the amount of
coverage to the amount of coverage that can be obtained for an annual premium
equal to 150% of the last annual premium paid for the insurance prior to July
14, 2000.
Option Acceleration.
Options granted to Anesta's officers and directors pursuant to the Anesta
stock option plans accelerate upon occurrence of the merger. Options granted to
officers that are unvested as of the date of the merger generally will
accelerate according to the following schedule: (1) 50% of the unvested portion
of an officer's options will accelerate and immediately become vested and
exercisable upon the occurrence of the merger; (2) the remaining 50% of the
officer's unvested options will vest in 12 equal monthly installments following
the date of the merger; and (3) if within 24 months following the merger the
officer's employment terminates due to an involuntary termination without cause
or a constructive termination, any unvested outstanding options will accelerate
and immediately become vested and exercisable. Options granted to directors that
are unvested as of the date of the merger generally will accelerate in full and
be immediately vested and exercisable upon occurrence of the merger.
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<PAGE> 36
The following table summarizes the outstanding Anesta stock options held by
each person who has served as an officer or director of Anesta as of July 1,
2000:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
PRICE OF
TOTAL NUMBER NUMBER OF IMMEDIATELY
OF OUTSTANDING UNVESTED IMMEDIATE VESTED
NAME OPTIONS OPTIONS VESTING(1) OPTIONS
---- -------------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Thomas King.................................... 332,500 126,046 63,023 $12.80
Martha Arnold.................................. 84,584 37,133 18,567 12.95
Frank Kiser.................................... 76,000 38,044 19,022 13.00
Paul Litka..................................... 73,500 40,699 20,350 14.60
Dennis Coleman................................. 71,000 31,795 15,898 12.74
Jeffrey Williams............................... 63,616 41,139 20,570 12.23
Carl Accetura.................................. 73,500 43,824 21,912 12.38
W. Davis Templeton............................. 64,501 29,200 14,600 12.67
Roger Evans.................................... 61,418 35,982 17,991 12.53
Steven Shoemaker............................... 71,000 31,795 15,898 12.73
William Moeller................................ 65,731 5,211 5,211 13.00
Richard Urfer.................................. 35,600 16,894 16,894 16.76
Richard Leazer................................. 33,500 18,794 18,794 17.41
Daniel Kisner.................................. 41,600 18,394 18,394 17.45
Emmanuel Papper................................ 24,300 12,130 12,130 17.61
Theodore Stanley............................... 38,500 12,034 12,034 13.26
</TABLE>
---------------
(1) Number immediately vested as if the merger were to close on July 1, 2000.
Severance Benefits.
In addition to the acceleration of the vesting of stock options, certain
officers may receive certain other severance benefits upon occurrence of the
merger. If within 24 months following the merger such officer's employment
terminates due to an involuntary termination without cause or a constructive
termination, the officer generally will receive a severance payment equal to 12
months of pay (24 months in the case of Mr. King), payable in a lump sum or
installments over not more than 12 months. Such officer also will be eligible
upon termination to receive health care continuation benefits pursuant to the
Consolidated Omnibus Reconciliation Act of 1985, or COBRA, and Cephalon
generally will continue to pay its portion of the officer's COBRA insurance
premium for up to 12 months after the date of termination. Additionally,
terminated officers generally will be entitled to receive any accrued vacation
pay in accordance with Anesta's vacation pay policy.
The following table sets forth the severance payments each officer will be
eligible for if they are terminated:
<TABLE>
<CAPTION>
NAME AMOUNT
---- --------
<S> <C>
Thomas King................................................. $634,130
Paul Litka.................................................. 245,700
Martha Arnold............................................... 240,068
Steven Shoemaker............................................ 239,101
Franck Kiser................................................ 219,625
Jeffrey Williams............................................ 216,466
Dennis Coleman.............................................. 210,600
Carl Accetura............................................... 209,213
W. Davis Templeton.......................................... 183,934
Roger Evans................................................. 179,325
</TABLE>
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<PAGE> 37
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the anticipated material U.S. federal
income tax consequences of the merger to Anesta stockholders who exchange their
Anesta common stock for Cephalon common stock in the merger. This summary is
based upon current provisions of the Internal Revenue Code, existing regulations
under the Internal Revenue Code and current administrative rulings and court
decisions, all of which are subject to change. Any such change, which may or may
not be retroactive, could alter the tax consequences to Cephalon, Anesta or the
stockholders of Anesta described in this summary. No attempt has been made to
comment on all federal income tax consequences of the merger that may be
relevant to particular Anesta stockholders, including stockholders:
- who are subject to special tax rules, such as dealers in securities,
foreign persons, mutual funds, insurance companies and tax-exempt
entities;
- who are subject to the alternative minimum tax provisions of the Internal
Revenue Code;
- who acquired their shares in connection with stock option or stock
purchase plans or in other compensatory transactions;
- who hold their shares as a hedge or as part of a hedging, straddle or
other risk reduction strategy; or
- who do not hold their shares as capital assets.
In addition, the following discussion does not address the tax consequences
of the merger under state, local and foreign tax laws. Furthermore, the
following discussion does not address:
- the tax consequences of transactions effectuated before, after or at the
same time as the merger, whether or not they are in connection with the
merger, including, without limitation, transactions in which Anesta
shares are acquired or Cephalon shares are disposed of;
- the tax consequences to holders of options issued by Anesta that are
assumed, exercised or converted, as the case may be, in connection with
the merger; or
- the tax consequences of the receipt of Cephalon shares other than in
exchange for Anesta shares.
Accordingly, holders of Anesta common stock are advised and expected to
consult their own tax advisors regarding the federal income tax consequences of
the merger in light of their personal circumstances and the consequences under
state, local and foreign tax laws.
Morgan, Lewis & Bockius LLP has delivered to Cephalon, and Cooley Godward
LLP has delivered to Anesta, an opinion stating that the merger will constitute
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. These opinions are attached as Exhibits 8.1 and 8.2 to the registration
statement on Form S-4 filed with the Securities and Exchange Commission, which
includes this proxy statement/prospectus. The tax opinions discussed in this
section assume and are conditioned upon the following:
- the truth and accuracy of the statements, covenants, representations and
warranties contained in the merger agreement, in the tax representations
received from Cephalon, C Merger Sub and Anesta to support the tax
opinions and in all other instruments and documents related to the
formation, organization and operation of Cephalon, C Merger Sub and
Anesta examined by and relied upon by Cooley Godward LLP and Morgan,
Lewis & Bockius LLP in connection with the merger;
- that original documents submitted to such counsel are authentic, that
documents submitted to such counsel as copies conform to the original
documents and that all of these documents have been (or will be by the
effective time) duly and validly executed and delivered where due
execution and delivery are a prerequisite to the effectiveness of these
documents;
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<PAGE> 38
- that all covenants contained in the merger agreement and the tax
representations described above are performed without waiver or breach of
any material provision of these covenants; and
- that any representation or statement made "to the best of knowledge" or
similarly qualified is correct without that qualification.
No ruling from the Internal Revenue Service has been or will be requested
in connection with the merger. In addition, stockholders of Anesta should be
aware that the tax opinions discussed in this section are not binding on the IRS
or any court. The IRS could adopt a contrary position and a contrary position
could be sustained by a court.
Subject to the assumptions and limitations discussed above, it is the
opinion of Morgan, Lewis & Bockius LLP, tax counsel to Cephalon, and Cooley
Godward LLP, tax counsel to Anesta, that:
- the merger will be treated for federal income tax purposes as a
reorganization;
- Cephalon, C Merger Sub and Anesta will each be a party to the
reorganization;
- Cephalon, C Merger Sub and Anesta will not recognize any gain or loss
solely as a result of the merger;
- stockholders of Anesta will not recognize any gain or loss upon the
receipt of solely Cephalon common stock (including any rights which may
attach to such common stock pursuant to Cephalon's Amended and Restated
Rights Agreement, dated as of January 1, 1999 and as amended on July 31,
2000) for their Anesta common stock;
- the aggregate basis of the shares of Cephalon common stock and rights
under Cephalon's Amended and Restated Rights Agreement that are received
by an Anesta stockholder in the merger (including any fractional share
deemed received) will be the same as the aggregate basis of the shares of
Anesta common stock surrendered in exchange therefor;
- the holding period of the shares of Cephalon common stock received by an
Anesta stockholder in the merger will include the holding period of the
shares of Anesta common stock surrendered in the merger if such shares of
Anesta common stock are held as capital assets at the effective time of
the merger; and
- a stockholder of Anesta who receives cash instead of a fractional share
of Cephalon common stock will recognize gain or loss equal to the
difference, if any, between such stockholder's basis in the fractional
share and the amount of cash received. Such gain or loss will be a
capital gain or loss if the Anesta common stock is held by such
stockholder as a capital asset at the effective time of the merger. The
deductibility of capital losses is subject to limitations for both
individuals and corporations.
In addition to the foregoing, there are other tax-related issues that you
should be aware of, such as:
- Reporting Requirements. Each Anesta stockholder that receives Cephalon
common stock in the merger will be required to file a statement with his,
her or its federal income tax return setting forth the stockholder's
basis in the Anesta stock surrendered and the fair market value of the
Cephalon stock and cash received in the merger, and to retain permanent
records of these facts relating to the merger.
- Backup Withholding. Unless an exemption applies under applicable law and
regulations, the exchange agent is required to withhold, and will
withhold, 31% of any cash payments to an Anesta stockholder in the merger
unless the stockholder provides the appropriate form as described below.
Each Anesta stockholder should complete and sign the substitute Form W-9
included as part of the letter of transmittal to be sent to each Anesta
stockholder, so as to provide the information, including such
stockholder's taxpayer identification number, and certification necessary
to avoid backup withholding,
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<PAGE> 39
unless an applicable exemption exists and is proved in a manner
satisfactory to Cephalon and the exchange agent.
- Consequences of IRS Challenge. A successful IRS challenge to the
reorganization status of the merger would result in significant tax
consequences. Anesta stockholders would recognize gain or loss with
respect to each share of Anesta common stock surrendered in the merger.
Such gain or loss would be equal to the difference between the
stockholder's basis in such share and the sum of the fair market value,
as of the effective time, of the Cephalon common stock received in the
merger and any cash received instead of a fractional share of Cephalon
common stock. In such event, a stockholder's aggregate basis in the
Cephalon common stock so received would equal its fair market value as of
the effective time and the stockholder's holding period for such stock
would begin the day after the merger is consummated.
- Other Consideration. Even if the merger qualifies as a reorganization, a
recipient of Cephalon common stock would recognize income if, for
example, any such shares were determined to have been received in
exchange for services, to satisfy obligations or in consideration for
anything other than the Anesta capital stock surrendered. Generally, such
income is taxable as ordinary income upon receipt. In addition, to the
extent that Anesta stockholders were treated as receiving, directly or
indirectly, consideration other than Cephalon capital stock in exchange
for such stockholder's Anesta common stock, gain or loss would have to be
recognized.
THE SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH
ABOVE IS INTENDED TO PROVIDE ONLY A GENERAL SUMMARY AND IS NOT INTENDED TO BE A
COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. IN ADDITION, THE SUMMARY DOES NOT ADDRESS TAX
CONSEQUENCES THAT MAY VARY WITH, OR ARE CONTINGENT ON, INDIVIDUAL CIRCUMSTANCES.
MOREOVER, THE SUMMARY DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE
OR LOCAL TAX CONSEQUENCES OF THE MERGER. THE SUMMARY DOES NOT ADDRESS THE TAX
CONSEQUENCES OF ANY TRANSACTION OTHER THAN THE MERGER. ACCORDINGLY, EACH ANESTA
STOCKHOLDER IS STRONGLY URGED TO CONSULT WITH A TAX ADVISOR TO DETERMINE THE
PARTICULAR FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES OF
THE MERGER TO SUCH STOCKHOLDER.
ANTICIPATED ACCOUNTING TREATMENT
The merger is expected to be accounted for using the "pooling of interests"
method of accounting pursuant to Opinion No. 16 of the Accounting Principles
board. The pooling of interests method of accounting assumes that the combining
companies have been merged from inception, and the historical consolidated
financial statements for periods prior to completion of the merger are restated
as though the companies had been combined from inception. Cephalon may terminate
the merger agreement if the merger cannot be accounted for as a pooling of
interests.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules promulgated thereunder (the "HSR Act"), the merger may not be
completed until notifications have been given and certain information has been
furnished to the Federal Trade Commission (the "FTC") and the Antitrust Division
of the U.S. Department of Justice and specified waiting period requirements have
been satisfied or early termination of the waiting period is granted at the
request of Cephalon and Anesta. Any consent required under any applicable
foreign antitrust law or regulation also must have been obtained. Cephalon and
Anesta completed their filing of the notification and report forms under the HSR
Act with the FTC and the Antitrust Division on August 2, 2000. These filings
commenced a 30-day waiting period under the HSR Act that was terminated early by
the FTC on August 24, 2000.
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There can be no assurance that a challenge to the merger on antitrust
grounds will not be made, or if such challenge is made, that Cephalon and Anesta
would prevail or would not be required to terminate the merger agreement, to
divest certain assets, to license certain proprietary technology to third
parties or to accept certain conditions in order to complete the merger.
RESTRICTIONS ON RESALE BY AFFILIATES
The shares of Cephalon common stock to be received by Anesta stockholders
in the merger have been registered under the Securities Act and, except as
described in this paragraph, may be freely traded without restriction. The
shares of Cephalon common stock to be issued in the merger and received by
persons who are considered to be "affiliates" (as that term is used in Rule 145
under the Securities Act) of Anesta before the merger may be resold by them only
in transactions permitted by the resale provisions of Rule 145 under the
Securities Act or as otherwise permitted under the Securities Act. Under
guidelines published by the SEC, the sale or other disposition of Cephalon
common stock or Anesta common stock by an affiliate of either Cephalon or Anesta
within 30 days before the effective time of the merger or the sale or other
disposition of Cephalon common stock after the merger and before the publication
of financial results that include at least 30 days of post-merger combined
operations of Cephalon and Anesta could preclude pooling of interests accounting
treatment of the merger. Accordingly, Cephalon has obtained signed affiliate
agreements from all persons whom it has been advised may be considered to be
affiliates of Anesta. The affiliate agreements provide that these persons will
not sell, transfer or otherwise dispose of any shares of Anesta common stock or
Cephalon common stock during the period referred to above and that they will not
sell, transfer or otherwise dispose of Cephalon common stock at any time in
violation of the Securities Act, including Rule 145.
CERTAIN TERMS OF THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement
among Cephalon, C Merger Sub and Anesta, and is not an exhaustive description.
You should read the merger agreement carefully and in its entirety. A copy of
the merger agreement is attached as Annex A to this proxy statement/prospectus
and is incorporated herein by reference.
GENERAL
Under the merger agreement, C Merger Sub, Inc., a wholly-owned subsidiary
of Cephalon, will merge with and into Anesta, with Anesta continuing as the
surviving corporation and wholly owned subsidiary of Cephalon. Following the
merger, Anesta will be led by Cephalon's management team.
CLOSING MATTERS
Closing.
Unless the parties agree otherwise, the closing of the merger will take
place as soon as practicable, but no later than two business days after all
closing conditions have been satisfied or waived, unless the merger agreement
has been terminated. See "Conditions to Obligations to Effect the Merger" below
for a more complete description of the conditions that must be satisfied prior
to closing.
Effective Time.
On the closing date, Cephalon and Anesta will file a certificate of merger
with the Delaware Secretary of State in accordance with the relevant provisions
of the Delaware General Corporation Law. The merger will become effective when
the certificate of merger is filed or at such later time as Cephalon and Anesta
agree and specify in the certificate of merger.
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CONVERSION OF SHARES; TREATMENT OF STOCK OPTIONS
As a result of the merger, each share of Anesta's common stock issued and
outstanding immediately prior to the effective time will be converted into the
right to receive 0.4765 shares of Cephalon common stock, par value $.01 per
share. If you own Anesta common stock, you may exchange your shares of Anesta
common stock for shares of Cephalon common stock after the merger becomes
effective. In addition, the exchange agent will make a cash payment to you for
any fractional share of Cephalon common stock you would otherwise be entitled to
receive.
At the effective time of the merger, each outstanding and unexercised
option or right to purchase shares of Anesta common stock granted under the
Anesta stock option plans will be converted into an option or a right to
purchase shares of Cephalon common stock under the same terms and conditions as
were applicable to the options as granted under the Anesta stock plans. The
number of shares of Cephalon common stock that the converted options will be
exercisable for, and the exercise price of the option, will be adjusted to
reflect the exchange ratio of 0.4765.
Each share of Cephalon common stock will remain outstanding following the
merger and will continue to represent one share of common stock of the combined
company.
EXCHANGE OF STOCK CERTIFICATES
Before the closing of the merger, Cephalon will appoint an exchange agent
to handle the exchange of Anesta stock certificates for stock of Cephalon and
the payment of cash for fractional shares. Soon after the closing of the merger,
the exchange agent will send a letter of transmittal to each former Anesta
stockholder, which is to be used to exchange Anesta stock certificates for stock
of Cephalon. The letter of transmittal will contain instructions explaining the
procedure for surrendering Anesta stock certificates.
Anesta stockholders who surrender their stock certificates, together with a
properly completed letter of transmittal, will receive shares of Cephalon common
stock into which the shares of Anesta common stock were converted in the merger.
After the merger, each certificate that previously represented shares of
Anesta stock will only represent the right to receive the shares of Cephalon
common stock into which those shares of Anesta common stock have been converted.
After the effective time of the merger, Anesta will not register any
transfers of the shares of Anesta common stock.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of Anesta that
are customary for a transaction of this nature relating to, among other things:
- Anesta's organization, capitalization and authority to enter into the
merger agreement;
- the enforceability of the merger agreement as a binding obligation of
Anesta; any conflicts between the merger agreement and any of Anesta's
other material contracts, any law, or any of Anesta's charter or bylaw
provisions; any required filings and consents;
- the accuracy of Anesta's financial statements and filings with the SEC
and Anesta's submission of all required filings;
- material liabilities or obligations incurred by Anesta or any Anesta
subsidiary since December 31, 1999, other than in the ordinary course of
business;
- indebtedness and absence of undisclosed liabilities;
- the absence of litigation;
- compliance with laws;
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- environmental matters;
- Anesta's conduct of its business since December 31, 1999 and the absence
of any material adverse effect on the business of Anesta;
- tax matters;
- employee benefit and labor matters;
- intellectual property matters;
- certain matters with respect to pooling of interests accounting;
- brokers and finders in connection with the merger;
- Anesta's financial advisor's opinion;
- insurance;
- the validity of Anesta's material contracts;
- title to Anesta's owned and leased personal property;
- Anesta's owned and leased real property;
- supply and distribution relationships;
- regulatory matters; and
- facts or circumstances that would initially affect the continued
marketing, manufacture, and sale of Actiq as currently conducted.
The merger agreement also includes representations and warranties by
Cephalon as to:
- Cephalon's organization, capitalization and authority to enter into the
merger agreement;
- the enforceability of the merger agreement as a binding obligation of
Cephalon;
- any conflicts between the merger agreement and any of Cephalon's other
material contracts, any law, or any of Cephalon's charter or bylaw
provisions;
- required filings and consents;
- the accuracy of Cephalon's financial statements and filings with the SEC
and Cephalon's submission of all required filings;
- material liabilities or obligations incurred by Cephalon or any Cephalon
subsidiary since December 31, 1999 other than in the ordinary course of
business;
- the absence of litigation;
- compliance with laws;
- Cephalon's conduct of its business since December 31, 1999 and the
absence of any material adverse effect on Cephalon;
- certain matters with respect to pooling of interests accounting;
- brokers and finders in connection with the merger; and
- Cephalon's financial advisor's opinion.
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COVENANTS
The merger agreement contains the following covenants made by Cephalon and
Anesta, among others.
No Solicitation:
Anesta agreed not to, without the prior written consent of Cephalon:
- solicit, initiate or encourage (including by way of furnishing certain
information) or take any other action to facilitate knowingly any
inquiries or the making of any proposal that would constitute or may
reasonably be expected to lead to an acquisition proposal;
- engage in any discussion with any third party other than its
representatives, or negotiations relating to any acquisition proposal; or
- enter into any agreement with respect to, agree to, approve or recommend
any acquisition proposal.
An acquisition proposal is a proposal or offer for a tender or exchange
offer, merger, consolidation or other business combination involving Anesta or
any Anesta subsidiary or any proposal to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets of, Anesta or any
Anesta subsidiary.
This covenant does, however, expressly permit Anesta to:
- prior to the approval of the merger agreement by Anesta's stockholders,
engage in discussions or negotiations with a third party who (without
solicitation or initiation by Anesta) makes an unsolicited bona fide
written acquisition proposal, if the Anesta board of directors
determines, in good faith after consultation with its financial advisors
and independent legal counsel, that such competing proposal is
financially superior to the transactions contemplated by the merger
agreement and that in the case of a cash offer, such third party is able
to finance the acquisition proposal and after considering applicable
provisions of state law, that such action is necessary for the board of
directors to act in a manner consistent with its fiduciary duties under
applicable law;
- comply with 14e-2 of the Exchange Act with regard to a tender or exchange
offer; and
- accept a superior proposal.
In the event that Anesta accepts a superior proposal, it will be obligated
to pay a termination fee of $15,000,000 plus expenses up to $1,000,000. See
"Termination; Termination Fees and Expenses" on page 40.
In addition, Anesta agreed to notify Cephalon promptly if it receives any
competing proposal or inquiries indicating that any person is considering making
a competing proposal. Additionally, prior to accepting a superior proposal,
Anesta agreed to negotiate in good faith with Cephalon, for a period of not less
than five business days, to make such changes to the terms and conditions of the
merger agreement that would enable Anesta to proceed with the transactions
contemplated by the merger agreement.
Conduct of Anesta's Business.
Anesta made covenants concerning the conduct of its business and the
business of its subsidiaries from the date of execution of the merger agreement
until the effective time of the merger. In general, Anesta is required to
conduct its business in the ordinary course in the same manner as previously
conducted and to use its commercially reasonable efforts to preserve intact its
present relationships with customers, suppliers and other third parties. Anesta
has agreed that it will not do any of the following without Cephalon's prior
written consent:
- amend or propose to amend its charter or bylaws;
- change its capitalization including (a) stock splits, combinations or
reclassifications, (b) repurchasing or redeeming its capital stock and
(c) issuing, delivering or selling any of its shares of its capital stock
or other equity interests, other than in connection with its benefit
plans or the exercise of options;
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- acquire, merge or consolidate with or into any other corporation or other
business organization or make any investment therein;
- incur indebtedness other than in the ordinary course of business, with
certain specified exceptions;
- release or relinquish any material contract rights;
- make certain tax elections, settlements or compromises;
- make salary, wage and benefits increases other than in the ordinary
course of business; and
- take any action that would cause the merger not to be treated as a
"pooling of interests" for accounting purposes and a reorganization
within the meaning of Section 368(a) of the Code.
Conduct of Cephalon's Business.
Cephalon made covenants concerning the conduct of its business and the
business of its subsidiaries from the date of execution of the merger agreement
until the effective time of the merger. In general, Cephalon is required to
conduct its business in the ordinary course in the same manner as previously
conducted. Cephalon has agreed that it will not do any of the following without
Anesta's prior written consent:
- amend or propose to amend its charter or bylaws;
- change its capitalization including (a) stock splits, combinations or
reclassifications, (b) repurchasing or redeeming its capital stock and
(c) issuing, delivering or selling any of its shares of its capital stock
or other equity interests, other than in connection with its benefit
plans or the exercise of options;
- take any action that would cause the merger not to be treated as a
"pooling of interests" for accounting purposes and a reorganization
within the meaning of Section 368(a) of the Code.
Stockholders' Meeting.
Anesta agreed to use its reasonable best efforts to solicit and secure from
its stockholders the approval and adoption of the merger agreement and the
merger subject to the fiduciary duties of its board of directors under
applicable law.
Reasonable Efforts.
Each party agreed to use its commercially reasonable efforts to take all
actions and to do all things necessary, proper or advisable under applicable
laws, statutes, ordinances, codes, rules and regulations to consummate and make
effective the transactions contemplated by the merger agreement in the most
expeditious manner practicable.
Access to Information.
Cephalon and Anesta each agreed to provide the other reasonable access to
its and its subsidiaries' facilities, books and records and to furnish certain
information to the other upon reasonable request. Cephalon and Anesta each
agreed to comply with all of their respective obligations under a
confidentiality agreement, dated as of June 5, 2000, between Cephalon and
Anesta.
Public Announcements.
The parties agreed to consult with each other before making any public
announcements or otherwise communicating with any news media concerning the
merger agreement or the transactions contemplated thereby, unless applicable law
requires.
Directors' and Officers' Indemnification and Insurance.
Cephalon agreed to maintain in effect the current provisions regarding
indemnification of officers and directors contained in the charter documents and
bylaws of Anesta. Cephalon further agreed that it shall cause the surviving
corporation to maintain, for six years following the effective time of the
merger, policies of directors' and officers' liability insurance that are no
less advantageous than those provided to directors and
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officers of Anesta immediately prior to the effective time of the merger;
provided, that Cephalon is not obligated to provide such coverage to the extent
that the cost of such coverage exceeds 150% of the cost immediately prior to the
effective time of the merger.
Affiliates.
Anesta agreed to take all action reasonably necessary to cause those
parties identified as Anesta affiliates for pooling purposes to execute and
deliver an affiliate agreement prior to the effective time of the merger.
Listing.
Cephalon agreed to apply for approval for listing of the Cephalon common
stock to be issued to Anesta stockholders in the merger on the Nasdaq National
Market.
Employee Matters.
Cephalon agreed to treat each Anesta employee who continues employment with
the combined company as if that employee had been employed by Cephalon for the
same period that he or she had been employed by Anesta for purposes of the
employee's coverage under Cephalon's benefits plans.
CONDITIONS TO OBLIGATIONS TO EFFECT THE MERGER
General Conditions.
The merger agreement contains various conditions to the parties'
obligations to effect the merger, including:
- the requisite approval of the Anesta stockholders;
- the expiration or termination of any waiting period applicable to the
merger under the HSR Act;
- the absence of any judicial or quasi-judicial action or litigation that
restrains or prohibits consummation of the merger and the related
transactions or that prohibits or limits the ownership, operation or
control by Cephalon, Anesta or any of their respective subsidiaries of
any part of their respective businesses or assets, or any action taken by
any governmental entity seeking to prohibit the merger;
- effectiveness of the registration of which this proxy
statement/prospectus is a part; and
- approval of the Nasdaq National Market, upon official notice of issuance,
of the listing of the Cephalon common stock to be issued in the merger.
Additional Conditions to Obligations of Cephalon.
Cephalon's obligations to complete the merger are subject to certain
additional conditions including:
- the accuracy of the representations and warranties of Anesta as of the
date of the merger agreement and as of the date of closing, except for
such inaccuracies which, individually or in the aggregate, would not have
an Anesta material adverse effect, as defined in the merger agreement;
- Anesta's performance in all material respects of each of the obligations
it has agreed, under the merger agreement, to perform prior to the
closing, and delivery to Cephalon of an officer's certificate to that
effect;
- the absence of any Anesta material adverse effect, as defined in the
merger agreement;
- Cephalon's receipt of an affiliate agreement from all parties deemed to
be Anesta's affiliates, as defined under Rule 145 of the Securities Act;
and
- Cephalon's receipt of letters from its independent public accountants and
the independent public accountants of Anesta, each dated as of the
closing date, stating that such accountants concur with management's
conclusion that the merger will qualify as a transaction to be accounted
for in accordance with the pooling of interests method of accounting
under the requirements of APB No. 16.
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Additional Conditions to Obligations of Anesta.
Anesta's obligations to complete the merger are subject to certain
additional conditions including:
- the accuracy of the representations and warranties of Cephalon and C
Merger Sub as of the date of the merger agreement and as of the date of
the closing, except for such inaccuracies which, individually or in the
aggregate, would not have a Cephalon material adverse effect, as defined
in the merger agreement;
- Cephalon's and C Merger Sub's performance in all material respects of
each of the obligations it has agreed, under the merger agreement, to
perform prior to the closing, and delivery to Anesta of an officer's
certificate to that effect;
- the absence of any Cephalon material adverse effect, as defined in the
merger agreement; and
- Anesta's receipt of an opinion from Anesta's legal counsel stating the
merger as contemplated in the merger agreement will be treated for
federal income tax purposes as a reorganization within the meaning of
section 368(a) of the Code.
TERMINATION; TERMINATION FEES AND EXPENSES
The merger agreement provides that the merger may be abandoned and the
merger agreement may be terminated prior to the merger's effectiveness, in
various ways including:
- by mutual written consent of Cephalon and Anesta;
- by either Cephalon or Anesta if approval of Anesta's stockholders has not
been obtained;
- by either Cephalon or Anesta if the merger is not consummated on or
before December 31, 2000, as long as the party requesting such
termination did not, by its failure to fulfill an obligation under the
merger agreement, prevent consummation of the merger;
- by either Cephalon or Anesta if any governmental entity or arbitrator
with jurisdiction issues a final order, injunction or decree preventing
consummation of the merger;
- by either Cephalon or Anesta upon the other entity's breach or failure to
comply with its obligations under the merger agreement in any material
respect, or any representation or warranty of the other entity being
incorrect except as would not result in a material adverse effect, as
defined in the merger agreement;
- by Cephalon if the board of directors of Anesta does not recommend the
merger to Anesta's stockholders or withdraws or modifies its approval or
recommendation of the merger agreement in any materially adverse manner,
or recommends to the stockholders of Anesta any acquisition proposal,
other than by Cephalon; or
- by Anesta if Anesta determines that an acquisition proposal is a superior
proposal or has changed its recommendation concerning the merger, and
Anesta has complied with its obligations regarding non-solicitation under
the merger agreement.
If the merger agreement is terminated, it becomes void and none of the
parties to the agreement has any liability or further rights or obligations
under the agreement other than the remedies described below. However, if any
party willfully breaches any of its representations and warranties, or breaches
any of its covenants or agreements under the merger agreement, the breaching
party remains fully liable to the non-breaching parties for such breach.
If the merger agreement is terminated, each party is responsible for the
expenses it incurs, except that if either party terminates the merger agreement
because the other party has breached, or failed to comply with, any of its
material obligations, or any representation or warranty made by either party is
breached in any material respect except as would not have a material adverse
effect, as defined in the merger agreement, the breaching party will pay up to
$1 million of the non-breaching party's expenses.
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However, if:
- Cephalon terminates the agreement because the board of directors of
Anesta does not recommend the approval of the merger agreement or the
merger to the stockholders of Anesta or withdraws or modifies such
approval or recommendation in a manner materially adverse to Cephalon or
recommends any acquisition proposal, other than by Cephalon;
- Cephalon terminates the agreement because Anesta breaches its
non-solicitation obligations under the agreement and such breach is not
cured within 10 days after notice thereof; or
- Anesta terminates the agreement because Anesta has determined that an
acquisition proposal is a superior proposal and has complied with its
obligations regarding non-solicitation under the merger agreement;
then, if after the date of the merger agreement and prior to such termination,
an acquisition proposal was made, or within one year following such termination,
Anesta enters into an agreement with respect to, or consummates, an acquisition
proposal, Anesta will pay a termination fee of $15,000,000 to Cephalon within
two business days after such termination or entering into such agreement or
consummating such acquisition proposal, plus up to $1,000,000 of Cephalon's
expenses.
Furthermore, if Anesta terminates the agreement because of a material
breach by Cephalon or C Merger Sub then, Cephalon will pay, within two business
days after such termination or entering into such agreement or consummating such
acquisition proposal, up to $1,000,000 of Anesta's expenses.
AMENDMENT AND WAIVER
The merger agreement may be amended by Cephalon and Anesta at any time
prior to the effective time. Any amendment must be in writing signed by all the
parties. Once Anesta's stockholders have voted to approve the merger agreement,
however, no party may make an amendment to the merger agreement which would
reduce the amount or change the type of consideration for which each share of
Anesta's common stock will be exchanged or which would materially and adversely
affect Anesta stockholders.
Prior to the consummation of the merger, any party may:
- extend the time given for the performance of any of the obligations or
other acts of the other parties;
- waive any inaccuracies in the representations and warranties of the other
parties contained herein or in any document delivered by the other
parties pursuant to the merger agreement; and
- waive compliance by the other parties with any of the agreements or
conditions contained in the merger agreement.
Any agreement as to extension or waiver by any party will be valid only as
against such party and only if set forth in writing executed by such party.
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THE COMPANIES
CEPHALON
Cephalon, Inc.,with its principal offices located in West Chester,
Pennsylvania, is a biopharmaceutical company dedicated to the discovery,
development and marketing of products to treat neurological disorders and
cancer.
Cephalon markets Provigil (modafinil) Tablets [C-IV] for treating excessive
daytime sleepiness associated with narcolepsy. It began marketing the product in
the United States in 1999, and also markets the product in the United Kingdom,
the Republic of Ireland, Italy and Austria. In addition, Cephalon holds rights
to develop and market Provigil in Latin America, South Korea and Taiwan.
Cephalon has an ongoing clinical program to explore the utility of Provigil in
treating excessive sleepiness and fatigue associated with disorders other than
narcolepsy.
In addition to its clinical program focused on Provigil, Cephalon has other
significant research programs that seek to discover and develop treatments for
neurological disorders and cancer. It has formed alliances with TAP Holdings,
Inc. and Schwarz Pharma AG for the development of signal transduction modulators
to treat cancers, including prostate and pancreatic cancers. Cephalon is also
collaborating with H. Lundbeck A/S for the development of signal transduction
modulators to treat neurodegenerative disorders, including Parkinson's and
Alzheimer's diseases. In addition, Cephalon is collaborating with Leo
Pharmaceuticals for the development of gene transcription regulators for the
treatment of Alzheimer's disease. Cephalon also enters into collaborative
commercial arrangements where it markets the products of third parties,
including Gabitril with Abbott Laboratories.
Cephalon's research and development efforts focus primarily on two areas:
neurodegenerative disorders and cancers. Neurodegenerative disorders are
characterized by the death of neurons (the specialized conducting cells of the
nervous system) that results in the loss of certain functions such as memory and
motor coordination. Cancers are characterized by the uncontrolled proliferation
of cells that form tumors. Cephalon's research strategy has focused on
understanding the intracellular molecular events that underlie the processes of
cell proliferation, cell survival and cell death. Cephalon utilizes its
technical expertise in molecular biology and chemistry to create novel, orally
active, synthetic molecules to inhibit key targets in intracellular pathways
that govern cell proliferation, survival and death. These novel molecules are
designed to (i) enhance the survival of neurons, thereby intervening in the
progression of neurodegenerative disease or (ii) facilitate the death of tumor
cells leading to new therapies in oncology.
Cephalon was incorporated in Delaware in 1987. Cephalon's headquarters are
located at 145 Brandywine Parkway, West Chester, PA 19380 and its telephone
number is (610) 344-0200. For further information concerning Cephalon, see
"Cephalon Selected Consolidated Financial Data" and "Where You Can Find More
Information."
C MERGER SUB
C Merger Sub is a wholly-owned subsidiary of Cephalon. It was incorporated
on January 11, 2000 in the State of Delaware. C Merger Sub has not engaged in
any operations to date and exists solely to facilitate the merger.
ANESTA
Anesta is a leader in the development of new pharmaceutical products using
its proprietary oral transmucosal system (OTS(TM)) for drug delivery. Anesta's
lead product is Actiq(R) (oral transmucosal fentanyl citrate), which was
approved by the U.S. Food and Drug Administration for marketing in November 1998
and launched in the U.S. in March 1999. Actiq is the first product specifically
designed, studied and approved for breakthrough cancer pain. Actiq is indicated
only for the management of breakthrough cancer pain in patients with
malignancies who are already receiving and who are tolerant to opioid therapy
for their underlying
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persistent cancer pain. In August 1999, Anesta UK Ltd. submitted a Marketing
Approval Application for Actiq in the United Kingdom. During 1998 and 1999,
Anesta entered into agreements with four European companies to market and
distribute Actiq in the countries of the European Union. Anesta has seven
investigational product candidates in various stages of clinical development;
OTS nicotine for smoking cessation, OTS fentanyl for acute pain management, OTS
etomidate for short-acting sedation, OTS piroxicam for mild to moderate pain,
OTS dorperidol and OTS prochlorperazine for nausea and vomiting and OTS
scopolamine for motion sickness.
Anesta was incorporated in 1985 under the laws of Utah to commercialize
specific licensed technologies from the University of Utah and reincorporated in
1993 under the laws of Delaware. Anesta has two wholly-owned subsidiaries:
Anesta GmbH located in Horv, Switzerland and Anesta UK Ltd. Located in
Henley-on-Thames, United Kingdom. Anesta is headquartered in Salt Lake City,
Utah.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following information has been provided to aid you in your analysis of
the financial aspects of the merger. The financial information of Cephalon and
Anesta were derived from the audited consolidated financial statements for the
years ended December 31, 1999, 1998 and 1997 and the unaudited consolidated
financial statements for the six months ended June 30, 2000 and 1999. The
information is only a summary and should be read together with the historical
financial statements and related notes contained in the annual reports and
quarterly reports and other information that we have filed with the Securities
and Exchange Commission and incorporated by reference. The pro forma combined
financial information is not necessarily indicative of the combined financial
positions or results of operations that would have been reported if the
companies had been combined for all periods presented.
POOLING OF INTERESTS ACCOUNTING TREATMENT
The merger is expected to be accounted for as a "pooling of interests."
This means that, for accounting and financial reporting purposes, the companies
will be treated as if they had always been combined. We have presented unaudited
pro forma financial information that reflects the pooling of interests method of
accounting to provide a picture of what the businesses might have looked like
had they always been combined. The unaudited pro forma statements of operations
and pro forma balance sheets were prepared by combining the historical amounts
of each company. The companies may have performed differently had they always
been combined. You should not rely on the unaudited pro forma financial
information as being indicative of the historical results that would have
occurred or the future results that will occur after the merger.
PERIODS COVERED
The following unaudited pro forma balance sheets as of June 30, 2000 and
December 31, 1999 are presented as if the merger had occurred on June 30, 2000
and December 31, 1999, respectively. The unaudited pro forma statements of
operations for the six months ended June 30, 2000 and 1999, and for the years
ended December 31, 1999, 1998 and 1997, are presented as if the companies had
always been merged.
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
CEPHALON ANESTA COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ 28,750 $ 3,993 $ 32,743
License and contract...................................... 9,256 678 9,934
-------- -------- --------
38,006 4,671 42,677
-------- -------- --------
Operating expenses:
Cost of product sales..................................... 5,074 1,023 6,097
Research and development.................................. 27,377 5,165 32,542
Selling, general and administrative....................... 28,716 9,702 38,418
-------- -------- --------
61,167 15,890 77,057
-------- -------- --------
Loss from operations.............................. (23,161) (11,219) (34,380)
Other income................................................ 6,761 1,585 8,346
-------- -------- --------
Loss before provision for income taxes............ (16,400) (9,634) (26,034)
Provision for income taxes.................................. -- (31) (31)
-------- -------- --------
Net loss.......................................... (16,400) (9,665) (26,065)
Dividends on preferred stock................................ (4,531) -- (4,531)
-------- -------- --------
Net loss applicable to common shares.............. $(20,931) $ (9,665) $(30,596)
======== ======== ========
Basic and diluted loss per share............................ $ (0.63) $ (0.72) $ (0.77)
======== ======== ========
Weighted average number of shares outstanding............... 33,164 13,373 39,536
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
45
<PAGE> 52
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------ PRO FORMA
CEPHALON ANESTA COMBINED
-------- ------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ 7,252 $ 1,128 $ 8,380
License and contract...................................... 7,727 651 8,378
-------- ------- --------
14,979 1,779 16,758
-------- ------- --------
Operating expenses:
Cost of product sales..................................... 839 371 1,210
Research and development.................................. 20,152 4,835 24,987
Selling, general and administrative....................... 23,780 4,062 27,842
-------- ------- --------
44,771 9,268 54,039
-------- ------- --------
Loss from operations.............................. (29,792) (7,489) (37,281)
Other income (expense)...................................... (1,650) 2,049 399
-------- ------- --------
Loss before provision for income taxes............ (31,442) (5,440) (36,882)
Provision for income taxes.................................. -- (15) (15)
-------- ------- --------
Net loss.......................................... $(31,442) $(5,455) $(36,897)
======== ======= ========
Basic and diluted loss per share............................ $ (1.09) $ (0.41) $ (1.05)
======== ======= ========
Weighted average number of shares outstanding............... 28,880 13,171 35,156
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
46
<PAGE> 53
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
CEPHALON ANESTA COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ 25,370 $ 2,232 $ 27,602
License and contract...................................... 19,549 4,283 23,832
-------- -------- --------
44,919 6,515 51,434
-------- -------- --------
Operating expenses:
Cost of product sales..................................... 3,250 671 3,921
Research and development.................................. 46,420 10,063 56,483
Selling, general and administrative....................... 50,992 9,141 60,133
-------- -------- --------
100,662 19,875 120,537
-------- -------- --------
Loss from operations.............................. (55,743) (13,360) (69,103)
Other income (expense)...................................... (3,014) 3,892 878
-------- -------- --------
Loss before provision for income taxes............ (58,757) (9,468) (68,225)
Provision for income taxes.................................. -- (20) (20)
-------- -------- --------
Net loss before extraordinary charge.............. (58,757) (9,488) (68,245)
Extraordinary charge for early extinguishment of debt....... (11,187) -- (11,187)
-------- -------- --------
Net loss.......................................... (69,944) (9,488) (79,432)
Dividends on preferred stock................................ (3,398) -- (3,398)
-------- -------- --------
Net loss applicable to common shares.............. $(73,342) $ (9,488) $(82,830)
======== ======== ========
Basic and diluted loss per common share:
Loss per common share before extraordinary charge......... $ (2.10) $ (0.72) $ (2.00)
Extraordinary charge...................................... (0.38) -- (0.31)
-------- -------- --------
$ (2.48) $ (0.72) $ (2.31)
======== ======== ========
Weighted average number of shares outstanding............... 29,584 13,227 35,887
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
47
<PAGE> 54
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
CEPHALON ANESTA COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ 728 $ 193 $ 921
License and contract...................................... 14,927 482 15,409
-------- -------- --------
15,655 675 16,330
-------- -------- --------
Operating expenses:
Cost of product sales..................................... -- 54 54
Research and development.................................. 43,649 8,812 52,461
Selling, general and administrative....................... 30,947 8,700 39,647
-------- -------- --------
74,596 17,566 92,162
-------- -------- --------
Loss from operations.............................. (58,941) (16,891) (75,832)
Other income................................................ 3,534 1,190 4,724
-------- -------- --------
Loss before provision for income taxes............ (55,407) (15,701) (71,108)
Provision for income taxes.................................. -- (16) (16)
-------- -------- --------
Net loss.......................................... $(55,407) $(15,717) $(71,124)
======== ======== ========
Basic and diluted loss per share............................ $ (1.95) $ (1.59) $ (2.15)
======== ======== ========
Weighted average number of shares outstanding............... 28,413 9,898 33,129
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
48
<PAGE> 55
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
CEPHALON ANESTA COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ -- $ 184 $ 184
License and contract...................................... 23,140 5 23,145
-------- -------- --------
23,140 189 23,329
-------- -------- --------
Operating expenses:
Cost of product sales..................................... -- 52 52
Research and development.................................. 51,587 8,064 59,651
Selling, general and administrative....................... 36,744 6,465 43,209
-------- -------- --------
88,331 14,581 102,912
-------- -------- --------
Loss from operations.............................. (65,191) (14,392) (79,583)
Other income................................................ 4,772 1,845 6,617
-------- -------- --------
Loss before provision for income taxes............ (60,419) (12,547) (72,966)
Provision for income taxes.................................. -- (2) (2)
-------- -------- --------
Net loss.......................................... $(60,419) $(12,549) $(72,968)
======== ======== ========
Basic and diluted loss per share............................ $ (2.36) $ (1.32) $ (2.42)
======== ======== ========
Weighted average number of shares outstanding............... 25,638 9,500 30,165
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
49
<PAGE> 56
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 2000
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
CEPHALON ANESTA ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 29,010 $ 16,592 $ -- $ 45,602
Short-term investments........................ 121,377 23,078 -- 144,455
Receivables, net.............................. 11,017 2,329 -- 13,346
Inventory..................................... 14,465 -- -- 14,465
Other......................................... 1,026 1,293 -- 2,319
--------- -------- ------- ---------
Total current assets.................. 176,895 43,292 -- 220,187
Property and equipment, net..................... 24,339 2,322 -- 26,661
Other........................................... 2,453 25,323 -- 27,776
--------- -------- ------- ---------
$ 203,687 $ 70,937 $ -- $ 274,624
========= ======== ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 7,365 $ 1,559 $ -- $ 8,924
Accrued expenses.............................. 19,988 1,776 9,000 30,764
Current portion of unearned revenues.......... -- 93 -- 93
Current portion of long-term debt............. 1,977 333 -- 2,310
--------- -------- ------- ---------
Total current liabilities............. 29,330 3,761 9,000 42,091
Unearned revenues............................... -- 1,833 -- 1,833
Long-term debt.................................. 13,486 1,667 -- 15,153
Other........................................... 198 -- -- 198
--------- -------- ------- ---------
Total liabilities..................... 43,014 7,261 9,000 59,275
--------- -------- ------- ---------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares,
authorized, 2,500 shares issued and
outstanding................................ 25 -- -- 25
Common stock, $.01 par value, 100,000 shares
authorized; 41,196 issued and outstanding,
pro forma.................................. 348 14 50 412
Additional paid in capital.................... 529,030 131,608 (50) 660,588
Treasury stock................................ (1,480) -- -- (1,480)
Accumulated deficit........................... (368,066) (67,832) (9,000) (444,898)
Accumulated other comprehensive income
(loss)..................................... 816 (114) -- 702
--------- -------- ------- ---------
Total stockholders' equity............ 160,673 63,676 (9,000) 215,349
--------- -------- ------- ---------
$ 203,687 $ 70,937 $ -- $ 274,624
========= ======== ======= =========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
50
<PAGE> 57
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
CEPHALON ANESTA ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 13,152 $ 11,746 $ -- $ 24,898
Short-term investments........................ 188,410 59,032 -- 247,442
Receivables, net.............................. 5,578 1,956 -- 7,534
Inventory..................................... 4,258 -- -- 4,258
Other......................................... 988 1,008 -- 1,996
--------- -------- ------- ---------
Total current assets.................. 212,386 73,742 -- 286,128
Property and equipment, net..................... 20,001 2,466 -- 22,467
Other........................................... 1,666 2,001 -- 3,667
--------- -------- ------- ---------
$ 234,053 $ 78,209 $ -- $ 312,262
========= ======== ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 6,221 $ 410 $ -- $ 6,631
Accrued expenses.............................. 19,328 795 9,000 29,123
Current portion of unearned revenues.......... -- 746 -- 746
Current portion of long-term debt............. 31,906 333 -- 32,239
--------- -------- ------- ---------
Total current liabilities............. 57,455 2,284 9,000 68,739
Unearned revenues............................... -- 1,832 -- 1,832
Long-term debt.................................. 14,034 1,667 -- 15,701
Other........................................... 4,207 -- -- 4,207
--------- -------- ------- ---------
Total liabilities..................... 75,696 5,783 9,000 90,479
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares,
authorized, 2,500 shares issued and
outstanding................................ 25 -- -- 25
Common stock, $.01 par value, 100,000 shares
authorized; 38,904 issued and outstanding,
pro forma.................................. 326 13 50 389
Additional paid in capital.................... 505,702 130,743 (50) 636,395
Treasury stock................................ (1,290) -- (1,290)
Accumulated deficit........................... (347,135) (58,167) (9,000) (414,302)
Accumulated other comprehensive income
(loss)..................................... 729 (163) -- 566
--------- -------- ------- ---------
Total stockholders' equity............ 158,357 72,426 (9,000) 221,783
--------- -------- ------- ---------
$ 234,053 $ 78,209 $ -- $ 312,262
========= ======== ======= =========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information
51
<PAGE> 58
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(1) The unaudited pro forma combined financial statements for Cephalon and
Anesta give retroactive effect to the proposed merger, which will be
accounted for as a pooling of interests and, as a result, such statements
are presented as if the companies had been combined for all periods
presented. There were no material differences between the accounting
policies of Cephalon and Anesta. Certain amounts have been reclassified to
conform the pro forma presentation.
(2) Transaction costs will be incurred to complete the merger and consist
primarily of financial advisor, legal, accounting and consulting fees, and
printing, mailing, and registration expenses. Due to the non-recurring
nature of these costs, they have not been reflected in the pro forma
condensed combined statements of operations. These expenses will be included
in the results of operations in the quarter the merger is completed. The pro
forma combined balance sheets include an accrual of $9.0 million in
estimated transaction costs.
(3) Pro forma basic and diluted loss per share have been computed using the pro
forma weighted average number of shares of common stock outstanding during
the periods. Pro forma basic and diluted net loss per share are the same
since common stock equivalents outstanding are antidilutive for all periods
presented. As a result of the merger, each outstanding share of Anesta
common stock will be converted into the right to receive 0.4765 shares of
Cephalon common stock.
52
<PAGE> 59
MARKET PRICE DATA AND DIVIDEND POLICIES
Cephalon common stock and Anesta common stock are included in the National
Association of Securities Dealers Automated Quotations System under the symbols
"CEPH" and "NSTA," respectively. These tables set forth, for the periods
indicated, the range of high and low per share closing sales prices for Cephalon
common stock and Anesta common stock as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
CEPHALON
COMMON STOCK
---------------
LOW HIGH
------ ------
<S> <C> <C>
FISCAL YEAR 1998
First quarter............................................... $ 9.81 $14.63
Second quarter.............................................. 6.94 15.38
Third quarter............................................... 4.00 8.06
Fourth quarter.............................................. 4.69 9.19
FISCAL YEAR 1999
First quarter............................................... 7.50 10.69
Second quarter.............................................. 9.38 17.38
Third quarter............................................... 16.06 21.94
Fourth quarter.............................................. 14.00 36.75
FISCAL YEAR 2000
First quarter............................................... 32.63 72.31
Second quarter.............................................. 36.19 65.00
Third quarter (through September 5, 2000)................... 39.25 80.00
</TABLE>
<TABLE>
<CAPTION>
ANESTA
COMMON STOCK
---------------
LOW HIGH
------ ------
<S> <C> <C>
FISCAL YEAR 1998
First quarter............................................... $16.00 $20.75
Second quarter.............................................. 14.00 20.00
Third quarter............................................... 11.81 18.63
Fourth quarter.............................................. 13.88 27.25
FISCAL YEAR 1999
First quarter............................................... 18.25 28.44
Second quarter.............................................. 12.56 21.38
Third quarter............................................... 8.06 19.06
Fourth quarter.............................................. 8.38 18.31
FISCAL YEAR 2000
First quarter............................................... 13.00 26.75
Second quarter.............................................. 12.69 24.88
Third quarter (through September 5, 2000)................... 19.00 32.63
</TABLE>
Neither Cephalon nor Anesta has ever declared or paid cash dividends on its
common stock. The policies of Cephalon and Anesta are to retain cash, cash
equivalents and investments for use in their respective businesses.
Following the merger, Cephalon common stock will continue to be listed on
Nasdaq, and there will be no further market for Anesta common stock.
53
<PAGE> 60
MANAGEMENT AND OTHER INFORMATION
After the merger, Anesta will be a wholly-owned subsidiary of Cephalon, and
all of Anesta's subsidiaries will be indirect wholly-owned subsidiaries of
Cephalon. Information relating to the management, executive compensation, the
security ownership of certain beneficial owners and management, certain
relationships and related transactions and other related matters pertaining to
Cephalon and Anesta is contained in or incorporated by reference in their
respective annual reports on Form 10-K, which are incorporated in this proxy
statement/prospectus. See "Where You Can Find More Information."
COMPARISON OF THE RIGHTS OF THE HOLDERS OF
CEPHALON COMMON STOCK AND ANESTA COMMON STOCK
The rights of both Cephalon and Anesta stockholders are governed by the
Delaware General Corporation Law, and the respective certificates of
incorporation and bylaws of Cephalon and Anesta. Upon completion of the merger,
Anesta stockholders will become Cephalon stockholders. No changes to the
Cephalon certificate of incorporation or bylaws will be adopted in connection
with the merger.
The material differences between the rights of Cephalon stockholders and
Anesta stockholders, resulting from differences in their respective certificates
of incorporation and bylaws, are summarized below. This summary is not a
complete discussion of, and is qualified by reference to, Delaware law,
including the Delaware General Corporation Law, the common and constitutional
law of Delaware, and the full texts of the certificate of incorporation and
bylaws of Cephalon and Anesta.
STOCKHOLDER ACTION BY CONSENT
Under the Delaware General Corporation Law, unless a corporation's
certificate of incorporation provides otherwise, any action required or
permitted to be taken at a stockholders' meeting may be taken without a meeting,
without prior notice and without a vote if a written consent, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote upon such action
were present and voted.
Cephalon's bylaws provide that stockholders may consent in writing to any
action required or permitted to be taken at a meeting without such a meeting.
Anesta's certificate of incorporation expressly provides that no action
required or permitted to be taken at a common stockholders' meeting may be taken
without a meeting. Anesta's certificate of incorporation also provides that the
power of common stockholders to consent in writing is specifically denied.
SPECIAL STOCKHOLDERS' MEETINGS
The Delaware General Corporation Law provides that a special stockholders'
meeting may be called by the corporation's board of directors or by such person
or persons as the certificate of incorporation or the bylaws may authorize.
Cephalon's bylaws provide that a special meeting may be called by:
- the chairman of the board;
- the majority of the board of directors;
- the president; or
- upon written request of the holders of the majority of the outstanding
common stock.
54
<PAGE> 61
Anesta's certificate of incorporation provides that the following persons
may call a special meeting:
- the chairman of the board of directors;
- the chief executive officer; or
- the board of directors pursuant to a resolution approved by a majority of
the members of the board then in office.
Anesta's certificate of incorporation does not permit the stockholders to
call a special meeting.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND OTHER STOCKHOLDER PROPOSALS
Cephalon's bylaws provide that in order to nominate directors or bring
business before an annual meeting, stockholders must provide written notice to
the secretary of Cephalon at least 70 days before the date that is the
anniversary of the prior year's annual meeting but no earlier than 90 days
before such date. However, if the date of the annual meeting is more than 20
days before or 70 days after the anniversary date of the prior year's annual
meeting, notice must be delivered at least 70 days before the meeting date or
within ten days of the date of the public announcement of the meeting but no
earlier than 90 days before the date of the meeting. Cephalon's bylaws contain
similar advance notice requirements for stockholder director nominations at
special meetings. Cephalon's bylaws state that business, other than the
nomination of directors, may only be brought before a special meeting of
stockholders pursuant to the notice of the special meeting.
Anesta's bylaws provide that in order to nominate directors or bring
business before an annual meeting, stockholders must provide written notice to
the secretary of Anesta at least 60 days before the date that is the anniversary
of the prior year's annual meeting but no earlier than 90 days before such date.
However, if Anesta did not hold a meeting in the previous year or has changed
the annual meeting date by more than 30 days, notice must be delivered at least
60 days before the meeting date or, in the event that the public announcement of
the meeting is first made by Anesta with fewer than 70 days remaining before the
meeting date, within ten days of the date of the public announcement of the
meeting, but no earlier than 90 days before the date of the meeting. Anesta's
bylaws contain similar advance notice requirements for stockholder director
nominations at special meetings. Anesta's bylaws state that business, other than
the nomination of directors, may only be brought before a special meeting of
stockholders pursuant to the notice of the special meeting.
NUMBER AND ELECTION OF DIRECTORS
The Delaware General Corporation Law permits a corporation's certificate of
incorporation or bylaws to contain provisions governing the number and terms of
directors. However, if the certificate of incorporation contains provisions
fixing the number of directors, such number may be changed only by an amendment
to the certificate of incorporation.
Cephalon's bylaws provide that the number of directors may not be less than
three nor more than seven. Cephalon's board can change these minimum and maximum
numbers of directors through amendment of the bylaws. The number of directors is
set through the adoption of a resolution of the board of directors. Cephalon
currently has a seven-member board. Cephalon's bylaws also provide that
directors will hold office until the next annual meeting of stockholders.
Anesta's certificate of incorporation provides that the number of directors
shall be fixed by a resolution adopted by a majority of the board of directors
and that its directors will hold office until the next annual meeting of
stockholders. Anesta currently has a seven-member board.
AMENDMENT OF BYLAWS
Under Delaware corporate law, bylaws may be adopted, amended or repealed by
the stockholders entitled to vote thereon; provided, however, that any
corporation may, in its certificate of incorporation,
55
<PAGE> 62
confer this power upon the directors, provided the power vested in the
stockholders shall not be divested or limited where the board of directors also
has such power.
The Cephalon certificate of incorporation provides that the board of
directors may adopt, amend or repeal the bylaws. The Cephalon bylaws provide
that the bylaws may also be adopted, amended or repealed upon the vote of a
majority of the Cephalon voting stock.
The Anesta certificate of incorporation provides that bylaws may be
adopted, amended or repealed by the board of directors or by the vote of at
least two-thirds of the Anesta voting stock.
REMOVAL OF DIRECTORS
The Delaware General Corporation Law provides that a director or directors
may be removed with or without cause by the holders of a majority of the shares
then entitled to vote at an election of directors, with certain exceptions.
Neither Cephalon's bylaws nor its certificate of incorporation provide for
removal of directors.
Anesta's certificate of incorporation provides that, subject to the rights
of holders of preferred stock, a director may be removed only for cause by an
affirmative vote of stockholders holding a majority of the outstanding shares
stock entitled to vote at an election of directors.
VACANCIES
Under the Delaware General Corporation Law, unless the corporation's
certificate of incorporation or bylaws provides otherwise, vacancies on the
board of directors and newly created directorships resulting from an increase in
the authorized number of directors may be filled by:
- a majority of the directors then in office, although less than a quorum;
or
- by the sole remaining director.
If, immediately prior to the filling of any such vacancy or newly created
directorship, the directors in office constitute less than a majority of the
whole board, the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least 10% of the total number of
outstanding shares entitled to vote for such directors, summarily order an
election to fill any such vacancy or newly created directorship, or replace the
directors chosen by the directors then in office.
Cephalon's bylaws provide that vacancies and newly created directorships
resulting from an increase in the number of directors may be filled by the
holders of a majority of the directors then in office, even though the number of
remaining directors in office is less than a quorum, or by the sole remaining
director.
Anesta's certificate of incorporation provides that vacancies and newly
created directorships resulting from an increase in the number of directors may
be filled by the vote of a majority of the directors in office at the time of
the vote. Anesta's certificate of incorporation expressly states that such
vacancies and newly created directorships may not be filled by stockholders.
PREFERRED STOCK
The certificate of incorporation of Cephalon and the certificate of
incorporation of Anesta authorize the respective boards of directors to issue
shares of preferred stock in one or more series and to fix the designations,
preferences, powers and rights of the shares to be included in each series.
The Cephalon certificate of incorporation reserves 5,000,000 shares of the
total authorized capital stock of Cephalon for issuance as preferred stock. Of
this 5,000,000 reserve, 2,000,000 shares of convertible exchangeable preferred
stock have been issued and 1,000,000 shares have been reserved for issuance in
connection with Cephalon's stockholder rights plan.
56
<PAGE> 63
The Anesta certificate of incorporation reserves 1,000,000 shares of the
total authorized capital stock of Anesta for issuance as preferred stock.
RIGHTS PLAN
In November 1993, the Cephalon board of directors adopted a stockholder
rights plan and declared a dividend of one preferred share purchase right for
each outstanding share of Cephalon common stock. In addition a right attaches to
and is transferred with each new issue of Cephalon common stock. The purpose of
the plan is to give the Cephalon board sufficient time to respond, consistent
with its fiduciary duties, to a takeover attempt. Each right entitles the
holder, upon the occurrence of certain events, including the acquisition of 20%
or more of the outstanding Cephalon common stock and the commencement of a
tender offer for 20% or more of the outstanding Cephalon common stock, to
purchase from Cephalon a unit consisting of one one-hundredth of a share of the
Series A Junior Participating Preferred Stock of Cephalon, or a combination of
securities and assets of equivalent value, at a purchase price of $200.00 per
unit (subject to further adjustment). The rights are redeemable under certain
circumstances. The rights under the plan are not triggered by the transactions
contemplated by the merger agreement.
Anesta does not currently have any agreement or plan in effect that is
similar to the Cephalon Rights Plan.
INDEPENDENT ACCOUNTANTS
It is expected that representatives of PricewaterhouseCoopers LLP will be
present at the special meeting of Anesta stockholders to respond to appropriate
questions from stockholders and to make a statement if they so desire.
LEGAL MATTERS
The validity of the Cephalon common stock to be issued in the merger has
been passed upon for Cephalon by Morgan, Lewis & Bockius LLP. Certain tax
consequences of the merger have been passed upon for Anesta by Cooley Godward
LLP and for Cephalon by Morgan, Lewis & Bockius LLP.
David R. King, a partner at Morgan, Lewis & Bockius LLP, is a director of
Cephalon. As of August 31, 2000, Mr. King held options to acquire 25,000 shares
of Cephalon stock, of which 3,750 options are currently exercisable or will be
exercisable within 60 days from such date.
EXPERTS
The consolidated financial statements of Cephalon, Inc. included in the
Annual Report on Form 10-K for the year ended December 31, 1999 of Cephalon,
Inc. incorporated by reference in this proxy statement/prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
The financial statements of Anesta incorporated in this proxy
statement/prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 1999, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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WHERE YOU CAN FIND MORE INFORMATION
Cephalon and Anesta each file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that the companies file at the SEC's
public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional offices of the SEC: Northeast Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048 and Midwest Regional
Office, Citicorp Center, Suite 1400, 500 W. Madison Street, Chicago, Illinois
60661. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Cephalon's and Anesta's public filings are also
available to the public from commercial document retrieval services and at the
Internet web site maintained by the SEC at http://www.sec.gov. Reports, proxy
statements and other information concerning Cephalon and Anesta also may be
inspected at the offices of the National Association of Securities Dealers,
Inc., Listing Section, 1735 K Street, Washington, D.C. 20006.
Cephalon has filed a Form S-4 registration statement to register with the
SEC the offering and sale of the shares of Cephalon common stock to be issued to
Anesta stockholders in the merger. This proxy statement/prospectus is a part of
that registration statement and constitutes a prospectus of Cephalon and a proxy
statement of Anesta for the special meeting of stockholders.
As allowed by SEC rules, this proxy statement/prospectus does not contain
all the information that stockholders can find in the registration statement or
the exhibits to the registration statement.
The SEC allows Cephalon and Anesta to incorporate information in this proxy
statement/prospectus "by reference," which means that the companies can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be part of this proxy statement/prospectus, except for any information
superseded by information contained directly in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents listed
below that Cephalon and Anesta have previously filed with the SEC. These
documents contain important information about the companies and their financial
condition.
CEPHALON FILINGS (FILE NO. 000-19119):
- Annual Report on Form 10-K for fiscal year ended December 31, 1999,
including all material incorporated by reference therein
- Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 2000,
including all material incorporated by reference therein
- Quarterly Report on Form 10-Q for fiscal quarter ended June 30, 2000,
including all materials incorporated therein.
- Current Reports on Form 8-K filed on January 5, 2000, July 21, 2000 and
July 31, 2000, including all materials incorporated therein
- Definitive Revised Proxy Statement on Schedule 14A filed on April 17,
2000, including all material incorporated by reference therein
- Registration Statement on Form 8-A filed with the SEC on March 15, 1991,
setting forth the description of the Cephalon common stock, including all
material incorporated by reference therein
- Form 8-A/A Registration Statements filed with the SEC on January 20, 1999
and August 2, 2000, containing the description of the Cephalon
stockholder rights plan, including all material incorporated by reference
therein
ANESTA FILINGS (FILE NO. 000-23160):
- Annual Report on Form 10-K for fiscal year ended December 31, 1999,
including all material incorporated by reference therein
- Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 2000,
including all material incorporated by reference therein
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- Amended Quarterly Report on Form 10-Q/A for fiscal quarter ended March
31, 2000, including all material incorporated by reference therein
- Quarterly Report on Form 10-Q for fiscal quarter ended June 30, 2000,
including all material incorporated by reference therein.
- Current Reports on Form 8-K filed on March 24, 2000, July 21, 2000 and
August 3, 2000, including all material incorporated by reference therein
- Definitive Proxy Statement on Schedule 14A filed on May 1, 2000,
including all material incorporated by reference therein
Cephalon and Anesta hereby incorporate by reference additional documents
that Cephalon or Anesta may file with the SEC between the date of this proxy
statement/prospectus and the date of the special meeting of Anesta's
stockholders. These, among other things, include periodic reports, such as
annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports
on Form 8-K, as well as proxy statements.
Cephalon has supplied all information contained or incorporated by
reference in this proxy statement/ prospectus relating to Cephalon or Merger
Sub, and Anesta has supplied all information relating to Anesta.
If you are a stockholder of Anesta, you may have received some of the
documents incorporated by reference. You may also obtain any of those documents
from the appropriate company or the SEC or the SEC's Internet web site described
above. Documents incorporated by reference are available from the appropriate
company without charge, excluding all exhibits, unless specifically incorporated
by reference as an exhibit in this proxy statement/prospectus. Stockholders may
obtain documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate company at the
following addresses:
<TABLE>
<S> <C>
CEPHALON, INC. ANESTA CORP.
145 Brandywine Parkway 4745 Wiley Post Way
West Chester, PA 19380 Salt Lake City, UT 84116
Tel: (610) 344-0200 Tel: (801) 595-1405
Email: [email protected]
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY OCTOBER 3, 2000 TO
RECEIVE THEM BEFORE THE SPECIAL MEETING OF ANESTA STOCKHOLDERS. If you request
any incorporated documents, the appropriate company will mail them to you by
first-class mail, or other equally prompt means, within one business day of
receipt of your request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE YOUR SHARES AT THE SPECIAL
MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
DIFFERS FROM THAT CONTAINED IN THIS PROXY STATEMENT/ PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED SEPTEMBER 8, 2000. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT/ PROSPECTUS IS ACCURATE AS OF ANY
DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF SHARES OF CEPHALON
COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
Cephalon, Inc. is a registered trademark or trademark of Cephalon, Inc. in
the U.S. and in other select countries. Provigil is a registered trademark of
Genelco, S.A. and is licensed to Cephalon. Gabitril is a registered trademark of
Abbott Laboratories, Inc. and is licensed to Cephalon. Anesta Corp., the Anesta
logos and all other Anesta product and service names are registered trademarks
or trademarks of Anesta Corp. in the U.S. and in other select countries.
"Registered Trademark" and "TM" indicate U.S. registration and U.S. trademark,
respectively. Other third party logos and product/trade names are registered
trademarks or trade names of their respective companies.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 14,
2000, among Cephalon, Inc., a Delaware corporation ("Parent"), C Merger Sub,
Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger
Sub"), and Anesta Corp., a Delaware corporation (the "Company").
RECITALS
A. Parent and the Company each have determined that a business combination
between Parent and the Company is in the best interests of their respective
companies and stockholders, and accordingly have agreed to effect the merger
provided for herein upon the terms and subject to the conditions set forth
herein.
B. The respective Boards of Directors of Parent and Merger Sub, and Parent,
acting as the sole stockholder of Merger Sub, have approved the merger of Merger
Sub with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement.
C. The Board of Directors of the Company has (i) unanimously approved the
Merger upon the terms and subject to the conditions set forth in this Agreement,
and (ii) determined to recommend that the stockholders of the Company adopt and
approve this Agreement and approve the Merger.
D. It is intended that, for federal income tax purposes, the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Code (as
defined in Section 3.10) and that this Agreement shall be, and hereby is,
adopted as a plan of reorganization for purposes of Section 368 of the Code.
E. The parties intend to cause the Merger to be accounted for as a pooling
of interests under generally accepted accounting principles ("GAAP").
F. Merger Sub is a wholly-owned subsidiary of Parent and has been formed
solely to facilitate the Merger and has conducted and will conduct no business
or activity other than in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with
and into the Company in accordance with this Agreement, and the separate
corporate existence of Merger Sub shall thereupon cease. The Company shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and will be a wholly-owned subsidiary of Parent.
The Merger shall have the effects specified in the Delaware General Corporation
Law ("DGCL").
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices of
Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania, as
promptly as practicable, but no later than two (2) business days, following the
satisfaction or waiver of the conditions set forth in Article 6 (other than
conditions which by their nature are to be satisfied at Closing, but subject to
those conditions), or (b) at such other time, date or place as Parent and the
Company may agree. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
1.3 Effective Time. If all the conditions set forth in Article 6 shall
have been fulfilled or waived in accordance herewith and this Agreement shall
not have been terminated as provided in Article 7, the parties
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hereto shall cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL (the "Certificate of Merger") to be properly executed and filed
in accordance with such Section on the Closing Date. The Merger shall become
effective at the time of filing of the Certificate of Merger with the Secretary
of State of the State of Delaware in accordance with the DGCL or at such later
time which the parties hereto shall have agreed upon and designated in such
filings as the effective time of the Merger (the "Effective Time").
1.4 The Charter and Bylaws.
(a) The Certificate of Incorporation of the Surviving Corporation
shall be amended and restated in its entirety in the form of the
Certificate of Incorporation of Merger Sub in effect immediately prior to
the Effective Time until duly amended as provided therein or by applicable
law, except that, as of the Effective Time, Article I of such Certificate
of Incorporation shall be amended to read as follows: "The name of the
Corporation is Anesta Corp."
(b) The Bylaws of Merger Sub in effect at the Effective Time shall be
the Bylaws of the Surviving Corporation, until thereafter amended as
provided therein or by applicable law.
1.5 Directors of the Surviving Corporation. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation as of the Effective Time and until their successors are duly
appointed or elected in accordance with applicable law.
1.6 Officers of the Surviving Corporation. The officers of Merger Sub
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation as of the Effective Time and until their successors are duly
appointed or elected in accordance with applicable law.
ARTICLE 2
CONVERSION AND EXCHANGE OF SECURITIES
2.1 Merger Sub Stock. At the Effective Time, each share of common stock of
Merger Sub outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of common stock of the Surviving Corporation. Each
certificate evidencing ownership of shares of Merger Sub common stock shall
continue to evidence ownership of such shares of capital stock of the Surviving
Corporation.
2.2 Company Stock.
(a) Subject to Section 2.3(e), at the Effective Time, each outstanding
share of common stock of the Company, par value $.001 per share (the
"Company Common Stock"), other than any shares of Company common stock to
be cancelled pursuant to Section 2.2(c) below shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
cancelled and extinguished and automatically converted into the right to
receive 0.4765 shares of common stock of the Parent, par value $.01 per
share (the "Parent Common Stock") (such ratio, as adjusted pursuant to
Section 2.4 below, being defined herein as the "Exchange Ratio").
(b) As a result of the Merger and without any action on the part of
the holder thereof, at the Effective Time, all shares of Company Common
Stock outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall cease to exist, and each holder of shares of Company
Common Stock shall thereafter cease to have any rights with respect to such
shares of Company Common Stock, except the right to receive, without
interest, the consideration contemplated by Section 2.2(a) and cash in lieu
of fractional shares in accordance with Sections 2.3(c) and 2.3(e) upon the
surrender of a certificate (a "Certificate") representing such shares of
Company Common Stock.
(c) Each share of Company Common Stock held in the Company's treasury
at the Effective Time, and each share of Company Common Stock that is owned
by Parent or any Parent Subsidiary (as defined in Section 4.1) at the
Effective Time, shall, by virtue of the Merger, cease to be outstanding and
shall be canceled and retired and shall cease to exist without payment of
any consideration thereof.
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(d) As of the Effective Time, each outstanding option to purchase
capital stock of the Company (the "Company Options"), whether or not
exercisable and whether or not vested, under any plan or arrangement of the
Company providing for the grant of options to purchase shares of Company
Common Stock (collectively, the "Company Stock Option Plans"), shall be
converted into an option to purchase Parent Common Stock. Each Company
Option so converted shall be subject to the same terms and conditions as
under the applicable Company Stock Option Plan immediately prior to the
Effective Time and the applicable grant instrument issued thereunder
(including, without limitation, any repurchase rights or vesting
provisions), except that (A) each such Company Option shall be exercisable
(or will become exercisable in accordance with its terms) for that number
and whole shares of Parent Common Stock (rounded down to the nearest whole
share) equal to the product of the number of shares of Company Common Stock
that were issuable upon exercise of such Company Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, (B) the exercise
price per share of Parent Common Stock shall be an amount equal to the
quotient determined by dividing the exercise price per share of Company
Common Stock subject to such Company Option in effect immediately prior to
the Effective Time by the Exchange Ratio (the exercise price per share, as
so determined, being rounded up to the nearest tenth of a cent), and (C)
the vesting of certain Company Options as set forth on Section 3.25 of the
Company Disclosure Schedule (as defined below) will be accelerated or
become subject to subsequent acceleration pursuant to the terms of such
Company Options as a result of the Merger, so long as such acceleration
does not adversely affect Parent's ability to account for the Merger in
accordance with the pooling of interests method of accounting under the
requirements of APB No. 16.
(e) It is the intention of the parties that the Company Options
converted by Parent qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent permitted under
Section 422 of the Code and to the extent the Company Options qualified as
incentive stock options prior to the Effective Time.
(f) Parent shall, as soon as practicable after the Effective Time, but
in no event later than 30 days after the Effective Time, file a
registration statement on Form S-8 under the Securities Act of 1933 (the
"Securities Act"), covering the shares of Parent Common Stock issuable upon
the exercise of the Company Options converted under Section 2.2(d), and
will maintain the effectiveness of such registration, and the current
status of the prospectus contained therein, until the exercise or
expiration of such converted Company Options.
2.3 Exchange of Certificates Representing Company Common Stock.
(a) As of the Effective Time, Parent shall deposit, or shall cause to
be deposited, with a banking or other financial institution mutually
acceptable to Parent and the Company (the "Exchange Agent"), for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article 2, certificates representing the shares of
Parent Common Stock to be issued in connection with the Merger and cash in
an amount equal to Parent's good faith estimate of the cash required to be
paid to holders of shares of Company Common Stock in lieu of fractional
shares expected to be payable in connection with the Merger (such cash and
certificates for shares of Parent Common Stock, together with any dividends
or distributions with respect thereto (relating to record dates for such
dividends or distributions after the Effective Time), being hereinafter
referred to as the "Exchange Fund") to be issued pursuant to Section 2.2
and paid pursuant to this Section 2.3 in exchange for outstanding shares of
Company Common Stock.
(b) Promptly after the Effective Time, Parent shall cause the Exchange
Agent to mail to each holder of record of shares of Company Common Stock
(i) a letter of transmittal specifying that delivery shall be effected, and
risk of loss and title to such shares of Company Common Stock shall pass,
only upon delivery of the Certificates representing such shares to the
Exchange Agent and which letter shall be in such form and have such other
provisions as Parent may reasonably specify and (ii) instructions for use
in effecting the surrender of Certificates in exchange for the
consideration contemplated by Section 2.2 and this Section 2.3, including
cash in lieu of fractional shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed and completed
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in accordance with the instructions thereto, the holder of the shares
represented by such Certificate shall be entitled to receive in exchange
therefor (x) a certificate representing that number of whole shares of
Parent Common Stock and (y) a check representing the amount of cash in lieu
of fractional shares, if any, and unpaid dividends and distributions, if
any, that such holder has the right to receive in respect of the
Certificate surrendered pursuant to the provisions of this Article 2, after
giving effect to any required withholding tax, and the shares represented
by the Certificate so surrendered shall forthwith be canceled. No interest
will be paid or accrued on the cash payable to holders of shares of Company
Common Stock. In the event of a transfer of ownership of Company Common
Stock that is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common
Stock, together with a check for the cash to be paid pursuant to Section
2.3(b)(y) may be issued to such a transferee if the Certificate
representing such Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
and to evidence that any applicable stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Effective Time on
Parent Common Stock shall be paid with respect to any shares of Company
Common Stock represented by a Certificate until such Certificate is
surrendered for exchange as provided herein. Following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective
Time theretofore payable with respect to such whole shares of Parent Common
Stock and not paid, less the amount of any withholding taxes which may be
required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective
Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Parent Common Stock, less the
amount of any withholding taxes which may be required thereon.
(d) At or after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Company Common Stock
which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for certificates for
shares of Parent Common Stock and cash deliverable in respect thereof
pursuant to this Agreement in accordance with the procedures set forth in
this Article 2. Certificates surrendered for exchange by any Affiliate (as
defined in Section 5.9 hereof), shall not be exchanged until Parent has
received a written agreement from such person as provided in Section 5.9.
(e) No fractional shares of Parent Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of Parent
Common Stock, cash adjustments will be paid to holders in respect of any
fractional share of Parent Common Stock that would otherwise be issuable,
and the amount of such cash adjustment shall be equal to the product
obtained by multiplying such stockholder's fractional share of Parent
Common Stock that would otherwise be issuable by the average closing price
per share of Parent Common Stock for the ten-day period ending two days
before the Closing Date as reported by The Wall Street Journal (or, if not
reported thereby, any other authoritative source).
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of Parent Common Stock) that remains
unclaimed by the former stockholders of the Company one year after the
Effective Time shall be delivered to Parent. Any former stockholders of the
Company who have not theretofore complied with this Article 2 shall
thereafter look only to Parent, and Parent shall comply with such requests,
made in accordance with the terms of this Agreement, for payment of their
shares of Parent Common Stock, cash and unpaid dividends and distributions
on Parent Common Stock deliverable in respect of each share of Company
Common Stock such stockholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon.
(g) None of Parent, the Company, the Surviving Corporation, the
Exchange Agent or any other person shall be liable (except to the extent
provided by applicable law) to any former holder of shares of
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Company Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and the posting
by such person of a bond in such amount as the Surviving Corporation may
reasonably request as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the shares of
Parent Common Stock and cash deliverable in respect thereof pursuant to
this Agreement.
2.4 Adjustment of Exchange Ratio. In the event that, subsequent to the
date of this Agreement but prior to the Effective Time, the outstanding shares
of Parent Common Stock or Company Common Stock, respectively, shall have been
changed into a different number of shares or a different class as a result of a
stock split, reverse stock split, stock dividend, subdivision, reclassification,
combination, exchange, recapitalization or other similar transaction (or a
record date shall have been set for such purpose), the Exchange Ratio shall be
appropriately adjusted.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered prior to the
execution hereof to Parent (the "Company Disclosure Schedule"), the Company
represents and warrants to Parent as of the date of this Agreement as follows:
3.1 Existence; Good Standing; Corporate Authority. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware. The Company is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of any other
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified or to be in good standing would not
result in a Company Material Adverse Effect (as defined in Section 8.14 hereof).
The Company has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted, or as described
in the Company Reports, as reasonably contemplated in the future. The Company
has no Subsidiaries (as defined in Section 8.14) other than those Subsidiaries
set forth in Section 3.1 of the Company Disclosure Schedule (the "Company
Subsidiaries"). Each of the Company Subsidiaries is a corporation duly
organized, validly existing and in good standing, under the laws of the
jurisdictions in which such companies are incorporated. Neither the Company nor
any of the Company Subsidiaries is in violation of any order of any court,
governmental authority or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation to which the Company or any of the Company
Subsidiaries or any of their respective properties or assets is subject, other
than any violations that would not result in a Company Material Adverse Effect.
3.2 Authorization, Validity and Effect of Agreements. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and all other agreements and documents to which it is a party contemplated
hereby and to perform its obligations hereunder. Subject only to the approval of
this Agreement and the Merger by the holders of a majority of the outstanding
shares of Company Common Stock, the consummation by the Company of the
transactions contemplated hereby have been unanimously approved by the Board of
Directors of the Company (the "Company Board") and duly authorized by all
requisite corporate action. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
3.3 Capitalization. The authorized capital stock of the Company consists
of 35,000,000 shares of Company Common Stock and 1,000,000 shares of preferred
stock of the Company (the "Company Preferred Stock"). As of July 12, 2000, there
were 13,417,034 shares of Company Common Stock and no shares of
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Company Preferred Stock issued and outstanding. Since such date, no shares of
capital stock of Company have been issued, except shares of Company Common Stock
issued pursuant to the exercise of options outstanding under the Company Stock
Option Plans. As of July 12, 2000, options to acquire 1,905,833 shares of
Company Common Stock were outstanding pursuant to the terms of the Company Stock
Option Plans. The Company has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) on any
matter with respect to such securities. All issued and outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, and were issued in compliance with
all applicable federal and state securities laws, rules and regulations. Other
than as set forth above, there were not, as of July 12, 2000, any existing
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments that obligate the Company or any of the
Company Subsidiaries to issue, transfer or sell any shares of capital stock of
the Company or any of the Company Subsidiaries or entitle any third party to
receive any capital stock of the Company or any of the Company Subsidiaries.
Section 3.3 of the Company's Disclosure Schedule lists all Company Options
outstanding as of July 12, 2000, and for each such Company Option the vesting
schedule through July 11, 2001. There are no voting trusts or other agreements
or understandings to which the Company is a party, nor, to the knowledge of the
Company, to which any stockholder of the Company is a party, with respect to the
voting of capital stock of the Company. The issuance of the Option Shares upon
exercise of the Company Option has been duly authorized by all requisite
corporate and stockholder action and, upon exercise of the Company Option, the
Option Shares will be validly issued, fully paid and non-assessable shares of
Company Common Stock.
3.4 Subsidiaries. The Company owns directly or indirectly each of the
outstanding shares of capital stock of each of the Company Subsidiaries. Each of
the outstanding shares of capital stock of each of the Company Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable, and is owned,
directly or indirectly, by the Company free and clear of all liens, pledges,
security interests, claims or other encumbrances. Other than the Company
Subsidiaries, neither the Company nor any Company Subsidiary owns any equity
interest in any person.
3.5 No Violation. Neither the execution and delivery by the Company of
this Agreement, nor the consummation by the Company of the transactions
contemplated hereby and thereby in accordance with the terms of such agreements
will: (i) conflict with or result in a breach of any provisions of the
Certificate of Incorporation or the Bylaws of the Company; (ii) result in a
breach or violation of, or a default under, any existing Company Employee Plans,
or any grant or award made under any of the foregoing; or (iii) violate,
conflict with, result in a breach of any provision of, constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, result in the termination or in a right of termination or
cancellation of, accelerate the performance required by, result in the
triggering of any payment or other material obligations pursuant to, result in
the creation of any lien, security interest, charge or encumbrance upon any of
the material properties of the Company or any of the Company Subsidiaries under,
or result in being declared void, voidable, or without further binding effect,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any license, franchise, permit, lease, contract,
agreement or other instrument, binding commitment or obligation to which the
Company or any of the Company Subsidiaries is a party, or by which the Company
or any of the Company Subsidiaries or any of their respective properties is
bound or to the knowledge of the Company affected, except for any of the
foregoing matters which would not (a) result in a Company Material Adverse
Effect, or (b) impair in any material respect the ability of the Company to
perform its obligations under this Agreement, or (c) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement; or
(iv) other than (a) filings by the Company required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), (b) the filing with the
Securities and Exchange Commission (the "SEC") of a proxy statement relating to
the approval by the Company's stockholders of this Agreement and such reports
under the Securities Exchange Act of 1934 (the "Exchange Act"), as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement, (c) the filing of the Certificate of Merger with the Delaware
Secretary of State and (d) the filings and notifications required by the rules
of the Nasdaq National Market, required by or with respect to the Company or any
of the Company Subsidiaries in connection with the execution and delivery of
this Agreement by the Company or the consummation by the
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Company of the Merger, any consent, approval or authorization of, or
declaration, filing or registration with, any domestic governmental or
regulatory authority, other than consents, approvals, authorizations,
declarations or filings or registration which, if not obtained or made, would
not (a) result in a Company Material Adverse Effect, (b) impair in any material
respect the ability of the Company to perform its obligations under this
Agreement, or (c) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
3.6 SEC Documents; Undisclosed Matters.
(a) The Company has filed all required forms, reports, schedules,
statements and other documents (including exhibits and other information
incorporated therein) with the SEC since January 1, 1997 (collectively, the
"Company Reports"). As of the respective dates they were filed, or, if
amended, as of the date of the filing of the last such amendment, each
Company Report, (i) complied as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the
rules and regulations thereunder applicable to such Company Reports and
(ii) at the time they were filed did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference into
the Company Reports (including the related notes and schedules) fairly
presents in all material respects the consolidated financial position of
the Company and each of the Company Subsidiaries as of its date, and each
of the consolidated statements of operations, stockholders' equity and cash
flows included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents in all material
respects the financial position, results of operations and cash flows, as
the case may be, of the Company and each of the Company Subsidiaries for
the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which would not be
material in amount or effect, and the absence of footnotes), in each case
(x) in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein and (y) in compliance as to form
in all material respects with the published rules and regulations of the
SEC with respect thereto as of the date they were filed or, if amended, as
of the date of the filing of the last such amendment.
(b) Except (i) as set forth in the Company Reports (including the
financial statements and notes thereto contained therein), (ii) for
liabilities set forth in this Agreement, (iii) for liabilities described in
Section 3.6 of the Company Disclosure Schedule or incurred in the ordinary
course of business consistent with past practice, neither the Company nor
any of the Company Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute or contingent or otherwise) which,
individually or in the aggregate, would have a Company Material Adverse
Effect.
3.7 Litigation. Except as disclosed in the Company Reports, there are no
actions, suits or proceedings pending against the Company or any of the Company
Subsidiaries or, to the knowledge of the Company, threatened against the Company
or any of the Company Subsidiaries that, individually or in the aggregate, would
have a Company Material Adverse Effect, nor is there any judgment, decree,
injunction, rule, order, action, demand, or requirement of any governmental
entity or other regulatory body or arbitrator outstanding against, or, to the
knowledge of the Company, any investigation by any governmental entity or other
regulatory body involving the Company or any of the Company Subsidiaries that
individually or in the aggregate would have a Company Material Adverse Effect.
3.8 Compliance with Laws.
(a) Each of the Company and the Company Subsidiaries is in compliance
with all statutes, laws, ordinances, rules, regulations, judgments, orders
and decrees of any governmental entity or regulatory entity (other than
Environmental Laws) (collectively, "Legal Provisions") applicable to its
business or operations, except for instances of noncompliance that
individually or in the aggregate would not have a Company Material Adverse
Effect. Each of the Company and the Company Subsidiaries has in effect all
approvals, authorizations, certificates, filings, franchises, licenses,
notices, permits and rights of or with
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all governmental and regulatory entities, including all authorizations
under Environmental Laws ("Permits"), necessary for it to own, lease or
operate its properties and assets and to carry on its business and
operations as now conducted, except for the failure to have such Permits
that individually or in the aggregate would not have a Company Material
Adverse Effect. There has occurred no default under, or violation of, any
such Permit, except for defaults under, or violations of, Permits that
individually or in the aggregate would not have a Company Material Adverse
Effect. The Merger, in and of itself, would not cause the revocation or
cancellation of any such Permit that individually or in the aggregate would
have a Company Material Adverse Effect.
(b) Except for those matters that individually or in the aggregate
would not have a Company Material Adverse Effect: (A) each of the Company
and the Company Subsidiaries is, and has been, in compliance with all
applicable Environmental Laws; (B) during the period of ownership or
operation by the Company or the Company Subsidiaries of any of its
currently or previously owned, leased or operated properties, no Hazardous
Material has been treated or disposed of, and there have been no Releases
or threatened Releases of Hazardous Material at, in, on, under or affecting
such properties or any contiguous site by the Company or the Company
Subsidiaries, or, to the knowledge of the Company and the Company
Subsidiaries, by any other person or entity; (C) prior to the period of
ownership or operation by the Company or the Company Subsidiaries of any of
its currently or previously owned, leased or operated properties, to the
knowledge of the Company and the Company Subsidiaries, no Hazardous
Material was treated, stored, or disposed of, and there were no Releases of
Hazardous Material at, in, on, under or affecting any such property or any
contiguous site; and (D) neither the Company nor the Company Subsidiaries
have received any written notice of, or entered into or assumed by
contract, judicial or administrative settlement, or operation of law any
indemnification obligation, order, settlement or decree relating to: (1)
any violation of any Environmental Laws or the institution or pendency of
any suit, action, claim, proceeding or investigation by any governmental
entity, regulatory entity or any third party in connection with any alleged
violation of Environmental Laws or any Release of Hazardous Materials, (2)
the response to or remediation of Hazardous Material at or arising from any
of the Company's or its Subsidiaries' activities or properties or any other
properties or (3) payment for any response action relating to or
remediation of Hazardous Material at or arising from any of the Company's
or the Company Subsidiaries' properties, activities, or any other
properties.
The term "Environmental Laws" means all applicable laws, statutes,
treaties, rules, codes, ordinances, regulations, certificates, orders,
directives, interpretations, licenses, permits, and other authorizations of any
governmental entity or regulatory entity and judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal or agency of competent jurisdiction,
including any thereof of the European Community or the European Union having the
force of law and being applicable to the Company, dealing with the protection of
health, welfare or the environment, and any provincial, municipal, water board
or other local statute, law, rule, regulation or ordinance relating to public or
employee health, safety or environment; including all laws relating to Releases
to air, water, land or groundwater, relating to the withdrawal or use of
groundwater, and relating to the use, handling, transportation, manufacturing,
introduction into the stream of commerce, or disposal of Hazardous Materials.
The term "Hazardous Materials" means any chemical, material, liquid, gas,
substance, or waste, whether naturally occurring or man-made, that is
prohibited, limited, or regulated by or pursuant to an Environmental Law.
The term "Release" means spilling, leaking, discharging, injecting,
emitting, and or disposing and placement of a Hazardous Material in any location
that poses a threat thereof.
3.9 Absence of Certain Changes. Other than as set forth in the Company
Reports (i) since December 31, 1999 the Company has conducted its business only
in the ordinary course of such business, (ii) from December 31, 1999 to the date
of this Agreement there has not been any Company Material Adverse Effect, and
(iii) since December 31, 1999, there has not been any material change in its
accounting principles, practices or methods, except as required under GAAP or
applicable law.
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3.10 Taxes and Tax Returns.
(a) As used in this Agreement:
"Code" means the Internal Revenue Code of 1986, as amended. All
citations to provisions of the Code, or to the Treasury Regulations
promulgated thereunder, shall include any amendments thereto and any
substitute or successor provisions thereto.
"Taxes" means (i) any and all federal, state, local and foreign
taxes, assessments, deficiencies, fees and other governmental charges,
including, without limitation, taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added,
ad valorem, transfer, gains, franchise, withholding, payroll,
employment, excise, unemployment, premium, social security, occupation,
stamp, and property taxes, together with all interest, penalties and
additions to tax imposed with respect to such amounts, and (ii) any
obligations under any agreements or arrangements with respect to any
amounts described in clause (i) above.
"Tax Return" means any report, return, declaration, statement or
other form or document filed or required to be filed with any federal,
state, local or foreign taxing authority in connection with any Taxes.
(b) All Tax Returns required to be filed by or with respect to the
Company and each of the Company Subsidiaries have been timely filed and all
such Tax Returns are true, correct and complete in all material respects.
The Company and each of the Company Subsidiaries have (i) timely paid or
caused to be timely paid all material Taxes of the Company and the Company
Subsidiaries due, whether or not shown (or required to be shown) on a Tax
Return and (ii) provided a sufficient reserve (without regard to deferred
Tax assets and liabilities) for the payment of all material Taxes of the
Company and the Company Subsidiaries not yet due and payable on the
financial statements included in the Company Reports.
(c) The Company and each of the Company Subsidiaries have complied in
all material respects with the provisions of the Code relating to the
withholding and payment of Taxes, including, without limitation, the
withholding and reporting requirements under Code sections 1441 through
1464, 3401 through 3406, and 6041 through 6049, as well as similar
provisions under any other federal, state, local or foreign laws, and have,
within the time and in the manner prescribed by law, withheld from employee
wages and paid over to the proper governmental authorities all material
amounts required to be withheld and paid over.
(d) Neither the Company nor any of the Company Subsidiaries has
received notice that any of the Tax Returns of the Company or any of the
Company Subsidiaries is currently being examined by the Internal Revenue
Service ("IRS") or relevant state, local or foreign taxing authorities, and
there are no administrative or court proceedings relating to any material
Taxes of either the Company or any of the Company Subsidiaries in progress
or, to the Company's knowledge, pending.
(e) Except for liens for Taxes that are not yet due and payable, there
are no liens for any material Tax upon any asset of the Company or any of
the Company Subsidiaries.
(f) Neither the Company nor any of the Company Subsidiaries is, or has
been, a party to any agreement (other than this Agreement) (i) relating to
allocating or sharing the payment of, or liability for, Taxes, (ii)
affording any other person the benefit of any net operating loss, net
capital loss, investment tax credit, foreign tax credit, charitable
deduction or other credit or Tax attribute which could reduce Taxes
(including, without limitation, deductions and credits related to
alternative minimum Taxes) of Company or any Company Subsidiary, or (iii)
requiring or permitting the transfer or assignment of income, revenues,
receipts or gains to Company or any Company Subsidiary, from any other
person.
(g) True and complete copies of all federal, state, local and foreign
Tax Returns of the Company and each of the Company Subsidiaries for taxable
years beginning on or after January 1, 1992 have been made available to
Parent prior to the date hereof to the extent reasonably requested by
Parent.
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(h) No extension of time with respect to any date on which a Tax
Return was or is to be filed by the Company or any of the Company
Subsidiaries is in force, and no waiver or agreement by the Company or any
of the Company Subsidiaries is in force for the extension of time for the
assessment or payment of any Taxes; and there are no pending requests for
waivers or extensions of time for the assessment or payment of any Taxes
with respect to Company or any of the Company Subsidiaries.
(i) Neither the Company nor any of the Company Subsidiaries has been a
member of an (i) affiliated group (within the meaning of Section 1504 of
the Code) or (ii) affiliated, combined, consolidated, unitary, or similar
group for state, local or foreign Tax purposes, other than the group of
which the Company is the common parent.
(j) Neither the Company nor any of the Company Subsidiaries has any
liability under Treas. Regs. Section 1.1502-6, or any similar provision of
state, local or foreign law, except with respect to members of the
affiliated group of which the Company is the common parent.
(k) Neither Company nor any of the Company Subsidiaries has received
notice of a claim by any taxing authority from a jurisdiction in which such
corporation does not file any Tax Returns that such corporation is or may
be subject to taxation by that jurisdiction.
(l) Neither Company nor any of the Company Subsidiaries has filed an
election under Section 341(f) of the Code to be treated as a consenting
corporation.
(m) Neither Company nor any of the Company Subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock intended to qualify for tax-free treatment under
Section 355 of the Code either (i) during the two (2) years prior to the
Effective Time (or will constitute such a corporation during such time), or
(ii) in connection with a distribution that otherwise constitutes part of a
plan or series of related transactions (within the meaning of Section
355(e) of the Code) in conjunction with the Merger.
3.11 Employee Benefit Plans.
(a) Schedule 3.11 of the Company Disclosure Schedule contains a list
of each plan, program, arrangement and contract which is maintained or
sponsored by the Company or any Company Subsidiaries or under which the
Company or any of the Company Subsidiaries is obligated to make
contributions or to which the Company or any Company Subsidiary otherwise
have or may have any liability, contingent or otherwise, either directly or
as a result of an ERISA Affiliate (as defined below), and which provides
benefits or compensation to or on behalf of employees or former employees
and their beneficiaries or directors, agents or independent contractors,
including but not limited to executive arrangements, employment agreements,
severance policies or agreements, sick leave, vacation pay, consulting or
other compensation arrangements, bonus plan, stock option or stock purchase
plans, and any other equity compensation plans or arrangements, any plans
subject to section 125 of the Code, any plans providing benefits or
payments in the event of a change of ownership or control, and "employee
benefit plans" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans, programs,
arrangements, practices or contracts are referred to herein as "Company
Employee Plans." The Company has made available to Parent the plan
documents or other writing constituting each Company Employee Plan that has
been reduced to writing and, if applicable, the trust, insurance contract,
service agreement, formal and informal amendments thereto, or other funding
arrangement, the most recent ERISA summary plan description and any
amendments or modifications thereof; all notices that were issued within
the preceding three years by the IRS, Department of Labor, or any other
governmental entity with respect to the Company Employee Plans; all minutes
and resolutions describing the manner in which the Company Employee Plan is
or has been administered or describing corrections to the administration of
a Company Employee Plan; and the three (3) most recently filed Forms 5500
and actuarial report for each such Company Employee Plan. The Company has
made available to Parent accurate copies of the most recent favorable
determination letters for all Company Employee Plans qualified under
Section 401(a) of the Code. "ERISA Affiliate" means any person, together
with the Company or any Company Subsidiary, is or was at any time treated
as a
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single employer under Section 414 of the Code or Section 4001 of ERISA and
any general partnership of which the Company or any Company Subsidiary is
or has been a general partner.
(b) The Company and any Company Subsidiary does not sponsor, maintain
or contribute to, and has never sponsored, maintained or contributed to, or
had any liability with respect to, any employee benefit plan subject to
Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA. No
Company Employee Plan is a multiemployer plan (as defined in Section 3(37)
of ERISA), and neither the Company nor any Company Subsidiary is, or has
been, a participant in a multiemployer plan.
(c) Neither the Company nor any of the Company Subsidiaries is
obligated to provide post-employment or retirement medical benefits or any
other unfunded welfare benefits to or on behalf of any Person who is no
longer an employee of Company or any of the Company Subsidiaries, except
for health continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA.
(d) The Company and any Company Subsidiary has no liability with
respect to any benefit plan or arrangement other than the Company Employee
Plans that would result in a Company Material Adverse Effect. Each Company
Employee Plan has at all times been maintained, by its terms and in
operation, in accordance with all applicable laws, and each of those
Company Employee Plans which are intended to be qualified under Section
401(a) of the Code has at all times been maintained, by its terms and in
operation, in accordance with Section 401(a) of the Code, in each case
except where a failure to be so maintained would not have a Company
Material Adverse Effect; and all reporting, disclosure, and notice
requirements of ERISA, the Code and other applicable laws have been
satisfied in all material respects with respect to each Company Employee
Plan.
(e) No non-exempt prohibited transaction (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) has occurred with respect
to any Company Employee Plan maintained by the Company or any of the
Company Subsidiaries that would result, directly or indirectly, in the
imposition of an excise tax or other liability under the Code or ERISA,
except for such a tax or other liability that would not have a Company
Material Adverse Effect.
With respect to any Company Employee Plan, to the knowledge of the Company
there has occurred no breach of any fiduciary duty described in Section 404 of
ERISA that could, if successful, result in any fiduciary duty described in 404
of ERISA that could, if successful, result in any liability, direct or indirect,
for the Company or any Company Subsidiary or any stockholder, officer, director,
or employee of the Company or any Company Subsidiary. No Company Employee Plan
is presently under audit or examination (nor has noticed been received of a
potential audit or examination) by the IRS, the Department of Labor, or any
other governmental entity, and no matters are pending with respect to any
Company Employee Plan under any IRS program.
(f) The Company and the Company Subsidiaries have paid all amounts
that the Company and the Company Subsidiaries are required to pay as
contributions to the Company Employee Plans as of the last day of the most
recent fiscal year of each of the Company Employee Plans; all benefits
accrued under any funded or unfunded Company Employee Plan will have been
paid, accrued or otherwise adequately reserved with GAAP; and all monies
withheld from employee paychecks with respect to the Company Employee Plans
have been transferred to the appropriate Company Employee Plan in a timely
manner as required by applicable law.
(g) To the knowledge of the Company, all persons classified by the
Company and the Company Subsidiaries as independent contractors satisfy and
have at all times satisfied the requirements of applicable law to be so
classified; to the knowledge of the Company, the Company and the Company
Subsidiaries have fully and accurately reported their compensation on IRS
Forms 1099 when required to do so; and to the knowledge of the Company, the
Company and the Company Subsidiaries have no obligations to provide
benefits with respect to such persons under the Company Employee Plans or
otherwise. No individuals are currently providing, or have ever provided,
services to the Company or the Company Subsidiaries pursuant to a leasing
agreement or similar type of arrangement, nor has the
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Company or the Company Subsidiaries entered into any arrangement whereby
services will be provide by such individuals.
(h) All Company Employee Plans may be amended or terminated without
penalty by the Company at any time on or after the Closing Date.
(i) All Company Employee Plans outside of the United States, if any,
(the "Foreign Plans") are in material compliance with all applicable laws
and have been operated in all material respects in accordance with the
Foreign Plans' respective terms. There are no unfunded liabilities under,
or in respect of, the Foreign Plans, and all contributions or other
payments required to be made to, or in respect of, the Foreign Plans prior
to the Effective Time have been made, or will be made, prior to the
Effective Time
3.12 Intellectual Property. Each of the Company and the Company
Subsidiaries owns, or is validly licensed or otherwise has the right to use all
patents, patent applications, trademarks, trademark rights, trade names, trade
name rights, service marks, service mark rights, copyrights and other
proprietary intellectual property rights and computer programs (collectively,
"Intellectual Property Rights") which if the Company or the Company Subsidiaries
did not own or validly license or otherwise have the right to use would have a
Company Material Adverse Effect. Section 3.12 of the Company Disclosure Schedule
sets forth, as of the date hereof, a list of all material granted patents,
pending patent applications, registered trademarks and applications therefor
owned by or licensed to the Company or any of the Company Subsidiaries. No
claims are pending or, to the knowledge of the Company, threatened that the
Company or any of the Company Subsidiaries is infringing the rights of any
person with regard to any Intellectual Property Right which have or would have a
Company Material Adverse Effect. To the knowledge of the Company, no person is
infringing the rights of the Company or any of the Company Subsidiaries with
respect to any Intellectual Property Right which would have a Company Material
Adverse Effect. As of the date hereof, the Company has no knowledge that the
business of the Company and the Company Subsidiaries as presently conducted or
as presently contemplated does or will infringe (i) any granted patent or
existing trademark or (ii) any patent to be granted from a pending patent
application. No claims are pending or, to the knowledge of the Company, are
threatened challenging the validity of, ownership of or license to the
Intellectual Property Rights owned by or licensed to the Company and the Company
Subsidiaries which would have a Company Material Adverse Effect.
3.13 Parent Stock Ownership. Neither the Company nor any of the Company
Subsidiaries beneficially owns any shares of Parent Common Stock or other
securities convertible into or exercisable for Parent Common Stock.
3.14 Pooling of Interests; Tax Reorganization. To the knowledge of the
Company, there has been no action or omission by the Company or any of the
Company Subsidiaries which would prevent the accounting for the Merger as a
pooling of interests in accordance with Accounting Principles Board Opinion No.
16 ("APB No. 16"), the interpretative releases issued pursuant thereto, and the
pronouncements of the SEC. Neither the Company nor any of the Company
Subsidiaries has taken or agreed to take any action or knows of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.
3.15 State Takeover Statutes. The Company Board has approved this
Agreement and the Merger, and such approval is sufficient to render
inapplicable, to this Agreement and the Merger, the provisions of Section 203 of
the DGCL to the extent, if any, such Section is applicable to this Agreement and
the Merger. To the Company's knowledge, no other state antitakeover statute or
similar statute or regulation is applicable to the Merger or the other
transactions contemplated hereby.
3.16 No Brokers. The Company has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or Parent to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby, except that the Company has retained U.S. Bancorp-Piper Jaffray ("Piper
Jaffray") as its financial advisors.
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3.17 Opinion of Financial Advisor. The Board of Directors of the Company
has received the opinion of Piper Jaffray to the effect that, as of the date
hereof, the Exchange Ratio is fair to the holders of Company Common Stock from a
financial point of view.
3.18 Insurance. Schedule 3.18 accurately sets forth as of the day
preceding the date hereof all policies of insurance, other than title insurance
policies, held by or on behalf of the Company and all outstanding claims
thereunder in excess, individually or in the aggregate, of $25,000. All such
policies of insurance are in full force and effect, and no notice of
cancellation has been received. In the reasonable judgment of the Company, such
policies are in amounts which are adequate in relation to the business and
properties of the Company, and all premiums to date have been paid in full.
3.19 Contracts. As of the date of this Agreement, neither the Company nor
any Company Subsidiary is a party to, and none of their respective properties or
assets are bound by, any material contracts, including contracts relating to
distribution, sale, licensing, co-promotion marketing, manufacturing, third
party suppliers of active ingredients, bulk product and finished product to the
Company, other than contracts filed as exhibits to the Company Reports or listed
on Schedule 3.19. The Company has not received any notice from any other party
to any such material contract, and otherwise has no knowledge that such third
party intends to terminate, or not renew, any such material contract and no
right to terminate such material contract arises in connection with the
transactions contemplated hereby. As of the date hereof, the Company has made
available to Parent true and correct copies of all such material contracts.
Neither the Company nor any of the Company Subsidiaries, and, to the knowledge
of the Company, no other party thereto, is in violation of or in default under
(nor does there exist any condition which upon the passage of time or the giving
of notice or both would cause such a violation of or default under) any loan or
credit agreement, bond, note, mortgage, indenture, lease or other contract,
agreement, obligation, commitment, arrangement, understanding, instrument,
permit or license which is listed in Section 3.19 of the Company Disclosure
Schedule, except for violations or defaults that individually or in the
aggregate would not have a Company Material Adverse Effect. Neither the Company
nor any of the Company Subsidiaries is a party to or otherwise bound by any
agreement or covenant not to compete or by any agreement or covenant (other than
licenses or similar agreements permitting the Company to use the intellectual
property of a third party) restricting in any material respect the development,
marketing or distribution of the Company's or any of the Company Subsidiaries'
products or services or the conduct of their businesses.
3.20 No Excess Parachute Payments; No Section 162(m) Payments. There will
be no payments or benefits to any "disqualified individual" (within the meaning
of Section 280G of the Code) that would constitute or result in an "excess
parachute payment" under Section 280G of the Code as a direct or indirect
consequence of the transactions contemplated by this Agreement, including,
without limitation, as a result of the acceleration of vesting or exercisability
of any options to purchase Company Common Stock held by "disqualified
individuals" as a direct or indirect consequence of the transactions
contemplated by this Agreement. No such Person is entitled to receive any
additional payment from the Company, the Surviving Corporation or any other
Person (a "Parachute Gross Up Payment") to reimburse such Person for the excise
tax imposed on such Person pursuant to Section 4999(a) of the Code. The Company
Employee Plans and other Company employee compensation arrangements in effect as
of the date of this Agreement have been designed so that the disallowance of a
deduction under Section 162(m) of the Code for employee remuneration will not
apply to any material amounts paid or payable by the Company or any of the
Company Subsidiaries under any such plan or arrangement and, to the knowledge of
the Company, no fact or circumstance exists that is reasonably likely to cause
such disallowance to apply to any such amounts.
3.21 Title to Properties.
(a) Each of the Company and the Company Subsidiaries has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets used in the conduct of its business except for such
as are no longer used or useful in the conduct of its businesses or as have
been disposed of in the ordinary course of business and except for defects
in title, easements, restrictive covenants and similar encumbrances that
individually or in the aggregate would not materially interfere with its
ability to conduct its business as currently conducted. All such material
assets and properties, other than assets and
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properties in which the Company or any of the Company Subsidiaries has a
leasehold interest, are free and clear of all liens, claims and
encumbrances, except for liens, claims and encumbrances that individually
or in the aggregate would not materially interfere with the ability of the
Company and the Company Subsidiaries to conduct their respective businesses
as currently conducted.
(b) Each of the Company and the Company Subsidiaries has complied in
all material respects with the terms of all material leases to which it is
a party and under which it is in occupancy, and all such leases are in full
force and effect, except for such noncompliance or failure to be in full
force and effect that individually or in the aggregate would not have a
Company Material Adverse Effect. Each of the Company and the Company
Subsidiaries enjoys peaceful and undisturbed possession under all such
material leases, except for failures to do so that individually or in the
aggregate would not have a Company Material Adverse Effect.
3.22 Supply and Distribution Relationships. Except as would not result in
a Company Material Adverse Effect, (i) the Company and the Company Subsidiaries
have in place supply and distribution agreements or arrangements sufficient to
meet the needs of the business of the Company as it is currently being conducted
and (ii) to the knowledge of the Company, no adverse change in those agreements
or arrangements is reasonably anticipated.
3.23 Regulatory Compliance.
(a) As to each product subject to the jurisdiction of the U.S. Food
and Drug Administration ("FDA") under the Federal Food, Drug and Cosmetic
Act and the regulations thereunder ("FDCA") (each such product, a
"Pharmaceutical Product") that is manufactured, tested, distributed and/or
marketed by the Company or any of its subsidiaries, such Pharmaceutical
Product is being manufactured, tested, distributed and/or marketed in
substantial compliance with all applicable requirements under FDCA and
similar Legal Provisions, including those relating to investigational use,
premarket approval, good manufacturing practices, labeling, advertising,
record keeping, filing of reports and security, except where the failure to
be in compliance would not have a Company Material Adverse Effect. Neither
the Company nor the Company Subsidiaries has received any notice or other
communication from the FDA or any other governmental entity, domestic or
foreign (A) contesting the premarket approval of, the uses of or the
labeling and promotion of any of the Company's or the Company Subsidiaries'
products or (B) otherwise alleging any violation of any Legal Provision by
the Company or the Company Subsidiaries which, in either case, would have a
Company Material Adverse Effect.
(b) No Pharmaceutical Products have been recalled, withdrawn,
suspended or discontinued by the Company or any of its Subsidiaries in the
United States or outside the United States (whether voluntarily or
otherwise) since January 1, 1998. No proceedings in the United States and
outside of the United States (whether completed or pending) seeking the
recall, withdrawal, suspension or seizure of any Pharmaceutical Product are
pending, or to the knowledge of the Company, threatened, against the
Company or any of the Company Subsidiaries, nor have any such proceedings
been pending at any time since January 1, 1998 which would have a Company
Material Adverse Effect.
(c) As to each biological or drug of the Company or its Subsidiaries
for which a biological license application, new drug application,
investigational new drug application or similar state or foreign regulatory
application has been approved, the Company and the Company Subsidiaries are
in substantial compliance with 21 U.S.C. sec. 355 or 21 C.F.R. Parts 312 or
314 et seq., respectively, and similar Legal Provisions and all terms and
conditions of such applications, except where the failure to be in
compliance would not have a Company Material Adverse Effect. As to each
such drug, the Company and any relevant Company Subsidiary, and the
officers, employees or agents of the Company or such Company Subsidiary
have included in the application for such drug, where required, the
certification described in 21 U.S.C. sec. 335a(k)(1) or any similar Legal
Provision and the list described in 21 U.S.C. sec. 335a(k)(2) or any
similar Legal Provision, and such certification and such list was in each
case true and accurate when made and remained true and accurate thereafter,
except in the case where the failure of such application to be true and
accurate would not have a Company Material Adverse Effect. In
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addition, the Company and the Company Subsidiaries are in substantial
compliance with all applicable registration and listing requirements set
forth in 21 U.S.C. sec. 360 and 21 C.F.R. Part 207 and all similar Legal
Provisions.
(d) Each article of any drug manufactured and/or distributed by the
Company or any of the Company Subsidiaries is not adulterated within the
meaning of 21 U.S.C. sec. 351 (or similar Legal Provisions) or misbranded
within the meaning of 21 U.S.C. sec. 352 (or similar Legal Provisions), and
is not a product that is in violation of 21 U.S.C. sec. 355 (or similar
Legal Provisions), except where such failure in compliance with the
foregoing would not have a Company Material Adverse Effect.
(e) Neither the Company, nor any Company Subsidiary, nor any officer,
employee or agent of either the Company or any Company Subsidiary has made
an untrue statement of a material fact or fraudulent statement to the FDA
or other governmental entity or regulatory entity, failed to disclose a
material fact required to be disclosed to the FDA or any other governmental
entity or regulatory entity, or committed an act, made a statement, or
failed to make a statement that, at the time such disclosure was made,
could reasonably be expected to provide a basis for the FDA or any other
governmental entity or regulatory entity to invoke its policy respecting
"Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities", set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any
similar policy. Neither the Company nor any Company Subsidiary, nor any
officer, employee or agent of either the Company or any Company Subsidiary,
has been convicted of any crime or engaged in any conduct for which
debarment is mandated by 21 U.S.C. sec. 335a(a) or any similar Legal
Provision or authorized by 21 U.S.C. sec. 335a(b) or any similar Legal
Provision.
(f) Except as disclosed in the Company Reports, neither the Company
nor any Company Subsidiary has received any written notice that the FDA or
any other governmental entity or regulatory entity has commenced, or
threatened to initiate, any action to withdraw its approval or request the
recall of any product of the Company or any Company Subsidiary, or
commenced, or overtly threatened to initiate, any action to enjoin
production at any facility of the Company or any Company Subsidiary which
would reasonably be expected to have a Company Material Adverse Effect.
3.24 Commercial, Clinical and Investigational Drugs. As of the date of
this Agreement, to the knowledge of the Company, there are no facts or
circumstances that would materially and adversely affect the continued
marketing, manufacture, and sale of Actiq as currently conducted. As of the date
of this Agreement, to the knowledge of the Company, all material information
regarding the development and commercialization of products and services of the
Company have previously been disclosed to Parent.
3.25 Agreement with Officers and Directors. Schedule 3.25 sets forth each
plan or agreement pursuant to which amounts may become payable (whether
currently or in the future) to current or former officers and directors of the
Company or any of the Company Subsidiaries as a result of or in connection with
the Merger.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered prior to the
execution hereof to the Company (the "Parent Disclosure Schedule"), Parent and
Merger Sub represent and warrant to the Company as of the date of this Agreement
as follows:
4.1 Existence; Good Standing; Corporate Authority; Compliance with
Law. Each of Parent and Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Parent is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so qualified or to be in good standing would not result in a
Parent Material Adverse Effect (as defined in Section 8.14 hereof). Parent has
all requisite corporate power and authority to own, operate and
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lease its properties and carry on its business as now conducted or as described
in the Parent Reports as reasonably contemplated in the future. Parent has no
Subsidiaries other than those Subsidiaries set forth in Section 4.1 of the
Parent Disclosure Schedule (the "Parent Subsidiaries"). Each of the Parent
Subsidiaries is a corporation duly organized, validly existing and in good
standing, under the laws of the respective jurisdictions in which they are
incorporated.
4.2 Authorization, Validity and Effect of Agreements. Each of Parent and
Merger Sub, respectively, has the requisite corporate power and authority to
execute and deliver this Agreement and all other agreements and documents
contemplated hereby and thereby, and perform its obligations hereunder and
thereunder. The consummation by Parent and Merger Sub, as applicable, of the
transactions contemplated hereby have been (i) unanimously approved by the Board
of Directors of Parent and Merger Sub, as applicable, (ii) approved by the
Parent as the sole stockholder of Merger Sub, and duly authorized by all
requisite corporate action. This Agreement constitutes the valid and legally
binding obligation of Parent and Merger Sub, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
4.3 Capitalization. The authorized capital stock of Parent consists of
100,000,000 shares of Parent Common Stock and 5,000,000 shares of Preferred
Stock ("Parent Preferred Stock"). As of July 12, 2000, there were 34,820,937
shares of Parent Common Stock and 2,500,000 shares of the $3.625 Convertible
Exchangeable Preferred Stock (the "Convertible Exchangeable Preferred Stock")
series of Parent Preferred Stock issued and outstanding. Since such date, no
additional shares of capital stock of Parent have been issued, except shares
issued pursuant to the exercise of options outstanding under Parent's stock
option plans (the "Parent Stock Option Plans"). Parent is a party to an Amended
and Restated Rights Agreement, dated as of January 1, 1999 (the "Parent Rights
Agreement"), with StockTrans, Inc. as Rights Agent. As of July 1, 2000, options
to acquire 3,768,298 shares of Parent Common Stock were outstanding pursuant to
the terms of the Parent Stock Option Plans and 1,000,000 shares of Series A
Junior Participating Preferred Stock were reserved for issuance in connection
with the rights issued pursuant to the Parent Rights Agreement. Since such date,
no additional options have been granted. Other than the Convertible Exchangeable
Preferred Stock, Parent has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of Parent on any matter. All such issued and outstanding shares
of Parent Common Stock are, and all shares of Parent Common Stock to be issued
pursuant to Section 2.2(a) hereof, when issued in accordance with the terms
hereof will be, duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. Other than as set forth above, there are not, as of
July 12, 2000, any existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate Parent or
any of the Parent Subsidiaries to issue, transfer or sell any shares of capital
stock of Parent or any of the Parent Subsidiaries.
All of the issued and outstanding shares of capital stock of Merger Sub are
owned by Parent. Merger Sub has not engaged in any activities other than in
connection with its formation and the transactions contemplated by this
Agreement.
4.4 Subsidiaries. Parent owns directly or indirectly each of the
outstanding shares of each of the Parent Subsidiaries. Each of the outstanding
shares of capital stock of each of the Parent Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and is owned, directly or
indirectly, by Parent free and clear of all liens, pledges, security interests,
claims or other encumbrances.
4.5 No Violation. Neither the execution and delivery by Parent and Merger
Sub of this Agreement nor the consummation by Parent and Merger Sub of the
transactions contemplated hereby in accordance with the terms hereof, will: (i)
conflict with or result in a breach of any provisions of the respective
Certificate of Incorporation or Bylaws of Parent or Merger Sub; (ii) result in a
breach or violation of, a default under, or the triggering of any payment or
other material obligations pursuant to, or accelerate vesting under, any of the
Parent Stock Option Plans, or any grant or award under any of the foregoing, or
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination or in a right of
termination or cancellation of,
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accelerate the performance required by, result in the triggering of any payment
or other material obligations pursuant to, result in the creation of any lien,
security interest, charge or encumbrance upon any of the material properties of
Parent, any of the Parent Subsidiaries or Merger Sub under, or result in being
declared void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any material license, franchise, permit, lease, contract, agreement or other
instrument, binding commitment or obligation to which Parent, any of the Parent
Subsidiaries or Merger Sub is a party, or by which Parent, any of the Parent
Subsidiaries or Merger Sub or any of their respective properties is bound or to
the knowledge of the Parent affected, except for any of the foregoing matters
which would not (a) result in a Parent Material Adverse Effect, (b) impair in
any material respects the ability of Parent to perform its obligations under
this Agreement, or (c) prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement; or (iii) other than (a) filings
by Parent required under the HSR Act, (b) the filing with the SEC of a
Registration Statement on Form S-4, (c) the filing of the Certificate of Merger
with the Delaware Secretary of State, and (d) the submission to the Nasdaq
National Market of a listing application, require, by or with respect to Parent,
any of the Parent Subsidiaries or Merger Sub in connection with the execution
and delivery of this Agreement by Parent and Merger Sub or the consummation by
Merger Sub of the Merger, any consent, approval or authorization of, or
declaration, filing or registration with, any domestic governmental or
regulatory authority, other than consents, approvals, authorizations,
declarations or filings or registrations which, if not obtained or made, are not
reasonably likely to result in a Parent Material Adverse Effect.
4.6 SEC Documents; Undisclosed Matters.
(a) Parent has filed all required forms, reports, schedules,
statements and other documents (including exhibits and other information
incorporated therein) with the SEC since January 1, 1997 (collectively, the
"Parent Reports"). As of the respective dates they were filed, or, if
amended, as of the date of the filing of the last such amendment, each
Parent Report, (i) complied as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the
rules and regulations thereunder applicable to such Parent Reports and (ii)
at the time they were filed did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference into
the Parent Reports (including the related notes and schedules) fairly
presents in all material respects the consolidated financial position of
Parent and each of the Parent Subsidiaries as of its date, and each of the
consolidated statements of operations, stockholders' equity and cash flows
included in or incorporated by reference into the Parent Reports (including
any related notes and schedules) fairly presents in all material respects
the financial position, results of operations and cash flows, as the case
may be, of Parent and each of the Parent Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments which would not be material in amount or effect,
and the absence of footnotes), in each case (x) in accordance with GAAP
consistently applied during the periods involved, except as may be noted
therein and (y) in compliance as to form in all material respects with the
published rules and regulations of the SEC with respect thereto as of the
date they were filed or, if amended, as of the filing of the last such
amendment.
(b) Except (i) as set forth in the Parent Reports (including the
financial statements and notes thereto contained herein), (ii) for
liabilities set forth in this Agreement, (iii) for liabilities described in
Section 4.6 of the Parent Disclosure or incurred in the ordinary course of
business consistent with past practice, the Parent has no liabilities or
obligations of any nature (whether accrued, absolute or contingent or
otherwise) which, individually or in the aggregate, would have a Parent
Material Adverse Effect.
4.7 Litigation. Except as disclosed in the Parent Reports, there are no
actions, suits or proceedings pending against Parent, any of the Parent
Subsidiaries or Merger Sub or, to the knowledge of Parent, threatened against
Parent, any of the Parent Subsidiaries or Merger Sub, that, individually or in
the aggregate would have a Parent Material Adverse Effect, nor is there any
judgment, decree, injunction, rule, order,
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action, demand or requirement of any governmental entity or other regulatory
body or arbitrator outstanding against, or, to the knowledge of Parent, any
investigation by any governmental entity or other regulatory body involving the
Parent that individually or in the aggregate would have a Parent Material
Adverse Effect.
4.8 No Violation of Law. The business and operations of Parent and the
Parent Subsidiaries have been conducted in compliance with all applicable laws,
ordinances, regulations and orders of all governmental entities and other
regulatory bodies, except where such noncompliance, individually or in the
aggregate, would not have a Parent Material Adverse Effect.
4.9 Absence of Certain Changes. Other than as set forth in the Parent
Reports (i) since December 31, 1999 Parent has conducted its business only in
the ordinary course of such business, (ii) from December 31, 1999 to the date of
this Agreement there has not been any Parent Material Adverse Effect; and (iii)
since December 31, 1999, there has not been any material change in its
accounting principles, practices or methods, except as required under GAAP or
applicable law.
4.10 Company Stock Ownership. Neither Parent nor any of the Parent
Subsidiaries beneficially owns any shares of Company Common Stock or other
securities convertible into or exercisable for Company Common Stock.
4.11 Pooling of Interests; Tax Reorganization. To the knowledge of Parent,
there has been no action or omission by Parent or any of the Parent Subsidiaries
which would prevent the accounting for the Merger as a pooling of interests in
accordance with APB No. 16, the interpretive releases issued pursuant thereto,
and the pronouncements of the SEC. Neither Parent nor any of the Parent
Subsidiaries has taken or agreed to take any action or knows of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.
4.12 No Brokers. Parent has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of the
Company or Parent to pay any finder's fee, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that Parent has retained Robertson Stephens as its financial advisor.
4.13 Opinion of Financial Advisor. The Board of Directors of Parent has
received the opinion of Robertson Stephens to the effect that, as of the date
hereof, the Exchange Ratio in the Merger is fair from a financial point of view
to the Parent.
ARTICLE 5
COVENANTS
5.1 No Solicitation.
(a) Without the prior written consent of Parent, from and after the
date hereof, the Company will not, and will not authorize or permit any of
its Subsidiaries or any officers, directors, employees, financial advisors,
agents and other representatives of any of the foregoing
("Representatives") to, directly or indirectly: (i) solicit, initiate or
encourage (including by way of furnishing information, other than public
information in the ordinary course of business in response to an
unsolicited request) or take any other action to facilitate knowingly any
inquiries or the making of any proposal which constitutes or may reasonably
be expected to lead to an Acquisition Proposal (as hereinafter defined)
from any person; (ii) engage in any discussion with any third party other
than its Representatives or negotiations relating to any Acquisition
Proposal; or (iii) enter into any agreement with respect to, agree to,
approve or recommend any Acquisition Proposal; provided, however, that
notwithstanding any other provision hereof, the Company may, (A) at any
time prior to the time the Company's stockholders shall have voted to
approve this Agreement engage in discussions or negotiations with a third
party (and may furnish such third party information concerning the Company
and its business, properties and assets to such party) who (without any
solicitation, initiation, encouragement, discussion or negotiation,
directly or indirectly, by or with the Company or the Representatives after
the date hereof) makes an unsolicited
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bona fide written Acquisition Proposal if, and only to the extent that, (1)
the third party has first made an Acquisition Proposal that is financially
superior to the transactions contemplated by this Agreement and, in the
case of a cash offer, has demonstrated that the funds necessary for the
Acquisition Proposal are reasonably likely to be available (as determined
in good faith in each case by the Company's Board of Directors after
consultation with its financial advisors) (such an Acquisition Proposal, a
"Superior Proposal"), and the Company's Board of Directors shall conclude
in good faith, after considering applicable provisions of state law, and
after consulting with independent legal counsel that such action is
necessary for the Board of Directors to act in a manner consistent with its
fiduciary duties under applicable law, and (2) prior to furnishing such
information to or entering into discussions or negotiations with such
person or entity, the Company receives from such person or entity an
executed confidentiality agreement substantially in the same form as the
Confidentiality Agreement, and (3) the Company shall have fully complied
with this Section 5.1; (B) comply with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer; and/or (C) accept a
Superior Proposal from a third party, provided the Company terminates this
Agreement pursuant to Section 7.3(a) hereof. As used herein, "Acquisition
Proposal" means a proposal or offer for a tender or exchange offer, merger,
consolidation or other business combination involving the Company or any
Subsidiary of the Company or any proposal to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of,
the Company or any Subsidiary thereof.
(b) The Company shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by the Company or its
Representatives with respect to a potential Acquisition Proposal and shall
promptly request the return of all confidential or proprietary information
of the Company furnished to any of such parties. The Company shall notify
Parent orally and in writing of any such inquiries, offers or proposals
(including, without limitation, the terms and conditions of any such
proposal and the identity of the person making it), within 24 hours of the
receipt thereof, shall keep Parent informed of the status and details of
any such inquiry, offer or proposal, and shall give Parent prompt prior
written notice of (i) any meeting of the Board of Directors of the Company
to take any action with respect to an Acquisition Proposal or to
withdrawing or modifying, in a manner adverse to Parent, its recommendation
to the Company's stockholders in favor of approval of the Merger, and (ii)
any agreement to be entered into with any person making such inquiry, offer
or proposal.
(c) Prior to accepting a Superior Proposal, the Company shall, and
shall cause its financial and legal advisors to, negotiate in good faith
with Parent, for a period of not less than five business days, to make such
changes to the terms and conditions of this Agreement as would enable the
Company to proceed with the transactions contemplated hereby.
(d) During the period from the date of this Agreement through the
Effective Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any
of the Company Subsidiaries is a party. During such period, the Company
shall enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including, without limitation, by
obtaining injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any court of the
United States of America or of any state having jurisdiction.
5.2 Interim Operations.
(a) Prior to the Effective Time, except as set forth in the Company
Disclosure Schedule or as contemplated by any other provision of this
Agreement, unless Parent has consented in writing thereto (which consent
shall not be unreasonably withheld), the Company:
(i) shall, and shall cause each of the Company Subsidiaries to,
conduct its operations in the ordinary course consistent with the manner
as heretofore conducted;
(ii) shall use commercially reasonable efforts, and shall cause
each of the Company Subsidiaries to use commercially reasonable efforts,
to preserve intact their business organizations
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and goodwill, keep available the services of their respective officers
and employees and maintain satisfactory relationships with those persons
having business relationships with them;
(iii) shall not, and shall cause each of the Company Subsidiaries
not to, amend their respective Certificates of Incorporation or Bylaws
or comparable governing instruments;
(iv) shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or
inaccurate in any material respect such that the condition set forth in
Section 6.3(a)(ii) would not be satisfied; provided, however, that no
such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement;
(v) shall not, and shall not permit any of the Company Subsidiaries
to, (A) acquire or agree to acquire by merging or consolidating with, or
by acquiring any capital stock of or purchasing a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof, or (B) acquire or agree to acquire assets other
than in the ordinary course of business or (C) release or relinquish or
agree to release or relinquish any material contract rights;
(vi) shall not, and shall not permit any of the Company
Subsidiaries to, effect any stock split or otherwise change its
capitalization or issue any shares of its capital stock or securities
convertible into or exchangeable or exercisable for shares of its
capital stock, except upon exercise of options to purchase shares of
Company Common Stock under the Company Stock Option Plans;
(vii) shall not, and shall not permit any of the Company
Subsidiaries to, grant, confer or award any options, warrants,
conversion rights or other rights, not existing on the date hereof, to
acquire any shares of its capital stock or other securities of the
Company or any of the Company Subsidiaries, other than the issuance of
Company Options consistent with past practice;
(viii) shall not, and shall not permit any of the Company
Subsidiaries to, take or fail to take any action which would, or would
be reasonably likely to, prevent the accounting for the Merger as a
pooling of interests in accordance with APB No. 16, the interpretive
releases issued pursuant thereto, and the pronouncements of the SEC;
(ix) shall not, and shall not permit any of the Company
Subsidiaries to, take or fail to take any actions which would be
reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code;
(x) shall not, and shall not permit any of the Company Subsidiaries
to, amend in any material respect, except as required by applicable law
or in response to changes in applicable law, the terms of any Company
Employee Plans, including, without limitation, any employment, severance
or similar agreements or arrangements in existence on the date hereof,
or adopt any new employee benefit plans, programs or arrangements or any
employment, severance or similar agreements or arrangements, or grant
any award thereunder (except as permitted by clause (vii) above or, in
the case of awards not involving the acquisition of securities, in the
ordinary course of business consistent with past practice), or grant any
salary increases to any employee of the Company or any of the Company
Subsidiaries except in the ordinary course of business consistent with
past practice except that (A) the Company may hire employees in the
ordinary course of business consistent with past practice and (B) this
subsection (x) shall not preclude Company from making payments under
Company Employee Plans;
(xi) shall not, and shall not permit any of the Company
Subsidiaries to, except in the ordinary course of business consistent
with past practice, (x) incur, create, assume or otherwise become liable
for borrowed money or assume, guarantee, endorse or otherwise become
responsible or liable for the obligations of any other individual,
corporation or other entity or (y) make any loans or advances to any
other person;
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(xii) shall not, and shall not permit any of the Company
Subsidiaries to, (x) make, revoke or change any material election with
respect to Taxes unless required by applicable law or (y) settle or
compromise any material Tax liability; and
(xiii) shall not, and shall not permit any of the Company
Subsidiaries to, agree, in writing or otherwise, to take any of the
foregoing actions.
(b) Prior to the Effective Time, except as set forth in the Parent
Disclosure Schedule or as contemplated by any other provision of this
Agreement, unless the Company has consented in writing thereto (which
consent shall not be unreasonably withheld), Parent:
(i) shall not, and shall cause each of Parent Subsidiaries not to,
amend their respective Certificates of Incorporation or Bylaws or
comparable governing instruments;
(ii) shall give prompt notice to the Company of any representation
or warranty made by it contained in this Agreement becoming untrue or
inaccurate in any material respect such that the condition set forth in
Section 6.2(a)(ii) would not be satisfied; provided, however, that no
such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement;
(iii) shall not, and shall not permit any of Parent Subsidiaries
to, effect any stock split or otherwise change its capitalization or
issue any shares of its capital stock or securities convertible into or
exchangeable or exercisable for shares of its capital stock, except upon
exercise of options to purchase shares of Parent Common Stock under
Parent Stock Option Plans;
(iv) shall not, and shall not permit any of Parent Subsidiaries to,
take or fail to take any action which would, or would be reasonably
likely to, prevent the accounting for the Merger as a pooling of
interests in accordance with APB No. 16, the interpretive releases
issued pursuant thereto, and the pronouncements of the SEC;
(v) shall not, and shall not permit any of Parent Subsidiaries to,
take or fail to take any actions which would be reasonably likely to
prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code; and
(vi) shall not, and shall not permit any of Parent Subsidiaries to,
agree, in writing or otherwise, to take any of the foregoing actions.
5.3 Meeting of Company Stockholders. The Company will, as soon as
reasonably practicable following the date of this Agreement, establish a record
date for, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Company Stockholders' Meeting") as promptly as practicable
for the purpose of obtaining the approval of its stockholders of this Agreement
and the Merger, it being agreed and understood that the Company may postpone the
Company Stockholders' Meeting if necessary to comply with its obligations under
5.1(c) above. The Company Board shall recommend such approval and shall use its
reasonable best efforts to solicit such approval, including, without limitation,
timely mailing the Proxy Statement/Prospectus (as defined in Section 5.7).
Notwithstanding the foregoing or anything else contained in this Agreement,
prior to the adoption and approval of this Agreement and the approval of the
Merger by the holders of a majority of the shares of Company Stock, the Company
Board, to the extent it determines in good faith, after considering applicable
provisions of state law, and after consulting with independent legal counsel
that such action is necessary for the Board of Directors to act in a manner
consistent with its fiduciary duties under applicable law, may withdraw or
modify its approval or recommendation of this Agreement or the Merger; it being
agreed and understood that any such withdrawal or modification in a manner
materially adverse to the Parent shall give rise to the right of Parent to
terminate under Section 7.4(a) below.
5.4 Reasonable Efforts; Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto will promptly file and
prosecute diligently the applications and related documents required to be filed
by such party with the applicable regulatory authorities in order to effect the
transactions
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contemplated hereby, including filings under the HSR Act requesting early
termination of the applicable waiting period. Each party hereto agrees to use
all commercially reasonable efforts to, and shall take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each corporation which is a party to this Agreement
shall take all such necessary action. Each of the parties hereto agrees to
defend vigorously against any actions, suits or proceedings in which such party
is named as defendant which seeks to enjoin, restrain or prohibit the
transactions contemplated hereby or seeks damages with respect to such
transactions.
5.5 Inspection of Records. From the date hereof to the Effective Time, the
Company and Parent shall (i) allow all designated officers, attorneys,
accountants and other representatives of their respective companies reasonable
access at all reasonable times to the offices, records and files,
correspondence, audits and properties, as well as to all information relating to
commitments, contracts, titles and financial position, or otherwise pertaining
to the business and affairs, of the other party and their Subsidiaries, (ii)
furnish to such other party and such other party's counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such persons may reasonably request and (iii) instruct
employees, counsel and financial advisors to cooperate with such party in such
party's investigation of the business of the other party and its Subsidiaries.
Except as required by law, Parent and the Company will hold, and will cause
their respective officers, employees, accountants, counsel, financial advisors
and other representatives and affiliates to hold, any and all information
received from the Company or from Parent, as the case may be, directly or
indirectly, in confidence, in accordance with the Confidentiality Agreement
dated as of June 5, 2000 between Parent and the Company (as it may be amended
from time to time, the "Confidentiality Agreement").
5.6 Publicity. The initial press release relating to this Agreement shall
be a joint press release in the form heretofore agreed to by the parties and
thereafter the Company and Parent shall, subject to their respective legal
obligations (including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable efforts to agree
upon the text of any press release, before issuing any such press release or
otherwise making public statements with respect to the transactions contemplated
hereby and in making any filing with any federal or state governmental or
regulatory agency or with any national securities exchange with respect thereto.
The parties hereto agree and acknowledge that the Company may, after the signing
of this Agreement, file a copy of this Agreement with the SEC on Form 8-K.
5.7 Registration Statement. Parent and the Company shall cooperate and
promptly prepare and Parent shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the Parent Common Stock issuable in the Merger, which
Registration Statement shall contain the proxy statement with respect to the
meeting of the stockholders of the Company in connection with the Merger (the
"Proxy Statement/Prospectus"). The respective parties will cause the Proxy
Statement/Prospectus and the Form S-4 to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange Act
and the rules and regulations thereunder. Parent shall use reasonable efforts,
and the Company will cooperate with Parent, to have the Form S-4 declared
effective by the SEC as promptly as practicable. Parent shall take all action
required to obtain, prior to the effective date of the Form S-4, all necessary
state securities law or "Blue Sky" permits or approvals required to carry out
the transactions contemplated by this Agreement. The information supplied by the
Company for inclusion or incorporation by reference in the Proxy
Statement/Prospectus and the Form S-4, shall not (i) at the time the Form S-4 is
declared effective, (ii) at the time the Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto) is first mailed to holders of Company
Common Stock, and (iii) at the time of the Company Stockholders Meetings,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading. The
information supplied by Parent for inclusion or incorporation by reference in
the Proxy Statement/Prospectus and the Form S-4, shall not (i) at the time the
Form S-4 is declared effective, (ii) at the time the Proxy Statement/Prospectus
(or any
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amendment thereof or supplement thereto) is first mailed to holders of Company
Common Stock, and (iii) at the time of the Company Stockholders Meetings,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading. No
amendment or supplement to the Proxy Statement/Prospectus will be made by the
Company without the approval of Parent and no amendment of the Form S-4 will be
made by Parent without the approval of the Company (such consent not to be
unreasonable withheld or delayed). Parent will advise the Company, promptly
after it receives notice thereof, of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Proxy Statement/Prospectus or the
Form S-4 or comments thereon and responses thereto or requests by the SEC for
additional information.
5.8 Listing Application/De-Listings.
(a) Parent shall promptly prepare and submit to the Nasdaq National
Market a listing application covering the shares of Parent Common Stock
issuable in the Merger and upon exercise of the Parent Options, and shall
use all reasonable efforts to obtain, prior to the Effective Time, approval
for the listing of such Parent Common Stock, subject to official notice of
issuance.
(b) The parties shall use their reasonable best efforts to cause the
Surviving Corporation to cause the Company Common Stock to be de-listed
from NASDAQ and de-registered under the Exchange Act as soon as practicable
following the Effective Time.
5.9 Affiliate Letters. No later than thirty (30) days prior to the date of
the Company Stockholders' Meeting, the Company shall deliver to Parent a letter
identifying all Persons who are, at the time this Agreement is submitted for
adoption by the stockholders of the Company, "affiliates" of the Company (other
than persons who have, on or prior to the date hereof, executed and delivered
affiliate letters to the Parent) for purposes of Rule 145 under the Securities
Act or for purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board and its related
interpretations. The Company shall take all actions reasonably necessary to
deliver or cause to be delivered to Parent, prior to the Closing Date, from each
such person an affiliate letter in the form of the affiliate letters delivered
to the Parent prior to the date hereof (an "Affiliate Letter").
5.10 Expenses. Except as otherwise provided in Section 7.5 hereof, whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
5.11 Directors' and Officers' Indemnification and Insurance.
(a) Parent agrees that all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to the
Effective Time now existing in favor of the current or former directors or
employees or officers of the Company as provided in the Certificate of
Incorporation or Bylaws of the Company or any indemnification agreement
between such directors or officers and the Company (in each case, as in
effect on the date hereof) shall be assumed by the Surviving Corporation in
the Merger, without further action, as of the Effective Time and shall
survive the Merger and shall continue in full force and effect in
accordance with their terms.
(b) Parent shall cause to be maintained, for a period of not less than
six years from the Effective Time, the Company's current directors' and
officers' liability insurance policy to the extent that it provides
coverage for events occurring prior to the Effective Time (the "D&O
Insurance") for all present and former directors and officers of the
Company or any Company Subsidiary, so long as the annual premium therefor
would not be in excess 150% of the last annual premium paid for the D&O
Insurance prior to the date of this Agreement, (such premium being the
"Maximum Premium"); provided that Parent may, in lieu of maintaining such
existing D&O Insurance as provided above, cause no less favorable coverage
to be provided under any policy maintained for the benefit of the directors
and
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officers of Parent or a separate policy provided by the same insurer. If
the existing D&O Insurance expires, is terminated or canceled by the
insurer or if the annual premium would exceed the Maximum Premium during
such period, Parent shall obtain, in lieu of such D&O Insurance, such
comparable directors' and officers' liability insurance as can be obtained
for the remainder of such period for an annualized premium not in excess of
the Maximum Premium and on terms and conditions no less advantageous than
the existing D&O Insurance.
(c) The provisions of this Section shall survive the Merger and are
intended to be for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
5.12 Benefit Arrangements.
(a) From and after the Effective Time, Parent shall (i) permit each
Company employee and officer who renders services for Parent or any Parent
Subsidiary (including the Company or any Company Subsidiary) after the
Effective Time ("Company Employees") to participate in the employee benefit
plans and arrangements covering Parent's employees and officers (including
employee benefit plans as defined in Section 3(3) of ERISA, arrangements
providing for insurance coverage or workers' compensation benefits,
incentive or deferred bonus arrangements, severance arrangements, equity
compensation and deferred compensation plans, and vacation programs,
whether or not sponsored by Parent) ("Parent Benefit Plans") to the same
extent as similarly situated employees of Parent, (ii) give each Company
Employee credit for all service with the Company prior to the Effective
Time, (including service with any Subsidiary or affiliate of the Company)
for purposes of eligibility and vesting, but not benefit accrual, under all
Parent Benefit Plans, (iii) not subject any Company employee to any waiting
periods or limitations on benefits for pre-existing conditions under Parent
Benefit Plans, except to the extent such Company Employee was subject to
such limitation under Company's Employee Benefit Plans, and (iv) credit all
Company Employees with one full year's deductible under the Company's
healthcare plans for the plan year that includes the Effective Time.
Notwithstanding the foregoing, Parent may continue, for the benefit of
Company Employees, any of the Company Employee Plans as in effect prior to
the Closing Date, in lieu of permitting such Company Employees to
participate in any of the Parent Benefit Plans as provided in (i) above.
(b) Prior to the Closing Date, the Company and the Company
Subsidiaries shall take whatever action is necessary to cause the adoption
of resolutions terminating the Company 401(k) Retirement Savings Plan as
of, or prior to, the Closing Date, subject to subsequent governmental
approval as the Company deems appropriate. Prior to the Closing Date, the
Company and the Company Subsidiaries shall also take whatever action is
necessary to terminate the Company Employee Stock Purchase Plan as of, or
prior to, the Closing Date.
5.13 Section 16 Matters. Parent and the Company shall take all actions
reasonably necessary to cause the transactions contemplated hereby and any other
dispositions of equity securities of the Company (including derivative
securities) or acquisitions of Parent equity securities (including derivative
securities) in connection with this Agreement by each individual who (a) is a
director or officer of the Company or (b) at the Effective Time, will become a
director or officer of Parent, to be exempt under Rule 16b-3 promulgated under
the Exchange Act.
5.14 Tax-Free Reorganization. Each of Company, Parent and Merger Sub shall
take all necessary actions to obtain tax-free reorganization treatment under
Section 368(a) of the Code and shall not take any position or action that is
inconsistent with such treatment.
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ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the Merger shall have been approved by the
holders of the issued and outstanding shares of capital stock of the
Company in accordance with the DGCL and Company's Certificate of
Incorporation.
(b) The waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated.
(c) No judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or issued by any court
or governmental regulatory or administrative agency or commission of
competent jurisdiction which restrains, enjoins or otherwise prohibits the
Merger shall be in effect. In the event any such order, decree, ruling or
other action shall have been issued, each party agrees to use commercially
reasonable efforts to have any such order, decree, ruling or other action
reversed and any such restraint or injunction lifted.
(d) The Form S-4 shall have become effective and shall be effective at
the Effective Time, and no stop order suspending effectiveness of the Form
S-4 shall have been issued, no action, suit, proceeding, or investigation
by the SEC to suspend the effectiveness thereof shall have been initiated
and be continuing.
(e) The Parent Common Stock to be issued to the Company stockholders
in connection with the Merger shall have been approved for listing on the
Nasdaq National Market, subject only to official notice of issuance.
6.2 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) (i) Parent and Merger Sub shall have performed in all material
respects all obligations contained in this Agreement required to be
performed by them on or prior to the Closing Date, (ii) each representation
and warranty of Parent and Merger Sub contained in this Agreement shall be
true and correct in each case as of the date of this Agreement and as of
Closing Date as though made on the Closing Date (it being understood that
those representations and warranties which address matters only as of a
particular date shall have been true and correct as of such date), except
as would not constitute a Parent Material Adverse Effect, and that
qualifications as to materiality (including the use of the term Parent
Material Adverse Effect) contained in any representation or warranty shall
be disregarded for purposes of this Section 6.2(a), and (iii) the Company
shall have received certificates of the President or a Vice President of
Parent and Merger Sub dated the Closing Date, certifying to such effect
with respect to Parent and Merger Sub, respectively.
(b) The Company shall have received an opinion of Cooley Godward,
special tax counsel to the Company, dated as of the Closing Date, to the
effect that the Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code. The issuance of such opinion shall be
conditioned upon the receipt by such special tax counsel of customary
representation letters from each of Parent, Merger Sub, and the Company, in
each case in form and substance reasonably satisfactory to such special tax
counsel. Each such representation letter shall be dated on or before the
date of such opinion and shall not have been withdrawn or modified in any
material respect.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred a Parent Material Adverse Effect.
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6.3 Conditions to Obligation of Parent and Merger Sub to Effect the
Merger. The obligations of Parent and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) (i) The Company shall have performed in all material respects all
obligations contained in this Agreement required to be performed on or
prior to the Closing Date, (ii) each representation and warranty of the
Company contained in this Agreement shall be true and correct in each case
as of the date of this Agreement and as of Closing Date as though made on
the Closing Date (it being understood that those representations and
warranties which address matters only as of a particular date shall have
been true and correct as of such date), except as would not constitute a
Company Material Adverse Effect, and that qualifications as to materiality
(including the use of the term Company Material Adverse Effect) contained
in any representation or warranty shall be disregarded for purposes of this
Section 6.3(a), (iii) Parent shall have received a certificate of the
President or a Vice President of the Company, dated the Closing Date,
certifying to such effect with respect to the Company.
(b) Parent shall have received a letter of its independent public
accountants and the Company's independent public accountants, each dated
the Effective Time, and each in form and substance reasonably satisfactory
to Parent, stating that such accountants concur with management's
conclusion that the Merger will qualify as a transaction to be accounted
for in accordance with the pooling of interests method of accounting under
the requirements of APB No. 16.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred a Company Material Adverse Effect.
(d) Parent shall have received from the Company an Affiliate Letter
from each person, if any, identified as an "affiliate" pursuant to Section
5.9 above.
ARTICLE 7
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of the Company, by the
mutual consent of Parent, Merger Sub and the Company.
7.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Parent or the Company if:
(a) the Merger shall not have been consummated by December 31, 2000;
provided, that the terminating party shall not have breached in any
material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the failure to consummate the Merger
by such date,
(b) the approval of the Company's stockholders required by Section
6.1(a) shall not have been obtained at a meeting duly convened therefor or
at any adjournment thereof, or
(c) a United States federal, state, local or foreign court of
competent jurisdiction or United States federal or state, local or foreign
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable; provided, that the party
seeking to terminate this Agreement pursuant to clause (c) shall have used
all commercially reasonable efforts to remove such injunction, order or
decree.
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7.3 Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, by action of
the Company Board:
(a) by written notice to Parent, if the Board of Directors of the
Company shall determine in good faith that an Acquisition Proposal
constitutes a Superior Proposal; provided, however, that the Company may
not terminate this Agreement pursuant to this clause (a) unless the Company
shall have complied with its obligations under Section 5.1(c).
(b) if there has been a breach by Parent or Merger Sub of any
representation or warranty contained in this Agreement that would cause the
condition set forth in Section 6.2(a)(ii) to not be satisfied, which breach
is not curable or, if curable, is not cured within thirty (30) days after
written notice of such breach is given by the Company to Parent, or
(c) if there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Parent which breach
would cause the condition set forth in Section 6.2(a)(i) to not be
satisfied, which breach is not curable or, if curable, is not cured within
thirty (30) days after written notice of such breach is given by the
Company to Parent.
7.4 Termination by Parent. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, by action of the Board
of Directors of Parent, if:
(a) the Company Board (i) shall not have recommended the approval of
this Agreement or the Merger to its stockholders, or shall have withdrawn
or modified (including, without limitation, pursuant to Section 5.3 above)
in a manner materially adverse to Parent its approval or recommendation of
this Agreement or the Merger, or (ii) shall have recommended an Acquisition
Proposal to the Company stockholders, or
(b) there has been a breach by the Company of any representation or
warranty contained in this Agreement that would cause the condition set
forth in Section 6.3(a)(ii) to not be satisfied, which breach is not
curable or, if curable, is not cured within thirty (30) days after written
notice of such breach is given by Parent to the Company, or
(c) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of the Company, which
breach would cause the condition set forth in Section 6.3(a)(i) to not be
satisfied, which breach is not curable or, if curable, is not cured within
thirty (30) days after written notice of such breach is given by Parent to
the Company.
7.5 Effect of Termination and Abandonment.
(a) The Company shall pay Parent a fee of $15 million (the
"Termination Fee"), which amount shall be payable prior to any termination
by the Company in the case of clause (i) below (with any such payment being
a condition precedent to any such termination), and Parent's reasonable
documented out-of-pocket expenses, not to exceed $1,000,000 in the
aggregate, in connection with this Agreement and the transactions
contemplated hereby (the "Parent Expenses"), which amount shall be payable
within two business days of receipt of an invoice therefor, if this
Agreement (A) is terminated by Parent pursuant to Section 7.4(a) hereof, or
by the Company pursuant to Section 7.3(a) hereof, or (B) is terminated as a
result of the Company's breach of Section 5.1 hereof which is not cured
within ten (10) days after notice thereof.
(b) In the event of termination of this Agreement by Parent pursuant
to Section 7.4(b) or (c), the Company shall pay to Parent the Parent
Expenses, which amount shall be payable within two business days of receipt
of an invoice therefor; provided however, that in the event that within
twelve (12) months after termination of this Agreement the Company shall
have entered into an agreement with respect to, or consummated, an
Acquisition Proposal which shall have existed at any time during the period
between the date hereof and the date of such termination, then, the Company
shall pay Parent the Termination Fee in addition to the Parent Expenses.
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(c) The Company acknowledges that the agreements contained in Section
7.5(a) and (b) are an integral part of the transactions contemplated in
this Agreement, and that, without these agreements, Parent and Merger Sub
would not enter into this Agreement; accordingly, if the Company fails to
promptly pay the amount due pursuant to Section 7.5(a) or (b), and, in
order to obtain such payment, Parent or Merger Sub commences a suit which
results in a judgment against the Company, the Company shall pay to Parent
its reasonable costs and expenses (including reasonable attorneys' fees) in
connection with such suit, together with interest on the amount of the
Termination Fee and the Parent Expenses at the prime rate of Chase
Manhattan Bank N.A. in effect on the date such amounts were required to be
paid. The payment of the Termination Fee and the Parent Expenses
contemplated by Section 7.5(a), or the Parent Expenses and if applicable
the Termination Fee contemplated by Section 7.5(b), as the case may be,
shall terminate all obligations or liabilities of the Company under this
Agreement, except as otherwise provided in Section 7.5(e) below.
(d) In the event of termination of this Agreement by the Company
pursuant to Section 7.3(b) or (c), the Parent shall pay to the Company the
Company's reasonable documented out-of-pocket expenses, not to exceed
$1,000,000 in the aggregate, in connection with this Agreement and the
transactions contemplated hereby, which amount shall be payable within two
(2) business days of receipt of an invoice therefor.
(e) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article 7, all obligations of the parties
hereto shall terminate, except the obligations of the parties set forth in
this Section 7.5 and Section 5.10 and except for the Confidentiality
Agreement, provided that nothing in this Section 7.5(e) shall relieve any
party from liability for willful breach, including, without limitation,
attorneys' fees and the right to pursue any remedy at law or in equity.
7.6 Extension; Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations and Warranties. All representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Effective Time.
8.2 Notices. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by facsimile transmission, by courier or other national
overnight express mail service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid), addressed as follows.
If to Parent or Merger Sub:
Cephalon, Inc.
145 Brandywine Parkway
West Chester, PA 19380
Attn: General Counsel
with copies to:
Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, NJ 08540
Attention: Randall Sunberg, Esquire
Telecopy: (609) 919-6639
If to the Company:
Anesta Corp.
4745 Wiley Post Way
Salt Lake City, UT 84116
Attn: Thomas B. King
with copies to:
Cooley Godward LLP
2595 Canyon Blvd.
Suite 250
Boulder, CO 80302
Attention: James C.T. Linfield, Esquire
Telecopy: (303) 546-4099
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date of
receipt.
8.3 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Merger Sub may assign its
rights hereunder to any Subsidiary of Parent, but no such assignment shall
relieve Merger Sub of any of its obligations hereunder. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Article 2 (Conversion and Exchange of Securities) and Section 5.11
(Directors' and Officers' Indemnification and Insurance), nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement. Parent shall cause Merger Sub to comply
with its obligations hereunder.
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8.4 Entire Agreement. This Agreement, the Exhibits hereto, the Company
Disclosure Schedule, the Parent Disclosure Schedule, the Confidentiality
Agreement and any documents delivered by the parties in connection herewith or
therewith constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto. No addition to or modification of any
provision of this Agreement shall be binding upon any party hereto unless made
in writing and signed by all parties hereto.
8.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of the Company; provided, however, after such stockholder approval,
no amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws.
8.7 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
8.8 Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
8.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting each gender shall include the other gender and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.12 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its 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 hereof, this being in addition to any
other remedy to which they are entitled at law or in equity.
8.13 Definitions.
(a) As used in this Agreement, the word "Subsidiary" when used with
respect to any party means any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or indirectly
owns or controls at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such
party is a general partner.
A-30
<PAGE> 96
(b) As used in this Agreement, "Company Material Adverse Effect" means
a change or effect that is materially adverse to the business, results of
operation or financial condition of the Company and the Company
Subsidiaries taken as a whole.
(c) As used in this Agreement, "Parent Material Adverse Effect" means
a change or effect that is materially adverse to the business, results of
operation or financial condition of Parent and the Parent Subsidiaries,
taken as a whole.
(d) As used in this Agreement the phrase "Company's knowledge," or
words of similar import means the actual knowledge, without independent
investigation, of the officers of the Company and Theodore H. Stanley,
M.D., and William C. Moeller.
(e) As used in this Agreement the phrase "Parent's knowledge", or
words of similar import means the actual knowledge, without independent
investigation of, the senior executive officers of the Parent.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
CEPHALON, INC.
By: /s/ Frank Baldino, Jr., Ph.D.
----------------------------------
Name: Frank Baldino, Jr., Ph.D.
Title: Chairman and
Chief Executive Officer
C MERGER SUB, INC.
By: /s/ Frank Baldino, Jr., Ph.D.
----------------------------------
Name: Frank Baldino, Jr., Ph.D.
Title: President
ANESTA CORP.
By: /s/ Thomas B. King
----------------------------------
Name: Thomas B. King
Title: President and
Chief Executive Officer
A-31
<PAGE> 97
ANNEX B
Confidential
[US BANCORP LOGO]
July 14, 2000
The Board of Directors
Anesta Corporation
4745 Wiley Post Way
Salt Lake City, UT 84116
Members of the Board:
In connection with the proposed merger ("Merger") in which a wholly owned
subsidiary of Cephalon Inc. ("Cephalon") will be merged with and into Anesta
Corporation ("Anesta") and Anesta will become a wholly-owned subsidiary of
Cephalon, you have requested our opinion as to the fairness, from a financial
point of view, to the stockholders of Anesta of the proposed exchange ratio in
the Merger pursuant to the Agreement referred to below. Under the terms of the
Agreement and Plan of Merger (the "Agreement"), at the effective time of the
Merger, each issued and outstanding share of Anesta common stock will be
converted into shares of Cephalon common stock at a fixed exchange ratio of
0.4765.
U.S. Bancorp Piper Jaffray, as a customary part of its investment banking
business, is engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, underwriting and secondary
distributions of securities, private placements and valuations for estate,
corporate and other purposes. We have acted as exclusive financial advisor to
Anesta in connection with the Merger and will receive a fee for our services
which is contingent upon consummation of the Merger. In addition, we have
received a retainer fee and will receive a separate fee for providing this
opinion, which fees will be credited against the fee for our services. This
opinion fee is not contingent upon the consummation of the Merger. Anesta has
also agreed to indemnify us against certain liabilities in connection with our
services. In the ordinary course of our business, we and our affiliates may
actively trade securities of Cephalon and Anesta for our own account or the
account of our customers and, accordingly, may at any time hold a long or short
position in such securities. U.S. Bancorp Piper Jaffray also makes a market and
provides research coverage on Cephalon's common stock.
In arriving at our opinion, we have undertaken such review, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have reviewed (i) a draft dated July 11, 2000 of the Agreement,
(ii) certain publicly available financial, operating and business information
related to Cephalon, (iii) certain publicly available market and securities data
of Cephalon and selected public
B-1
<PAGE> 98
Anesta Corporation
July 14, 2000
Page 2
companies, (iv) certain analyst reports on Cephalon, (v) to the extent publicly
available, information concerning selected mergers deemed comparable to the
proposed Merger, (vi) certain publicly available financial, operating and
business information related to Anesta and selected public companies, (vii)
certain internal financial information of Anesta on a stand-alone basis and as a
combined Company with Cephalon, prepared for financial planning purposes, and
furnished by Anesta management and (viii) certain publicly available market and
securities data of Anesta. We had discussions with members of the management of
(a) Anesta concerning the financial condition, current operating results and
business outlook for Anesta on a stand-alone basis and as a combined Company
with Cephalon, and (b) Cephalon concerning the financial condition, current
operating results and business outlook for Cephalon and the combined Company and
Cephalon's plans relating to the combined Company.
We have relied upon and assumed the accuracy, completeness and fairness of the
financial statements and other information provided to us by Anesta, Cephalon or
otherwise made available to or reviewed by us, and have not assumed
responsibility for the independent verification of such statements and
information. We have relied upon the assurance of the managements of Anesta and
Cephalon that the statements and information provided to us by Anesta and
Cephalon, respectively, have been prepared on a reasonable basis, and that they
are not aware of any information or facts that would make the information
provided to us incomplete or misleading. With respect to financial planning data
and other business outlook information of Anesta, we have relied upon the
assurance of the management of Anesta that such data and information reflect the
best currently available estimates of Anesta. Anesta does not publicly disclose
internal financial information of the type provided to us and such information
was prepared for financial planning purposes and not with the expectation of
public disclosure.
We have assumed that the final form of the Agreement will be substantially
similar to the last draft reviewed by us, without modification of material terms
or conditions, and that the Merger will be consummated in accordance with the
terms described in the Agreement, without waiver by Anesta of any conditions to
its obligations thereunder. We have also assumed that the Merger contemplated by
the Agreement will constitute a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended, and that the Merger
will be accounted for as a pooling of interests. Without limiting the generality
of the foregoing, for the purpose of this opinion, we have assumed that neither
Cephalon nor Anesta are party to any pending transaction, including external
financing, recapitalizations, acquisitions or merger discussions, other than the
Merger or in the ordinary course of business. In addition, we have assumed that,
in the course of obtaining the necessary regulatory approvals for the Merger, no
restrictions, including any divestiture requirements, will be imposed that will
have a material adverse effect on the contemplated benefits of the Merger.
In arriving at our opinion, we have not performed any appraisals or valuations
of any specific assets or liabilities of Anesta or Cephalon, and have not been
furnished with any such appraisals or valuations. We express no opinion
regarding the liquidation value of any entity. Without limiting the generality
of the foregoing, we have undertaken no independent analysis of any pending or
threatened litigation, possible unasserted claims or other contingent
liabilities, to which Cephalon, Anesta, or any of their respective affiliates is
a party or may be subject and, at your discretion and with your consent, our
opinion makes no assumption concerning, and therefore does not consider, the
possible assertions of claims, outcomes or damage arising out of any such
matters.
This opinion is necessarily based upon the information available to us and facts
and circumstances as they exist and are subject to evaluation on the date
hereof; events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. We are not expressing any opinion
herein as to the price at which shares of Anesta or Cephalon Common Stock have
traded or may trade at any future time. We have not undertaken to reaffirm or
revise this opinion or otherwise comment upon any events occurring after the
date hereof and do not have any obligation to update, revise or reaffirm this
opinion.
B-2
<PAGE> 99
Anesta Corporation
July 14, 2000
Page 2
This opinion is directed to and is for the use and benefit of the Board of
Directors of Anesta and is rendered to the Board of Directors in connection with
its consideration of the Merger. This opinion is not intended to be and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to the Merger. We were not requested to opine as to, and this
opinion does not address, the basic business decision to proceed with or effect
the Merger. This opinion shall not be published or otherwise used, nor shall any
public references to us be made, without our prior written approval. In
furnishing this opinion, we do not admit that we are experts within the meaning
of the term "experts" as used in the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, and we do not admit that this
opinion constitutes a report or valuation within the meaning of Section 11 of
the Securities Act.
Based upon and subject to the foregoing and based upon such other factors as we
consider relevant, it is our opinion that the exchange ratio pursuant to the
Agreement is fair, from a financial point of view, to the common stockholders of
Anesta as of the date hereof.
Sincerely,
U.S. BANCORP PIPER JAFFRAY
B-3
<PAGE> 100
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. Article
9 of Cephalon's By-Laws provides for the indemnification of directors, officers,
employees and agents of Cephalon to the maximum extent permitted by the Delaware
General Corporation Law. Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director, officer or agent of the corporation or another enterprise if
serving at the request of the corporation. Depending on the character of the
proceeding, a corporation may indemnify against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if the person
indemnified acted in good faith and in respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In the
case of an action by or in the right of the corporation, no indemnification may
be made with respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper. Section 145 further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to above or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith. Cephalon's By-laws permit it to purchase insurance on
behalf of such person against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
Cephalon would have the power to indemnify him against such liability under the
foregoing provision of the By-laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2 -- Agreement and Plan of Merger dated as of July 14, 2000
among Cephalon, Inc., C Merger Sub, Inc. and Anesta
Corp.(1)
5* -- Opinion of Morgan, Lewis & Bockius LLP regarding legality
of securities being registered
8.1* -- Opinion of Morgan, Lewis & Bockius LLP as to certain tax
matters related to Section 368(a) of the Internal Revenue
Code of 1986, as amended
8.2* -- Opinion of Cooley Godward LLP as to certain tax matters
related to Section 368(a) of the Internal Revenue Code of
1986, as amended
23.1* -- Consent of Arthur Andersen LLP
23.2* -- Consent of PricewaterhouseCoopers LLP
23.3* -- Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5)
24.1+ -- Power of Attorney (included as part of the signature page
hereto)
27 -- Financial Data Schedule(2)
99.1 -- Opinion of U.S. Bancorp Piper Jaffray, Inc.(3)
99.2* -- Form of proxy card of Anesta Corp. for special meeting of
stockholders
</TABLE>
---------------
* Filed herewith.
+ Previously filed.
II-1
<PAGE> 101
(1) Attached as Annex A to the proxy/prospectus which is part of this
registration statement on Form S-4 and previously filed as Exhibit 99.1 to
Cephalon's Form 8-K filed with the Commission on July 21, 2000.
(2) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.
(3) Attached as Annex B to the proxy/prospectus which is part of this
registration statement on Form S-4.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form;
(5) that every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(6) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes
II-2
<PAGE> 102
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request;
(7) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request;
(8) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective; and
(9) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) and 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall be
deemed a new registration relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the city
of West Chester, state of Pennsylvania on September 8, 2000.
CEPHALON, INC.
By: /s/ FRANK BALDINO, JR.
----------------------------------
Frank Baldino, Jr., Ph.D.
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement on Form S-4 has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ FRANK BALDINO, JR. Chairman and Chief Executive September 8, 2000
----------------------------------------------------- Officer (Principal
Frank Baldino, Jr., Ph.D. Executive Officer)
* Sr. Vice President and Chief September 8, 2000
----------------------------------------------------- Financial Officer
J. Kevin Buchi (Principal Financial
Officer and Principal
Accounting Officer)
* Director September 8, 2000
-----------------------------------------------------
William P. Egan
* Director September 8, 2000
-----------------------------------------------------
Robert J. Feeney, Ph.D.
* Director September 8, 2000
-----------------------------------------------------
Martyn D. Greenacre
* Director September 8, 2000
-----------------------------------------------------
David R. King
* Director September 8, 2000
-----------------------------------------------------
Kevin E. Moley
* Director September 8, 2000
-----------------------------------------------------
Horst Witzel, Dr.-Ing
</TABLE>
*By Frank Baldino, Jr., as Attorney-in-fact
II-4
<PAGE> 104
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2 -- Agreement and Plan of Merger dated as of July 14, 2000
among Cephalon, Inc., C Merger Sub, Inc. and Anesta
Corp.(1)
5* -- Opinion of Morgan, Lewis & Bockius LLP regarding legality
of securities being registered
8.1* -- Opinion of Morgan, Lewis & Bockius LLP as to certain tax
matters related to Section 368(a) of the Internal Revenue
Code of 1986, as amended
8.2* -- Opinion of Cooley Godward LLP as to certain tax matters
related to Section 368(a) of the Internal Revenue Code of
1986, as amended
23.1* -- Consent of Arthur Andersen LLP
23.2* -- Consent of PricewaterhouseCoopers LLP
23.3* -- Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5)
24.1+ -- Power of Attorney (included as part of the signature page
hereto)
27 -- Financial Data Schedule(2)
99.1 -- Opinion of U.S. Bancorp Piper Jaffray, Inc. (3)
99.2* -- Form of proxy card of Anesta Corp. for special meeting of
stockholders
</TABLE>
---------------
* Filed herewith.
+ Previously filed.
(1) Attached as Annex A to the proxy/prospectus which is part of this
registration statement on Form S-4 and previously filed as Exhibit 99.1 to
Cephalon's Form 8-K filed with the Commission on July 21, 2000.
(2) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.
(3) Attached as Annex B to the proxy/prospectus which is part of this
registration statement on Form S-4.
